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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-1177
Beneficial Corporation
(Exact name of registrant as specified in its charter)
Delaware 51-0003820
(State of incorporation) (I.R.S. Employer Identification No.)
301 North Walnut Street,
Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302)425-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
Name of each exchange
Title of each class on which registered
----------------------------
Common Stock, $1 Par Value New York Stock Exchange
5% Cumulative Preferred Stock, $50 Par Value New York Stock Exchange
$5.50 Dividend Cumulative Convertible Preferred
Stock, No Par Value $20 Stated Value
(convertible into nine shares of Common Stock) New York Stock Exchange
$4.50 Dividend Cumulative Preferred Stock,
$100 Par Value New York Stock Exchange
$4.30 Dividend Cumulative Preferred Stock,
No Par Value, $100 Stated Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
8% Debentures Maturing at Holder's Option
Annually on June 15,
Commencing in 1983 and Due June 15, 2001 New York Stock Exchange
8.40% Debentures Maturing at Holder's Option
Annually on December 15, Commencing in
1986 and Due May 15, 2008 New York Stock Exchange
12 7/8% Debentures, Due August 1, 2013 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
At February 27, 1998, there were 54,365,830 shares outstanding of the
registrant's common stock. The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant was approximately $6.5
billion.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain portions of the Beneficial
Corporation Proxy Statement for the 1998 Annual Meeting of Stockholders
scheduled to be held May 21, 1998.
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<PAGE>
PART I
Item 1. BUSINESS.
General
Beneficial Corporation (Company) was organized under the laws of the
State of Delaware on May 9, 1929, through the consolidation of three companies
which had been operated under the same management. The Company traces its origin
to 1914 when its first consumer loan office was opened. The Company is a holding
company, subsidiaries of which are engaged principally in the consumer finance
and credit-related insurance businesses. Operations conducted by the
subsidiaries consist principally of a 1,234-office consumer finance network
located in the United States, Canada, Germany and the United Kingdom; Personal
Mortgage Corporation, a direct-response mortgage lending unit, which originates
home equity loans chiefly in the Northeast, Middle Atlantic and West Coast
regions; Beneficial National Bank USA, a specialized private-label credit card
bank located in Delaware; Beneficial Credit Services, which is engaged in sales
finance activities; Beneficial National Bank, a full service commercial bank
located in Delaware, which is also engaged in making income tax refund
anticipation loans; The Central National Life Insurance Company of Omaha and its
subsidiary, First Central National Life Insurance Company of New York, which
underwrite life and disability consumer credit insurance; Wesco Insurance
Company, which provides credit property insurance; BFC Insurance (Life) Limited
and BFC Insurance Limited, which are located in Ireland, underwrite life,
accident and health insurance; and Harbour Island Inc. and subsidiaries, which
are engaged in real estate development in Florida. The Company and its
subsidiaries employed approximately 10,200 people at December 31, 1997.
The Company's Board of Directors, at its February 1998 meeting,
authorized management of the Company to consider a full range of tactical and
strategic alternatives to enhance shareholder value. These alternatives include,
among other things, continuing to pursue or modifying the strategic focus
announced by the Company in October 1997, the merger or other business
combination or strategic alliance with another entity, or the sale of the
Company. At this point, a comprehensive effort to identify and pursue the most
meaningful course for the Company and its shareholders is well under way.
The recent decision by the Board of Directors reflects the culmination
of a comprehensive strategic analysis undertaken by management to identify ways
to build on core strengths and enhance shareholder value. After a full year of
detailed analysis, the Company announced a new strategic focus in October 1997
and a number of initiatives to support these efforts, including the sale of its
Canadian consumer finance subsidiary, its German consumer banking subsidiary and
the divestiture of certain real estate holdings in New Jersey and Florida. The
proceeds from the sales are intended to be used primarily on technological
improvements in the U.S. consumer financial services business. On February 10,
1998, the Company entered into a definitive agreement for the sale of its
Canadian operations and on March 2nd closed the transaction. The sale generated
a net aftertax gain in excess of $100 million.
Also, as part of the announced strategic initiatives, the Company plans
major re-engineering efforts, including new technology for the loan office
network in the United States. The Company believes that these enhancements
should significantly improve overall systems performance by providing more
responsive technology for the loan office staff. Included in the new
capabilities would be improved loan origination, collection and marketing and
solicitation with significantly-enhanced credit decisioning for the individual
loan offices. Although the Company believes that its re-engineering efforts
should ultimately improve efficiency and productivity, the Company also believes
that the costs associated with their implementation are likely to burden
near-term operating earnings before benefits begin to be realized in 1999.
Potential risks do exist, however, for actual costs of systems and process
improvements and the related benefits to be realized to differ significantly
from expectations.
For information concerning various factors that affected operations
during 1997, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" under Item 7. For pertinent geographical data, see
Note 22 to the Financial Statements.
<PAGE>
Operations
Consumer Finance Operations
Loan Office Network
During 1997, consumer loan subsidiaries operated through a loan office
network in the United States, Canada, Germany and the United Kingdom. In
addition to making consumer loans, the subsidiaries purchase loans and sales
finance contracts and sell certain insurance products. The number of loan
offices has grown noticeably in the last four years. In the United States, this
trend reflects the Company's re-entering smaller markets and inner-city urban
locations, with new, scaled-down offices, staffed by only two or three people.
The number of offices in the network for the past five years is shown in the
following table:
Number of Offices at December 31
--------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
United States................ 1,019 972 927 902 886
Canada....................... 109 109 105 102 103
United Kingdom............... 91 90 81 69 60
Germany...................... 15 15 17 17 17
----- ----- ----- ----- -----
Total.................... 1,234 1,186 1,130 1,090 1,066
===== ===== ===== ===== =====
In addition, consumer finance operations include two subsidiaries engaged
in private-label and bank credit card and sales finance activities and a
commercial bank and its eight branches in Delaware, including three
full-service branches open seven days and six nights a week.
Finance Receivables
The following table shows the composition of the finance receivables
portfolio at December 31 (in millions):
<TABLE>
<CAPTION>
Receivables Owned: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real Estate Secured.........$ 5,905 $ 5,932 $ 6,636 $ 6,860 $ 6,708
Personal Unsecured.......... 3,263 2,983 2,756 2,486 2,275
Credit Cards................ 4,685 4,596 3,084 2,062 1,243
Sales Finance Contracts..... 994 926 837 810 696
Commercial.................. 183 99 103 105 97
------- ------- ------- ------- -------
Total Owned........ 15,030 14,536 13,416 12,323 11,019
Receivables Sold with Servicing
Retained (all real
estate secured).............. 2,913 2,325 1,114 630 192
------- ------- ------- ------- -------
Total Owned
and Serviced....... $17,943 $16,861 $14,530 $12,953 $11,211
======= ======= ======= ======= =======
</TABLE>
Periodically, subsidiaries of the Company sell home equity loans to trusts
created as real estate mortgage investment conduits and retain servicing.
The Company also retains an economic interest in the residual cash flows of
such trusts. The subsidiaries sold $1,608 million of home equity loans in
1997, $1,919 million in 1996, $1,104 million in 1995 and $757 million in 1994.
Prior to 1993, subsidiaries sold $868 million.
<PAGE>
The table below discloses at December 31 international finance receivables
by country as translated into U.S. dollars (in millions):
<TABLE>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Canada.............$ 801 $ 714 $ 684 $ 605 $ 517
United Kingdom..... 1,943 1,344 1,003 867 666
Germany............ 283 389 431 421 402
----- ----- ----- ----- -----
Total......... $3,027 $2,447 $2,118 $1,893 $1,585
====== ====== ====== ====== ======
Percentage of
Receivables Owned.. 20.1% 16.8% 15.8% 15.4% 14.4%
===== ===== ===== ===== =====
</TABLE>
International Operations
During 1997, decisions were made to divest the Canadian and German
subsidiaries. See Note 3 to Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
under Item 7 for further details regarding these transactions.
As of December 31, 1997, the Canadian operation consisted of 109
offices located across Canada, although the provinces of Ontario, Quebec and
British Columbia represented 59% of total Canadian receivables. At
year-end 1997, approximately 39% of Canadian receivables were real estate
secured, 29% were personal unsecured, 24% were private-label credit cards and
8% were sales finance contracts. The 15% receivable growth in Canadian dollars
in 1997 was primarily in the private-label credit card and personal unsecured
portfolios. The Canadian operations reported C$18.1 million (US$13.1 million)
in net income for 1997, compared with C$20.2 million (US$14.8 million) in
1996 and C$18.5 million (US$13.5 million) in 1995. The decrease in 1997
earnings was the result of increased operating expenses, primarily in marketing.
Net chargeoffs increased to C$27.5 million (US$19.9 million) in 1997 from
C$26.2 million (US$19.2 million) in 1996, and decreased as a percentage of
average receivables outstanding to 2.66% from 2.84% in 1996. Contractual
delinquency decreased to 2.36% at year-end 1997 from 2.49% a year earlier.
The United Kingdom operation offers consumer loans, sales finance
contracts, credit card and deposit services through 91 offices in the
United Kingdom. The U.K. operation is a leading issuer of Visa cards to
United Kingdom affinity groups and also has established a presence in the
co-branded credit card market. Its centralized secured lending operation
remains very profitable and recorded a record growth year as activity in the
housing market picked up. The presence in this market was doubled toward
the end of the year by the acquisition of Endeavour Personal Finance Ltd.,
a provider of secured personal loans, from Lloyds TSB Group PLC. This
acquisition makes Beneficial a leading provider of finance in the indirect
secured lending market in the United Kingdom and gives increased
opportunity for economies of scale in this segment of Beneficial's operations.
After this acquisition, centralized secured lending represents
(pound)336 million, or 29%, of United Kingdom receivables. Total receivables
increased by (pound)227 million, or 29%, on an internal basis during 1997,
and by (pound)392 million, or 50%, with the Endeavour acquisition included.
Total receivables at year-end were in excess of (pound)1 billion , with a 30%
growth in the number of accounts and the number of customers exceeding half
a million. Over the past four years, receivables have increased at a 27%
compound growth rate. Profits were (pound)8.9 million (US$14.5 million) in 1997,
up from (pound)7.1 million (US$11.0 million) in 1996 and down from (pound)10.4
million (US$16.4 million) in 1995. Examining profitability measures as a
percentage of average receivables, the 1.10% reduction interest margin was
more than offset by a reduction in the level of operating expenses of .89% and a
reduction of .28% in the level of bad costs. In addition, all United Kingdom
credit insurance is issued by Beneficial's Irish insurance subsidiaries,
which recorded 1997 aftertax profits of (pound)8.8 million versus (pound)3.4
million in 1996. Net chargeoffs increased to (pound)15.5 million (US$25.4
million) in 1997 from (pound)13.9 million (US$22.1 million) in 1996; likewise,
as a percentage of average receivables outstanding, net chargeoffs decreased to
1.73% from 1.97% in 1996. Contractual delinquency increased to 4.60% at
year-end 1997 from 3.75% at the end of 1996.
<PAGE>
The German consumer banking subsidiary's name was changed from
BFK Bank AG to Beneficial Bank AG (BBAG or Bank) on October 1, 1996. The Bank
offers consumer loans and accepts deposits through 15 offices in Germany. In
1997, Germany reported a pretax loss of $6.7 million versus virtual breakeven
results in 1996 and a loss of $26 million in 1995. The loss in 1995 was the
result of charges relating to the Fundus Grundstuecks GmbH (Fundus) portfolios.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," under Item 7 and Note 3 to the Financial Statements for further
details. As mentioned above, the Company anticipates the sale of Germany to
occur in the short-term. A loss of $27.8 million was recognized in 1997
after consideration of a $31.0 million tax benefit, primarily generated by
the expected utilization of capital losses. However, if the business is
liquidated by other means, additional losses may be possible.
Geographic Distribution
Finance receivables in each of the ten jurisdictions (U.S. and
international) with the highest percentages of total owned receivables were as
follows:
<TABLE>
<CAPTION>
Jurisdiction Percent
- ------------ -------
<S> <C>
California....................................................... 16.4%
United Kingdom................................................... 12.9
New York......................................................... 6.4
Canada........................................................... 5.3
Pennsylvania..................................................... 4.6
Texas............................................................ 4.6
Ohio............................................................. 3.6
Florida.......................................................... 3.5
New Jersey....................................................... 3.4
Illinois......................................................... 3.0
</TABLE>
Portfolio Distribution
The following table shows the distribution by size of real estate
secured and personal unsecured loans made during the respective years:
<TABLE>
<CAPTION>
Principal Amount of Loans Made in Each Size Class
as a Percent of Total Principal Amount
-------------------------------------------------------------------
Years Ended December 31
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Under $ 5,000.... 41.0% 40.9% 42.0% 38.8% 35.2%
5,001 - 50,000.... 29.3 28.8 28.9 26.7 26.0
50,001 - 100,000.... 14.0 15.2 14.4 16.9 18.7
Over 100,000.... 15.7 15.1 14.7 17.6 20.1
</TABLE>
<PAGE>
Credit Quality Measures
Certain data regarding loss experience of finance receivables on an
owned basis are as follows:
- --------------------------------------------------------------------------------
(in millions, except percentages)
<TABLE>
<CAPTION>
Net Allowance Allowance
Gross Chargeoffs Net for Credit for Credit
Amount (after Chargeoffs Losses at Losses to
of Receivables offsetting to Average End of Net
Year Charged Off recoveries) Receivables Year Receivables
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 $468.2 $412.2 $559.9 2.85% 3.73%
1996 363.3 316.9 498.2 2.26 3.43
1995 247.2 209.4 406.1 1.64 3.03
1994 183.3 148.7 331.6 1.28 2.69
1993 176.4 149.1 279.0 1.42 2.53
- --------------------------------------------------------------------------------
</TABLE>
Note: 1995 and 1994 do not include $15.0 million and $38.0 million,
respectively, in chargeoffs related to German liquidating loan portfolio, which
would increase net chargeoffs to average gross receivables to 1.76% in 1995 and
1.61% in 1994.
The allowance for credit losses at year-end 1997 covered net chargeoffs
1.36 times, compared with 1.57 times a year earlier. In addition to the
allowance for credit losses, the balance in dealer reserves at December 31, 1997
and 1996, was $8.1 million and $8.6 million, respectively. The following tables
summarize delinquency and chargeoff percentages by product. Amounts are
expressed as a percentage of owned receivables except where noted.
<TABLE>
<CAPTION>
Delinquency By Major Loan Product
------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real Estate Secured Loans*....... 3.03% 2.13% 2.17% 1.88% 2.13%
Personal Unsecured Loans......... 5.86 5.81 5.28 4.71 4.41
Credit Cards..................... 4.47 3.23 2.76 1.78 2.25
Sales Finance Contracts........... 4.17 3.62 2.89 2.12 2.06
Overall........................... 4.24% 3.38% 2.98% 2.46% 2.67%
*The percentage is presented on a managed receivable basis.
</TABLE>
<TABLE>
<CAPTION>
Net Chargeoffs By Major Loan Product
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real Estate Secured Loans*.. 0.64% 0.65% 0.81% 0.76% 0.91%
Personal Unsecured Loans.... 4.99 4.55 3.79 3.03 3.36
Credit Cards................ 4.84 3.81 2.73 2.59 4.15
Sales Finance Contracts..... 2.88 2.53 2.10 1.67 1.76
Note: 1995 and 1994 exclude the effect of the $15.0 million and $38.0 million
German liquidating loan portfolio charges, respectively.
*Includes losses on disposition of foreclosed property, including holding costs.
The percentage is presented on a managed receivables basis.
</TABLE>
Chargeoffs and delinquencies are generally higher during periods of
adverse economic conditions, such as rising unemployment, falling housing
values, and increased inflationary pressures, which affect the ability of the
borrower to repay. It is the policy of the subsidiaries generally not to
renew delinquent accounts. Receivables considered to be uncollectible or to
require disproportionate collection costs are charged to the allowance for
credit losses, but collection efforts are generally continued. For further
discussion on chargeoffs and delinquency, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under Item 7.
<PAGE>
Lending Policies
Loans on both a secured and unsecured basis are made after a thorough
credit investigation and a favorable evaluation as to the borrower's willingness
and ability to repay. Real estate secured loans are either closed-end or
revolving, and rates are either variable or fixed. Of the portfolio of loans
owned at the end of 1997, approximately 59% of real estate secured loans were
fixed-rate and 41% were variable-rate. Real estate secured loans are subject to
carefully monitored underwriting of both the borrower's ability to repay and the
independent professionally appraised market value of the property. The loans
are well-documented consumer loans based on the creditworthiness of the
borrower, with the collateral of the real estate providing additional security.
U.S. consumer finance subsidiaries will generally lend to a maximum of only
75% (including the existing first mortgage) of the appraised value of the
real estate as determined by independent appraisers on second mortgage loans.
In the case of a first mortgage, the subsidiaries will generally lend to
only 80%. Beginning in 1998, U.S. loan offices will be permitted to go to 90% on
both first and second mortgages, although subject to stringent underwriting
requirements and improved risk-based pricing guidelines. In addition,
a rigorous discipline of credit approval is enforced regarding borrower
debt-to-income ratios and overall consumer credit quality. Most real estate
loans must be approved by regional management, as well as by the originating
loan office manager. Loans above $250,000 generally require additional
approval by senior operating management at headquarters. Independent appraisers
are evaluated by regional management, as well as by the loan office manager.
Closed-end loans and revolving loans made under consumer finance
acts generally are not secured by real estate. Closed-end loans generally do
not exceed a 60-month term, and the interest rate may be limited according to
the size of the loan. Revolving loans are written with fixed rates. Generally,
loans under the consumer finance acts are made at the maximum rates allowable.
Experience indicates that a borrower who qualifies for additional credit
often obtains a new loan in an amount larger than his existing balance. A
portion of the proceeds of the new loan is applied to extinguish the existing
balance.
Sales Finance and Credit Card Activities
Sales finance activities conducted by subsidiaries featuring the name
"Beneficial Credit Services" represent an important source of new loan
customers for the consumer finance subsidiaries. In 1997, roughly 50% of
new loan customers for other consumer finance products originated as sales
finance customers. Beneficial Credit Services programs are marketed through
the loan office network to smaller local and regional merchants.
Beneficial National Bank USA (BNB USA) is a specialized,
private-label credit card bank located in Wilmington, Delaware. BNB USA
offers customized private-label and co-branded revolving charge programs
to large regional and national retailers, offering their retail customers open
lines of credit. Additionally, BNB USA provides marketing and cardholder
services designed to meet each retailer's needs. Targeted retailers include
electronics, furniture and apparel retailers, as well as home centers,
warehouse clubs and general merchandisers. Outstanding receivables totaled
$3,750 million at year-end 1997, down slightly from $3,870 million at the end
of 1996 and up from $2,545 million at the end of 1995. During 1997,
diversification of the BNB USA portfolio increased as the three
largest merchants - Best Buy Company, Inc., Rhodes Furniture (a division of
Heilig Meyers) and CompUSA - comprised 69% of the portfolio at year-end versus
75% a year earlier. The two newest programs, Costco Inc. and Kmart Corporation,
grew substantially to $609 million, or 16% of total outstandings, from
$360 million, or 9% of year-end 1996 outstandings.
The composition of the portfolio has also changed with respect to the
portion of standard revolving versus deferred financing receivables. At the
end of 1996, 56% of outstanding receivables were in a deferred financing
plan. One year later, this figure has declined to 41%. This provides BNB USA
with a higher revolving finance base with higher yields, and also reduces
BNB USA's exposure to interest-rate risk should interest rates suddenly
increase.
<PAGE>
After having a breakeven year in 1996, which was dampened by $65 million of
up-front loan loss provisioning on the strong receivables growth experienced in
1996 and $10 million of start-up costs relating to programs for Kmart and
PriceCostco, BNB USA enjoyed a dramatic recovery in earnings in 1997.
Accordingly, BNB USA earnings aftertax rose to $46 million in 1997 versus a
breakeven in 1996 and $21.1 million in 1995. Reflecting the leveling off of
receivable growth, coupled with the maturation of the portfolio and increasing
consumer bankruptcy, BNB USA experienced increases in loan delinquency and
chargeoffs. Net chargeoffs increased to $193.2 million in 1997 from $118.8
million in 1996. As a percentage of average receivables outstanding, net
chargeoffs rose to 5.34% in 1997 from 4.00% in 1996. Similarly, contractual
delinquency increased to 4.87% at year-end 1997 from 3.46% at December 31, 1996.
Personal Mortgage Corporation
Personal Mortgage Corporation (PMC), which began operations in
July 1991, provides consumers with fast action on home equity loan
applications, all by telephone, with an initial answer usually within 24 hours.
The menu of real estate products offered by PMC is wider than typically
offered in a loan office and therefore can meet the needs of a broader
demographic base. Although PMC expanded operations into four West Coast
markets in 1996, the decision was made to withdraw from these very high-cost
markets, effective October 1, 1997. With passage of a constitutional
amendment in Texas making available home equity loans for the first time, PMC
began taking applications in the state on November 6, 1997. In 1997, PMC
funded 4,320 loans for more than $200 million, a 7% improvement over 1996 in
number of loans. Approximately 89% of loans funded were retained by Beneficial
subsidiaries in 1997. The remainder were sold to other originators who
provide products to service niches outside of Beneficial's traditional customer
base. PMC made an aftertax profit contribution of $0.6 million for 1997,
down from $1.5 million in 1996 and $1.7 million in 1995.
Commercial Banking
Beneficial National Bank (BNB or Bank), based in Wilmington, Delaware,
is the Company's commercial banking subsidiary. Through its eight branches,
including three full-service, in Delaware, BNB provides a full range of
commercial and consumer banking services to small- and medium-sized
businesses and to consumers in Delaware and surrounding markets. Also, BNB,
in conjunction with affiliated companies, originates and services a portion
of the tax refund anticipation loans (RALs) issued through H&R Block and
certain of its franchisees. In December 1996, BNB introduced a nationwide
on-line loan program that allows consumers to apply for unsecured loans
through a personal computer and receive a decision in two minutes or less. In
addition, the Bank provides significant corporate cash management and
treasury services to the Company and its operating subsidiaries. All
disbursements through the consumer finance subsidiaries' loan office network,
as well as all checks written by customers on revolving credit lines originated
through the loan office network, are drawn on BNB.
At December 31, 1997, total loans outstanding were $189 million, up
from $176 million in 1996 but down from $227 million in 1995. The Bank's loan
portfolio is composed of 47% commercial and industrial (C&I) loans and 53%
consumer loans and credit card receivables. A large portion of the C&I loans
are commercial mortgage loans or have real estate collateral as additional
security for cash flow-oriented business loans. Total deposits at December 31,
1997 were $268 million, down from $319 million at December 31, 1996 and $321
million at December 31, 1995.
The Bank's earnings include processing fees for originating and
servicing the RAL program. These earnings have also been included with the
earnings reported in the tax refund anticipation loan program section that
follows, so that all earnings related to RAL can be set forth separately.
BNB's net income excluding RAL processing fees was $6.3 million in
1997, down from $6.8 million in 1996 and $7.0 million in 1995. The decrease in
earnings in 1997 resulted mainly from lower interest income compared with 1996
and 1995, respectively.
<PAGE>
Refund Anticipation Loan Program
Through BNB, RALs are made to consumers entitled to a tax refund who
electronically file their returns with the Internal Revenue Service (IRS)
through either H&R Block's (Block) electronic filing system or systems of other
independent electronic filers approved by the IRS. After the return is
processed, refund proceeds are directly transferred from the IRS via electronic
funds transfer to a unique customer loan/deposit account at BNB, with the
proceeds applied to repay the outstanding loan. In early February 1995, the IRS
began delaying the payment of the earned income tax credit (EITC) portion of the
tax refund payable to BNB on returns filed in 1995, and subsequently confirmed
that, when finally released, the held earned income portion would be sent
directly to the taxpayer, rather than to BNB as directed by the taxpayer. This
IRS action created serious collection problems for BNB as related credit losses
totaled $96 million. Of the $314 million in RALs affected by the IRS's action,
$248 million, or 79%, was recovered by year-end 1996. For discussion on the BNB
agreement with H&R Block Tax Services, Inc., see "Management Discussion and
Analysis of Financial Condition and Results of Operations" under Item 7.
The RAL program ended 1997 with aftertax income of $43.7 million, down
from aftertax income of $69.8 million in 1996 and up from an aftertax loss of
$37.9 million in 1995. As mentioned in the Commercial Banking section,
income includes BNB processing fees. Gross revenues in 1997 grew to $184.8
million from $141.3 million in 1996 and $152.6 million in 1995. The number of
RALs made in 1997 grew to 2,960,000 from 2,650,000 in 1996 and 2,717,000 in
1995. The average loan amount was $1,392 in 1997 up from $853 in 1996 and
$1,162 in 1995. The increase in RALs made and the average loan amount is the
result of the Company's decision to resume lending on the portion of tax refunds
attributable to the EITC in 1997, primarily to prior customers in good standing.
Insurance Operations
Operations of the Beneficial Insurance Group (BIG) consist primarily
of The Central National Life Insurance Company of Omaha (CNL) and its
subsidiary, First Central National Life Insurance Company of New York (FCNL),
which underwrite life and disability consumer credit insurance. In mid-1993,
BIG acquired Wesco Insurance Company (Wesco), a property/casualty insurance
company licensed in 41 jurisdictions. The addition of Wesco allowed BIG
to directly underwrite the credit property coverage for the Beneficial consumer
finance network. In addition, insurance agency relationships are maintained
with several outside insurance companies that offer selected non-credit
related products. These products are marketed chiefly through the domestic
Beneficial loan office network. Agency operations earn a commission, while the
insurance risk of loss rests with the insurance carrier. In October 1995, BFC
Insurance Limited, located in Ireland, began to provide credit-related life,
accident and health insurance products on United Kingdom originations.
CNL and its subsidiary, FCNL, rank among the industry leaders in
the highly specialized consumer credit insurance marketplace, offering both
life and disability coverages. The credit products are generally marketed
through the U.S. consumer finance subsidiary network. During 1997, A.M.
Best again affirmed its rating of A+ (Superior) for CNL.
Credit life insurance policies typically cover the life of the
borrower and provide for the full payment of the outstanding balance in the
event of the insured's death. Credit accident and health insurance policies
provide for the payments of the installments as they become due on the insured's
obligation during a period of unemployment or disability due to illness or
injury. Credit property insurance is written to protect the property pledged
as security for the obligation. Purchases of credit life and credit accident
and health are entirely voluntary and at the borrower's request.
Additionally, purchases of property insurance are also at the borrower's
request, except for property damage coverage for property pledged as collateral
if the borrower does not provide evidence of coverage with another insurance
carrier.
<PAGE>
In late 1995, the decision was made to exit the annuity business
based on the conclusion that this product line could not offer acceptable
profitability or a strategic fit with the core business. Further, recent
research indicated that the Beneficial core consumer is likely to remain a
borrower well into their mature years. In March 1996, CNL effectively
disposed of the $957 million annuity portfolio to SunAmerica Life Insurance
Company through a co-insurance agreement. As a result of the disposition,
there was an $8.4 million gain after consideration of related taxes and a
substantial upstream dividend of $124 million was paid to Beneficial
Corporation at year-end 1996. In June 1997, the co-insurance agreement with
Great Southern Life for the ordinary life block disposition was completed
and CNL disposed of approximately $40 million in assets (cash and policy loans)
resulting in an aftertax gain of $4.7 million. At year-end 1997, the Insurance
Group paid upstream dividends to Beneficial Corporation of $57.5 million.
BIG's total net premiums written in the U.S., largely by CNL, were
$164.5 million in 1997, down 3% from $169.2 million in 1996. Total net premiums
written in Ireland were (pound)35.0 million ($57.5 million) in 1997, up from
(pound)27.5 million ($43.0 million) in 1996. Total credit premiums written in
the U.S. were $125.3 million in 1997 compared with $159.7 million in 1996.
The following table sets forth information concerning the
consolidated insurance operations (U.S. and Ireland) (in millions):
<TABLE>
<CAPTION>
Years Ended December 31
<S> <C> <C> <C>
Premiums Earned 1997 1996 1995
---- ---- ----
Consumer Finance Subsidiaries:
Credit-related.................... $162.4 $133.5 $104.8
Other............................. 10.9 3.9 3.9
Independent:
Credit-related.................... 5.7 20.8 23.2
Ordinary.......................... 3.2 7.7 8.8
All Other............................ (4.4) 2.8 12.0
------ ------ ------
Total Premiums Earned............. $177.8 $168.7 $152.7
====== ====== ======
Operating Income
Consumer Finance Subsidiaries:
Credit-related................... $ 74.6 $ 51.3 $ 39.1
Agencies......................... 20.7 18.0 15.1
Other............................ 2.2 2.9 3.4
------ ------ ------
Total......................... 97.5 72.2 57.6
------ ------ ------
Independent:
Credit-related................... (1.0) (2.8) (1.5)
Ordinary......................... 6.2* 0.9 1.0
Annuity.......................... .1 22.4* 0.6
Other............................ (0.1) (0.4) (0.5)
------ ------ ------
Total......................... 5.2 20.1 (0.4)
------ ------ ------
All Other (primarily unallocated
investment income and
capital gains)................... 18.8 17.6 20.2
------ ------ ------
Total Operating Income........ $121.5 $109.9 $ 77.4
====== ====== ======
Net Income $ 82.9 $ 74.2 $ 50.6
====== ====== ======
*Includes gain on disposition of annuity-related assets.
</TABLE>
Investment income (net of interest paid on annuities) decreased 15% to
$36.2 million in 1997 from $42.7 million in 1996 and $52.1 million in 1995.
Investment yield increased to 6.72% at the end of 1997 compared with 6.56% in
1996. The decline is due to the disposition of the annuity block and the
investment portfolio. The market value of investments increased to $487 million
at year-end 1997 from $479 million in 1996.
<PAGE>
Real Estate Investments
Harbour Island is a 177-acre, mixed-use real estate development
attractively located adjacent to the southern end of the Central Business
District in Tampa, Florida. The island is connected to Tampa by two bridges. The
Development of Regional Impact plan for full development of the island has been
approved and provides for commercial, hotel, residential and retail space.
At year-end 1997, the investment in and advances to Harbour Island
amounted to $67 million, down from $80 million at the end of 1996. Some of the
more significant assets of Harbour Island include approximately 53 acres of
undeveloped land, a 300-room "four star" hotel (currently under lease to Wyndham
Hotels), and a mixed-use office/retail operation currently 87% leased. This
reduction in the Company's investment was largely due to the sale of two parcels
of land for residential development: a four-acre parcel acquired by Post
Properties of Atlanta for a 206-unit, upscale apartment complex, and a one-acre
parcel acquired by Destjil International for development of a luxury mid-rise
condominium project. In addition, the Harbour Island Athletic Club was sold to a
major national athletic club owner and manager. These sales, which exceeded $7.3
million in proceeds, have spurred additional interest in the remaining
undeveloped land.
On a fully debt-funded basis, Harbour Island incurred a pretax
operating loss of $23.0 million for 1997, compared with pretax losses of $18.7
million in 1996 and $19.5 million in 1995. The project is charged interest on
all net cash advanced since inception at Beneficial's annual overall melded
cost-of-funds rate. Accordingly, nearly all of the losses in recent years
represent interest cost to carry and non-cash depreciation charges. The 1997
results also reflect a writedown from the anticipated loss on the sale of a
People Mover System and its infrastructure. As the remaining assets are sold and
substantial cash inflows are received, Harbour Island's losses should decline.
Other Real Estate
Subsidiaries of the Company also own nearly 700 acres of real estate
adjacent to the Peapack, New Jersey, office complex. Including buildings, this
real estate is carried at approximately $15 million. In January 1998, the
Company entered into contracts for the sale of approximately 580 acres of this
real estate that includes the Hamilton Farm property in Bedminster, New Jersey,
and adjacent property located in Peapack, New Jersey. The sale is subject to due
diligence inspections, investigations of the property and receipt of all
necessary governmental approvals and permits by the buyer.
Financing
The Company and its subsidiaries obtain funds both in the United States
and in foreign markets through sales of long-term debt securities and commercial
paper and through short-term borrowings on unsecured lines of credit from banks.
At December 31, 1997, long-term debt totaled $8,887 million (including $4,175
million of variable-rate medium-term notes) and short-term borrowings aggregated
$4,585 million (consisting of $3,770 million of commercial paper and $815
million of bank borrowings). In addition, deposits payable totaled $555 million.
Lines of credit are used to support commercial paper borrowings by the Company
and its subsidiaries. At December 31, 1997, the total of all lines of credit was
$4,307 million. In 1995, in support of commercial paper issuances, the Company
concluded a $3 billion, five-year, syndicated revolving credit agreement, which
replaced the various one- and three-year bilateral agreements. The unused
portion of all lines of credit was $3,851 million at December 31, 1997. The
overall, weighted average annual interest cost, including the costs of
maintaining lines of credit, of all short- and long-term borrowings of the
Company and consolidated subsidiaries was 6.45% ,6.54%, 7.22%, 6.57%, and 6.77%
in 1997, 1996, 1995, 1994 and 1993, respectively.
Continuously offered medium-term notes (MTNs) are the primary vehicle
used by the Company to place senior-term debt. During 1997, $1.6 billion of
variable-rate MTNs were sold at an all-in cost only slightly above the Company's
cost of commercial paper borrowings. The average maturity was 3.0 years. In
addition, fixed-rate
<PAGE>
MTNs provided $.8 billion in funds during 1997, at an average coupon of 6.68%
and a weighted average maturity of 6.4 years. The Company had available under a
shelf registration with the Securities and Exchange Commission $2.1 billion of
unissued debt securities at the end of 1997.
Additionally, in July 1997, the Company, together with Beneficial Bank
PLC and Beneficial Canada Inc., the Company's United Kingdom and Canadian
operations, inaugurated a US$2 billion multi-issuer Euro-MTN (EMTN) program to
augment the Company's domestic MTN platform. In gaining this added access to the
global markets, the EMTN program provides additional flexibility, issuance
options and cost savings. Thus far, Beneficial Bank PLC has issued 10 notes for
(pound)134 million, one note for US$75 million and one note for DM33 million,
all achieving attractive variable-rate financing with a weighted-average
maturity of 4.7 years.
Beneficial Corporation guarantees the borrowings of its Canadian,
United Kingdom and German subsidiaries, thereby increasing such subsidiaries'
access to local capital markets and minimizing interest costs for these foreign
operations. The Canadian operation is funded through commercial paper borrowings
and notes sold in the Canadian financial market. The United Kingdom operation
generates a modest amount of deposits but is chiefly funded through bank
borrowings, sterling commercial paper sales, and medium-term debt placements.
The German consumer banking subsidiary is funded chiefly with deposits.
Regulations
Real estate secured loans are supervised under and regulated by state
legislation, which generally requires that the lender be licensed. Most states
do not limit rate, but rate is a competitive factor whether limited or not.
While the statutes of several states place no maximum limit on the contractual
term of closed-end loans secured by real estate, the consumer finance
subsidiaries generally limit loans of this type to periods ranging from 60 to
180 months. The consumer finance subsidiaries also operate under consumer
finance acts (small loan statutes), which typically require that the lender be
licensed. Licenses are subject to revocation for cause. The subsidiaries also
make non-real estate secured installment loans under statutes other than
consumer finance acts. The banking subsidiaries are subject to regulations of
certain federal agencies and undergo periodic examination by these regulatory
authorities.
The insurance operations are subject to regulation in the jurisdictions
in which they are authorized to conduct business. Generally, such laws cover,
among other things, types of insurance that may be sold, policy reserve
requirements, permissible investments, premiums charged, limitations on the
amount of dividends payable by any insurance company and guidelines and
standards with respect to dealings between insurance companies and affiliates.
In the United States, most states have also enacted insurance holding company
legislation pertaining to insurance companies and their affiliates.
The consumer finance subsidiaries are required to comply with the
Federal Truth-in-Lending Act, which requires, among other things, disclosure of
pertinent elements of consumer credit transactions, including the finance
charges and the comparative costs of credit expressed as an annual percentage
rate. In addition, the subsidiaries are also required to comply with the Federal
Equal Credit Opportunity Act (which prohibits discrimination in any aspect of a
credit transaction on the basis of sex, marital status, race, color, religion,
national origin, age, receipt of income from a public assistance program or the
good faith exercise of rights under the Federal Consumer Credit Protection Act)
and with the Real Estate Settlement Procedures Act.
The products and operations of the international subsidiaries are
subject to regulations in their respective countries. The Canadian operations
are subject to federal and provincial legislation which regulates various
aspects of its operations, including disclosure of contractual terms, collection
practices and creditor remedies. The United Kingdom subsidiary is an authorized
institution under the Banking Act 1987 and, as such, is subject to supervision
by the Bank of England. As a fully-licensed German Bank, Beneficial Bank AG is
regulated by the Federal German Banking Act and other Federal and consumer
legislation. The Bank is also a member of the Deposit Insurance System for
private German banks which provides specific standards for its members.
Competition
In the consumer finance industry, the Company's subsidiaries face
strong competition from banks, savings institutions, credit unions, finance
companies and other financial institutions. Rate competition among finance
companies is minimal for small consumer loans. The subsidiaries compete for
these loans primarily on the basis of name recognition, service and reputation.
There is considerable rate competition within the home equity loan market.
Competition has accelerated in recent years, as smaller companies have
aggressively entered the sub-prime market using securitization as essentially
their sole funding tool. This approach has reduced the cost of capital and
lowered industry entry barriers. In seven years, BNB USA has grown to one of the
nation's largest private-label credit card banks. This fiercely competitive
business is based upon service, pricing and product flexibility. In addition,
the business of the subsidiaries may be adversely affected in the future by
unforeseen factors, such as rate reductions, credit restrictions, economic
conditions, judicial decisions or legislative acts.
Item 2. PROPERTIES.
The Company and its subsidiaries do not hold any substantial amount of
property other than the real estate investments described previously and
properties acquired through a security interest. Substantially all of the
property utilized by the Company and its subsidiaries are held under lease. Loan
offices generally have lease terms of five years with a renewal option for a
like term. Most of the leases provide for cancellation rights after two years.
Information as to minimum rental commitments on leased property and periods of
expiration is contained in Note 26 to the Financial Statements.
Item 3. LEGAL PROCEEDINGS.
From time to time, the Company and its subsidiaries are named as
parties to various legal proceedings resulting from its activities in the
ordinary course of business. These legal proceedings may be purported class
actions or individual actions. While it is impossible to estimate with certainty
the ultimate legal and financial liability with respect to such actions, the
Company believes that the amount of such liabilities will not result in monetary
damages which in the aggregate would have a material adverse effect on the
financial position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Beneficial Corporation's Common Stock is listed on the New York Stock
Exchange. The aggregate amounts of common dividends paid during 1997 and 1996
were $115.5 million and $105.3 million, respectively. As of February 27, 1998,
Common Stock was held of record by 13,458 stockholders. Additional information
pertaining to the Company's Common Stock is set forth below:
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C>
3/31 6/30 9/30 12/31 Total
1997
Dividends per Common Share... $ .52 $ .52 $ .57 $ .57 $2.18
Market Price of Common Stock:
High..................... 76 72-1/4 78-1/8 84-1/8
Low...................... 61 59-1/2 69 73-3/8
Close.................... 64-5/8 71-1/16 76-3/16 83-1/8
1996
Dividends per Common Share... $ .47 $ .47 $ .52 $ .52 $1.98
Market Price of Common Stock:
High..................... 58-3/8 61-1/4 59-1/2 66-1/2
Low...................... 43-1/2 54-1/8 50-7/8 57-1/8
Close.................... 57-5/8 56-1/8 57-1/2 63-3/8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 6. SELECTED FINANCIAL DATA.
BENEFICIAL CORPORATION AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(in millions, except where noted)
<S> <C> <C> <C> <C> <C>
During The Year 1997 1996 1995 1994 1993
- --------------- ---- ---- ---- ---- ----
Net Income
Income from Continuing
Operations (a)..... $ 253.7 281.0 150.5 177.7 186.0
Extraordinary Loss............ $ -- -- -- -- (2.8)
Net Income..................... $ 253.7 281.0 150.5 177.7 183.2
Diluted Earnings per Common
Share (dollars)
Continuing Operations (a)...... $ 4.54 5.05 2.71 3.26 3.43
Extraordinary Loss............. $ -- -- -- -- (.05)
Diluted Earnings per Common
Share......... $ 4.54 5.05 2.71 3.26 3.38
Average Number of Common Shares
Outstanding.. 54.7 54.6 53.7 53.0 52.8
Dividends Paid per Common Share
(dollars).... $ 2.18 1.98 1.80 1.62 1.43
Gross Revenue................... $ 2,955.7 2,771.9 2,398.2 2,137.4 1,957.5
Interest Expense................ $ 855.0 812.8 816.2 673.6 633.2
Lending Spread.................. $ 1,462.1 1,330.7 1,198.4 1,080.1 974.2
Lending Spread as a % of Average
Receivables........... 10.11 9.84 9.71 9.65 9.62
Provision for Credit Losses (b). $ 485.3 398.8 280.2 198.7 171.8
Total Expenses.................. $ 2,582.4 2,313.4 2,127.8 1,811.3 1,642.3
Income before Income Taxes...... $ 373.3 458.5 270.4 326.1 315.2
% of Monthly Cash Principal
Collections to
Average Monthly Balances..... 6.66 5.51 5.03 4.52 3.85
% of Finance Receivables Charged Off
(less recoveries) to Average
Monthly Balances (b)... 2.85 2.26 1.64 1.28 1.42
At Year-End
Finance Receivables........ $15,030.2 14,536.2 13,416.2 12,322.6 11,018.7
Number of Accounts......... 7.4 7.0 5.1 4.4 3.5
Allowance for Credit Losses. $ 559.9 498.2 406.1 331.6 279.0
Total Assets............... $17,645.1 16,931.2 15,737.3 14,376.6 12,916.9
Short-Term Debt............ $ 4,585.1 4,169.3 4,023.9 3,473.9 2,934.4
Long-Term Debt............. $ 8,887.2 8,631.1 7,792.5 7,324.8 6,754.8
Shareholders' Equity....... $ 1,772.3 1,694.8 1,503.0 1,400.3 1,312.2
Book Value per Common Share
(dollars)................ $ 30.53 28.79 25.80 24.34 22.78
% of Allowance for Credit
Losses to Finance
Receivables............. 3.73 3.43 3.03 2.69 2.53
% of Finance Receivables with
Delinquency Two Months and
Greater on a Contractual
Basis....... 4.24 3.38 2.98 2.46 2.67
Holders of Common Shares
(whole numbers)......... 13,800 14,200 14,800 15,300 15,300
Employees (whole numbers).. 10,200 9,700 9,000 8,500 8,200
Consumer Finance Offices
(whole numbers)......... 1,234 1,186 1,130 1,090 1,066
(a) 1997 reflects a $27.8 aftertax ($.51 per share) provision for loss on
disposal of the Company's German consumer banking subsidiary and $18.7 ($.34
per share) of aftertax special items relating to additional legal reserves,
a writedown of certain real estate investments and costs associated with the
Company's re-engineering efforts. Income from continuing operations includes
a provision for credit losses related to the German liquidating portfolio of
$15.0 ($.28 per share) in 1995 and $38.0 ($.72 per share) in 1994, and a
$5.9 aftertax ($.11 per share) provision for restructuring in 1995.
(b) 1995 and 1994 do not reflect $15.0 (0.12% of average monthly balances) and
$38.0 (0.33% of average monthly balances), respectively, of credit losses
related to the German liquidating loan portfolio.
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis provides information that
management believes to be relevant to an understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and the
notes thereto.
Financial Condition
The Company's Board of Directors, at its February 1998 meeting,
authorized management of the Company to consider a full range of tactical and
strategic alternatives to enhance shareholder value. These alternatives include,
among other things, continuing to pursue or modifying the new strategic focus we
announced in October 1997, the merger or other business combination or strategic
alliance with another entity, or the sale of the Company. At this point, a
comprehensive effort to identify and pursue the most meaningful course for the
Company and its shareholders is well under way. We cannot predict the outcome of
the process, nor which, if any, of the alternatives will be recommended.
The recent decision by the Board of Directors reflects the culmination
of a comprehensive strategic analysis undertaken by management to identify ways
to build on core strengths and enhance shareholder value. After a full year of
detailed analysis, the Company announced a new strategic focus in October 1997
and a number of initiatives to support these efforts, including the sale of its
Canadian consumer finance subsidiary, its German consumer banking subsidiary and
the divestiture of certain real estate holdings in New Jersey and Florida. The
proceeds from the sales are intended to be used to repurchase stock and invest
in technological improvements in the U.S. consumer financial services business.
On February 10, 1998, the Company entered into a definitive agreement for the
sale of its Canadian operations and on March 2nd closed the transaction. The
sale generated a net aftertax gain in excess of $100 million.
Also, as part of the announced strategic initiatives, the Company plans
major re-engineering efforts, including new technology for the loan office
network in the United States. The Company believes that these enhancements
should significantly improve overall systems performance by providing more
responsive technology for the loan office staff. Included in the new
capabilities would be improved loan origination, collection and marketing and
solicitation with significantly-enhanced credit decisioning for the individual
loan offices. Although the Company believes that its re-engineering efforts
should ultimately improve efficiency and productivity, the Company also believes
that the costs associated with their implementation are likely to burden
near-term operating earnings before benefits begin to be realized in 1999.
Potential risks do exist, however, for actual costs of systems and process
improvements and the related benefits to be realized to differ significantly
from expectations.
Reflecting two sales by subsidiaries of the Company of $1,608 million
of variable-rate revolving home equity lines of credit through securitizations
in the capital markets, the Company's leverage (the ratio of interest-bearing
debt to total equity) decreased to 7.91 times at the end of 1997 from 7.93 times
at the end of 1996. The Company also completed two securitizations for a total
of $1,919 million in 1996, and is planning further securitizations of comparable
amounts during 1998.
The Company believes sufficient cash resources exist to support its
long-term growth strategies. These resources include cash generated by
operations (including repayments of receivables) and the Company's ability to
obtain additional financing through short-term borrowings (primarily commercial
paper supported by committed bank lines) and long-term borrowings through both
private and public debt offerings. As of December 31, 1997, the Company's
long-term debt was rated A or A+ and commercial paper 1 by all four major rating
agencies. In February 1998, as a result of the Company's announcement to seek
strategic alternatives (as previously discussed), action was
<PAGE>
taken by all four major agencies regarding debt ratings. Moody's Ratings
Services, Inc. ratings of long-term debt is "under review" with direction
uncertain and commercial paper is "under review" for possible downgrade.
Standard and Poor's Ratings Services ratings of long-term debt and commercial
paper are on "CreditWatch" pending developing implications. Fitch IBCA's ratings
of long-term debt and commercial paper are on "RatingWatch" pending evolving
implications and Duff and Phelps' ratings of long-term debt and commercial paper
are on "RatingWatch-Uncertain".
Total owned finance receivables increased $494 million, or 3%, in 1997,
compared with a gain of $1,120 million, or 8%, in 1996. Removing receivables of
the Canadian and German subsidiaries from all periods, total owned finance
receivables increased $513 million, or 4%, in 1997, compared with a gain of
$1,132 million, or 9%, in 1996. During 1997, the United Kingdom subsidiary
purchased the stock of Endeavour Personal Finance Ltd., a market leader in
second mortgage lending, from Lloyds TSB Group PLC, which increased real estate
loans by $274.9 million. Reflecting the anticipated paydown of certain maturing
same-as-cash portfolio tranches, Beneficial National Bank USA (BNB USA), the
Company's private-label credit card subsidiary experienced runoff of $118
million in 1997, compared with a gain of $1,326 million during 1996. BNB USA's
ending receivables were $3,752 million. Reflecting the aforementioned
securitizations, variable-rate real estate receivables declined $79 million or
3% in 1997. Fixed-rate real estate receivables increased $52 million or 2%. In
total, unsecured loan portfolios represented 59% of the Company's total
outstandings at year-end 1997, versus 58% at the end of 1996 and 50% at the end
of 1995.
Total managed receivables increased $1,082 million, or 6%, compared
with a gain of $2,331 million, or 16%, in the comparable 1996 period. Excluding
the receivables of the Canadian and German subsidiaries, total managed
receivables increased $1,101 million, or 7%, compared with a gain of $2,344
million, or 17%, in the comparable 1996 period. Reflecting this year's
securitizations, as well as the remaining balance of receivables serviced from
previous securitizations, total receivables sold with servicing retained were
$2,913 million at December 31, 1997, and $2,325 million at year-end 1996.
Total owned receivables delinquent two months and greater on a
contractual basis increased to 4.24% at the end of 1997 from 3.38% at the end of
1996, but remained flat when compared to September 1997. This increase reflects
both a greater proportion of, and higher delinquency in, the credit card and
unsecured portfolios in addition to a weaker overall consumer credit environment
primarily in North America. On a loans managed basis, delinquency similarly
increased to 4.02% at the end of 1997 from 3.20% at the end of 1996 and 3.94% at
September 30, 1997. The table that follows details delinquency by product on
both an owned and managed basis for 1997 and 1996.
<TABLE>
<CAPTION>
Managed Basis Owned Basis
------------- -----------
1997 1996 Delinquency 1997 1996
---- ---- ----------- ---- ----
<S> <C> <C> <C> <C>
3.03% 2.13% Real Estate Secured 3.14% 2.16%
5.86 5.81 Personal Unsecured 5.86 5.81
4.47 3.23 Credit Card 4.47 3.23
4.17 3.62 Sales Finance 4.17 3.62
4.02% 3.20% Overall 4.24% 3.38%
</TABLE>
Net chargeoffs were $412.2 million versus $316.9 million in 1996. As a
percentage of average owned receivables, net chargeoffs increased to 2.85% from
2.26% in 1996. At year-end 1997, the allowance for credit losses as a percentage
of finance receivables owned was 3.73%, compared with 3.43% at the end of 1996.
At this level, the allowance covers full year chargeoffs 1.36 times, compared
with 1.57 times in 1996. During the year, the balance of the reserve increased
$61.7 million to $559.9 million.
<PAGE>
At March 31, 1996, the Company effectively sold a $957 million annuity
portfolio of the Central National Life Insurance Company of Omaha, a subsidiary
of the Beneficial Insurance Group, to SunAmerica Life Insurance Company through
a co-insurance agreement. Accordingly, approximately $900 million of investment
securities were sold or transferred to SunAmerica as part of this disposition.
SunAmerica has not yet legally assumed the policies, therefore, the remaining
$737 million in policy reserves related to the annuity portfolio and an
offsetting deposit in other assets remain on the Company's balance sheet. These
policy reserves declined $171 million during 1997.
Investment securities increased $180 million, or 26%, in 1997, versus a
decrease of $805 million, or 54%, in 1996. The increase is primarily related to
residual interests in securitized receivables. The prior year decrease is
largely related to the sale of the annuity portfolio. See Note 7 to the
Financial Statements for more information on investment securities.
During 1997, approximately 1.2 million shares of common stock were
repurchased by the Company at an average price of $66.31 and placed in treasury,
completing the share repurchase program approved by the Board of Directors in
November 1996.
In October 1997, as part of the previously mentioned strategic
repositioning, the Company's Board of Directors authorized the repurchase of up
to 3.0 million, or approximately 5.5%, of outstanding common shares. The shares
will be repurchased from time-to-time at prices deemed appropriate by the
Company, and will be placed in treasury for general corporate purposes. As of
December 31, 1997, 5,000 shares have been repurchased under this program.
Results of Operations
Net income in 1997 was $253.7 million compared to $281.0 million in
1996 and $150.5 million in 1995. Results in 1997 were dampened by a $58.8
million pretax provision for the planned disposition of the Company's German
consumer banking subsidiary, a $13.5 million pretax addition to litigation
reserves, a $13.8 million pretax writedown of real estate holdings in both
Tampa, Florida, and Houston, Texas, that are being sold, and a $3.8 million
pretax charge for reorganization and restructuring efforts offset by a $7.3
million pretax gain on the sale of the Central National Life Insurance Company
of Omaha's ordinary life portfolio. 1996 results included an $8.4 million
aftertax annuity-related capital gain. Excluding the effects of these one-time
items in both years, net income would have increased $23.2 million, or 9%, over
1996.
The earnings improvement in 1996 stemmed primarily from the turnaround
of the tax refund anticipation loan (RAL) business. For the 1996 year,
consolidated results included pretax earnings of $116.3 million, or $69.8
million aftertax, from the RAL business, versus a pretax loss of $62.6 million,
or $37.6 million aftertax, in 1995. The RAL business was severely impacted in
1995 when the Internal Revenue Service (IRS) released payment of the earned
income tax credit (EITC) portion on thousands of refunds directly to the
taxpayers who had already received these refunds through the RAL program, rather
than to the Company's banking subsidiary to repay the loan as directed by the
taxpayer. Conversely, the 1996 RAL results benefited from prior-year bad debt
collections of $48.6 million as well as smooth and efficient processing of tax
refunds by the IRS. For the 1996 season, the Company's subsidiary, Beneficial
National Bank (BNB), did not lend on the EITC portion of any refunds. In 1997,
BNB resumed lending on the EITC portion of refunds, primarily to prior customers
in good standing. In 1997, the RAL program earned $72.9 million pretax.
In July 1996, BNB signed a new 10-year agreement with H&R Block Tax
Services Inc., giving BNB the exclusive right to offer RALs to eligible H&R
Block (Block) customers in all of Block's company-owned offices. In return for
the longer-term exclusivity given to BNB, the new agreement gives Block a share
in both the revenue and credit risk of the RALs by allowing Block Financial
Corporation to purchase an interest in the portfolio of RALs originated by
Block's company-owned offices. For the first two years of the contract, the
Block interest will be 40%; for years three through 10, the interest will be
49.99%. Although some near-term profits will be sacrificed, the new agreement
provides longevity and stability to BNB's RAL product. Prior agreements called
for the renegotiation of a contract every three years.
The absolute lending spread increased from the preceding year by 10% in
1997 and 11% in 1996, with the current year increase primarily attributable to
higher late fees coupled with higher average yields on BNB USA receivables,
reflecting a greater percentage of receivables in non-deferred plans. As a
percentage of average owned receivables, the lending spread was 10.11%, compared
with 9.84% in 1996 and 9.71% in 1995. The yield on the average owned receivables
portfolio was 16.02% in 1997, compared with 15.85% in 1996 and 16.32% in 1995.
Over the same periods, interest expense as a percentage of average owned
receivables was 5.91% in 1997, versus 6.01% in 1996 and 6.61% in 1995. In North
America, the fixed-rate real estate secured loans originated in 1997 were
written at an average yield of 12.74%, compared with 13.23% in 1996 and 13.85%
in 1995, while variable-rate real estate secured loans were written at a spread
over prime of approximately 343 basis points in 1997, compared with
approximately 366 and 400 basis points during the respective prior two years in
response to competitive pressures. In 1997, the average yield on unsecured
personal loans written in North America was 25.79%, compared with 25.64% and
25.41% in 1996 and 1995, respectively. The yield on the credit card portfolio
was 17.99% in 1997, versus 16.02% in 1996 and 17.45% in 1995.
During 1997, interest expense increased $42.2 million from the
preceding year and decreased $3.4 million in 1996 compared to 1995. 1997
worldwide average borrowing costs decreased to 6.45% from 6.54% in 1996, and
7.22% in 1995. Higher borrowing levels added $57.4 million in 1997 and $101.4
million in 1996 in interest costs from each respective preceding year, while the
corresponding fluctuations resulting from interest rate changes were a decrease
of $15.2 million in 1997 and $104.8 million in 1996. The Company minimizes its
exposure to interest-rate risk by closely managing the gap between its
interest-sensitive assets and liabilities. The Company utilizes interest rate
swaps and forward rate agreements to moderate its exposure to interest-rate
fluctuations. See Notes 2h and 24 to the Financial Statements for more
information on derivatives.
BNB USA's profitability rebounded during 1997 with $75.0 million pretax
profits versus a virtual break-even in 1996 and $35.1 million in 1995. The
current year results were driven by favorable changes in late fee structure,
higher average yields, reduced growth provisioning and volume-related expenses,
partially offset by heavy chargeoffs. The favorable results also reflect the
renegotiations of contracts with several merchant partners. In 1996, BNB USA
profitability was dampened by $65 million of up-front loan loss provisioning on
the strong receivables growth experienced in 1996 and $10 million of start-up
costs relating to programs for Kmart and Costco.
The Beneficial Insurance Group, Inc., reported pretax income of $105.6
million in 1997, versus $104.0 million ($79.6 million excluding the
annuity-related capital gains) in 1996 and $77.1 million in 1995. These trends
reflect the continuation of strong production of credit insurance and
well-controlled loss ratios, particularly in the credit property lines. The sale
of the Central National Life Insurance Company of Omaha's ordinary life
portfolio was completed during the second quarter of 1997, resulting in a pretax
gain of $7.3 million.
Subsidiaries outside the United States contributed $53.4 million pretax
earnings in 1997 (excluding the $58.8 million provision for loss on German
disposition), $44.0 million pretax earnings in 1996 and $20.1 million pretax
earnings in 1995. The Canadian and German subsidiaries contributed an aggregate
of $14.5 million and $21.6 million in pretax earnings during 1997 and 1996,
respectively, and a pretax loss of $6.0 million in 1995.
Harbour Island, Inc., the Company's real estate subsidiary in Tampa,
Florida, recorded a pretax loss, on a fully debt-funded basis, of $23.0 million
in 1997, up from $18.7 million in 1996, and $19.5 million in 1995. The 1997
results reflect the sale of the Athletic Club, residential land and a writedown
from the anticipated loss on the sale of a People Mover System and its
infrastructure, which is included in the $13.8 million pretax writedown of real
estate holdings previously mentioned. The sales reduced the Company's investment
in Harbour Island by approximately $13 million. Nearly all of the losses in
recent years represent imputed interest costs computed at the Company's overall
melded cost of funds rate and depreciation charges. As mentioned previously, the
Company intends to accelerate the divestiture of certain real estate holdings on
the island. The pretax loss relating to Harbour Island Inc. is likely to
continue at current levels excluding the current year real estate losses, until
substantial portions of the real estate on Harbour Island are sold.
<PAGE>
Other revenues in 1997 remained flat from the preceding year following
an increase of 99% in 1996, as a decrease in RAL revenue was offset by an
increase in servicing revenue and gain on sale associated with securitized
receivables. The 1996 increase in other revenue of $228.8 million related to the
previously mentioned turnaround of the RAL business, the capital gain related to
the disposition of the annuity portfolio, increased servicing revenue and gain
on sale associated with securitized receivables.
The provision for credit losses increased $86.5 million, or 22%, in
1997 compared with an increase of $118.6 million, or 42%, in 1996. The increases
in 1997 and 1996 reflect higher chargeoffs, as well as additions to the
allowance for credit losses corresponding to increased unsecured receivables
growth. The increase in chargeoffs were entirely in the unsecured product lines,
reflecting both the expected maturing of the BNB USA portfolio and a higher
incidence of bankruptcies in North America. As a percentage of receivables,
credit card chargeoffs increased to 4.84% in 1997 from 3.81% in 1996, and
personal unsecured chargeoffs increased to 4.99% from 4.55% in 1996. Management
expects this credit card trend to continue in 1998 (though at a less rapid rate
of increase than in prior years) as the portfolio matures, while the chargeoff
rates on the personal unsecured portfolio will continue to reflect the economic
cycle and the economic health of the consumer. Higher chargeoffs could also
result from the onset of a recession or similar downturn in the economic cycle,
particularly in North America, resulting in adverse consequences to the economic
health of the consumer. As a percentage of average owned receivables, the
provision was 3.36%, compared with 2.95% in 1996.
To date, the Company's U.S. consumer finance subsidiaries generally
lend to a cap of 75% (including the existing first mortgage) of the appraised
value of the home on second mortgage loans, but will go to 80% in the case of
first mortgages. Beginning in 1998, U.S. loan offices will be permitted to go to
90% loan-to-value ratio on both first and second mortgages, although subject to
stringent underwriting requirements and improved risk-based pricing guidelines.
While this change could result in increased chargeoffs, management believes that
such increase will be offset by additional revenues as a result of both
increased loan growth and improved pricing.
Salaries and other operating expenses combined were up 9% in 1997 and
10% in 1996 over the respective prior years. Included in the 1997 figures are
$31.1 million of pretax special items including writedowns of real estate
holdings that are in the process of being sold, additional litigation reserves
and charges for restructuring and reorganization efforts, primarily personnel
related. Excluding these special items from 1997, salaries and other operating
expenses increased 6%, generally reflecting normal increases attributable to
growth in receivables. In 1996, these trends also reflected the previously
mentioned costs associated with new merchant programs, and expenses relating to
a second data center opened during the fourth quarter of 1996. The 1996
comparisons with the prior year benefited from lower RAL collection expenses,
and savings from the fourth-quarter 1995 restructuring. As a percentage of
average managed receivables, salaries and other operating expenses were 6.57%
(6.39% excluding special items), 6.65% and 6.85% in 1997, 1996, and 1995,
respectively.
The Company previously announced its intent in December 1994 to sell
its German subsidiary. However, in December 1995, the Company announced the
decision to retain the operation because no acceptable offers were received.
Since negotiations and other efforts did not progress as anticipated in the
original loss estimates, the Company recorded a $15.0 million, or $.28 per
share, charge in 1995 for additional potential losses relating to a significant
liquidating loan portfolio. In 1997, as part of a strategic initiative to
enhance profitability and build shareholder value, the Company announced its
intent to sell the German operations once again. The Company anticipates the
sale to occur in the short term. While there can be no assurance that the sale
will be consummated, the sale is expected to result in a loss of $27.8 million,
which loss was recognized in 1997 results as previously mentioned, after
consideration of a $31.0 million tax benefit, primarily generated by the
expected utilization of capital losses. However, if the business is liquidated
by other means, additional losses may be possible.
In the fourth quarter of 1995, the Company implemented programs to exit
the Beneficial Insurance Group annuity business, and implemented an expense
reduction program principally within headquarters operations. These programs
resulted in a $9.8 million pretax restructuring charge, which is largely early
retirement and severance expenses corresponding to workforce reductions of 225.
This restructuring charge reduced net income by $5.9 million or $0.11 per share.
Although the statutory rate was 35% for all years, the Company's
effective tax rates were 32.0% in 1997, 38.7% in 1996 and 44.3% in 1995. The
effective rate in 1997 recognized tax benefits related to the anticipated sale
of the Company's German subsidiary. The effective rate in 1996 benefited from
approximately $8.0 million of additional foreign tax credit utilization,
resulting from the Company's election to modify the methodology for calculating
foreign tax credit limitations. The effective tax rate was substantially higher
in 1995 due to the German charges, which were not offset by tax benefits. Beyond
these items, taxes are higher than the U.S. federal statutory rate primarily
because of state income taxes. At December 31, 1997 and 1996, the Company's net
deferred tax assets were $302.7 million and $232.3 million, respectively. The
deferred tax assets were net of $3.3 million and $8.0 million of valuation
allowance at year-end 1997 and 1996, respectively. Management has determined,
based on the Company's history of prior operating earnings and its expectations
for future earnings, that operating income of the Company will be sufficient to
recognize fully these deferred tax assets after the valuation allowance. See
Note 17 to the Financial Statements for further discussion.
In 1992, the IRS completed its examination of the Company's federal
income tax returns for 1984 through 1987 and proposed certain adjustments that
relate principally to activities of the Company's former subsidiary, American
Centennial Insurance Company, prior to its sale in 1987. Although prepayments
were made thereon in 1992, the Company contested the proposed adjustments within
the administrative appeals process of the IRS. During the third quarter of 1996,
the IRS issued a statutory Notice of Deficiency asserting the unresolved
adjustments. The Company has initiated litigation in the United States Tax Court
to oppose the disallowance. Management does not expect the ultimate resolution
of these issues to have a material effect on the Company's financial position,
results of continuing operations or liquidity. See Note 28 to the Financial
Statements for further discussion of the assessment.
During the fourth quarter of 1996, the Company decided to implement a
broad-based option program for substantially all employees who do not
participate in the existing option plan. This program resulted in the issuance
on January 31, 1997, of options to purchase approximately 989,000 common shares
at a strike price 20% above the then prevailing market price. A second grant was
made in November 1997, of options to purchase approximately 943,000 common
shares at a strike price 20% above the then prevailing market price. See Note 20
to the Financial Statements for further information regarding stock options.
Changes in Cash Flow and Liquidity
The principal sources of cash are collections of finance receivables,
proceeds from the issuance of short-and long-term debt, and cash provided from
operations (including maturities and repayments of its receivables). The monthly
collections of cash principal as a percentage of average receivables were 6.66%
in 1997 and 5.51% in 1996, principally reflecting the paydown of certain
maturing same-as-cash portfolio tranches at BNB USA. Also, from time to time,
subsidiaries of the Company sell home equity loans through securitizations in
the capital markets.
Substantial additional liquidity is available through committed bank
credit lines that the Company maintains in support of its commercial paper
borrowings. During the fourth quarter of 1995, the Company entered into a $3
billion, five-year syndicated revolving credit agreement, which replaced the
various one- and three-year bilateral agreements, totaling $2.9 billion, that
the Company had previously maintained. This syndicated revolving credit
agreement has a $1.0 billion net worth test. At year-end 1997, total standby
lines of credit were $4.3 billion, of which $3.9 billion was unused.
One of the Company's financial strengths is its ability to raise
long-term debt in a wide variety of domestic and international markets.
Including medium-term notes, long-term debt represented 63% of the Company's
funding base at the end of 1997, compared with 64% at the end of 1996. Excluding
the Company's Canadian and German subsidiaries, long-term debt represented 65%
of the funding base at the end of 1997, compared with 66% at the end of 1996. In
1997, the Company issued $1.6 billion in variable-rate medium-term notes at an
all-in cost only slightly above the Company's cost of commercial paper
borrowings. The average maturity was 3.0 years. Fixed-rate medium-term note
issuances totaled $0.8 billion, at an average coupon of 6.68% and an average
maturity of 6.4 years. In addition, the Company had available under shelf
registrations with the Securities and Exchange Commission $2.1 billion of
unissued debt securities at year-end 1997.
The Company hedges the majority of its net investments in foreign
subsidiaries by selling at-the-money (spot) call options and buying
out-of-the-money (spot) put options on British pounds. With the exception of the
strike rates, all terms of the call and put are identical. The notional amount
of each option is an amount that will generally produce offsetting gains or
losses (on an aftertax basis) to the gains or losses produced by the underlying
investment. The combination of these instruments (a "no cost collar") is
effectively a partial hedge, as hedging gains or losses occur only when the spot
rates fluctuate outside the range of the respective strike rates. These option
transactions generally have a maturity of three to six months. Foreign currency
forward exchange agreements and foreign currency swaps are also utilized to
hedge a portion of the Company's net investment in foreign subsidiaries.
The Company monitors the effectiveness of its hedging program through a
quarterly analysis comparing the foreign exchange gains and losses on the net
investments in foreign operations to hedge gains and losses due to currency
fluctuations. Hedge gains and losses are calculated by comparing the option
strike rate to the spot exchange rate on each financial statement date as though
the option was exercised at that time. There were no amounts recognized in net
income during the three years ended December 31, 1997. Prospectively, gains and
losses in excess of the amount needed to offset gains or losses on investments
in foreign subsidiaries due to currency fluctuations are not likely given the
above hedging strategy. See Notes 2h and 24 to the Financial Statements for
further information on derivatives.
The Company minimizes all off-balance-sheet credit risk exposure by
limiting the counterparties to major international banks and financial
institutions. The Company has never experienced nonperformance by any
counterparty.
Year 2000 Date Conversion
In 1995, the Company initiated an enterprise-wide program to prepare
its computer systems and applications for the year 2000. Certain of the
Company's systems are dependent on outside sources (RAL program being dependent
on the IRS) which the Company has considered in its plan for remediation. The
Company has incurred and will continue to incur internal staff costs as well as
consulting and other expenses related to infrastructure and facilities
enhancements necessary to prepare its systems for the year 2000. Project
completion is expected in mid 1999 at an estimated cost of approximately $20
million. The Company expects this program to be completed on a timely basis and
will not have any material adverse effect on its business operations, products
or financial prospects. However, there can be no assurance that the systems of
other entities on which the Company's systems rely also will be timely converted
or that any such failures to convert by another entity would not have an adverse
effect on the Company's systems.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
SFAS 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company will adopt SFAS No. 130 beginning January 1,
1998.
The FASB has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS No. 131 beginning January 1, 1998.
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk Discussion
The Company is exposed to market risks, including fluctuations in
interest rates, variability in spread relationships (Prime to Libor spreads),
mismatches of repricing intervals between finance receivables and related
funding obligations, and variability in currency exchange rates. The Company has
established policies and internal processes governing its management of market
risks and its use of financial instruments to manage its exposure to such risks.
Detailed information relating to such practices is set forth in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
Item 7 and in Notes 2h and 24 of the Notes to Financial Statements included in
the Company's 1997 Annual Report to Shareholders.
Interest Rate Sensitivity
Based on the Company's overall interest-rate exposure at December 31,
1997, a 10% movement in interest rates affecting the Company's fixed rate and
variable rate financial instruments would have an immaterial effect on the fair
values of market risk sensitive instruments and earnings over the next year.
Exchange Rate Sensitivity
Based on the Company's overall currency rate exposure at December 31,
1997, a 10% movement of the U.S. dollar against functional currency rates would
have an immaterial effect on the fair value of Company's net exposed position
and earnings over the next year.
------------------------------------
FORWARD-LOOKING STATEMENTS
The Company has made forward-looking statements in this Annual Report
based on current expectations that involve a number of risks and uncertainties
that could cause actual results to differ materially. The potential risks and
uncertainties that could cause actual results to differ materially include the
ultimate costs of the systems and process improvements and the degree to which
benefits from the systems and process improvements are realized; the results of
the refund anticipation loan business; the ultimate successful consummation of
the sale of the Canadian and German subsidiaries; continuing competitive and
pricing pressures; continuing increases in the incidence of consumer bankruptcy
in North America; and the onset of a recession or a similar downturn in the
economic cycle in North America resulting in adverse consequence to the economic
health of the consumer. Further information on factors that could affect the
Company's financial results are included in the Company's filings with the
Securities and Exchange Commission, including this Annual Report on Form 10-K
for the year ended December 31, 1997.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
OF BENEFICIAL CORPORATION:
We have audited the accompanying consolidated balance sheets of
Beneficial Corporation and Subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income and retained earnings and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Beneficial Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 28, 1998
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND SUBSIDIARIES
BALANCE SHEET
Years Ended December 31
<S> <C> <C>
1997 1996
----------- -----------
(in millions)
ASSETS
Cash Equivalents............................. $ 253.9 $ 279.6
Finance Receivables (Note 5)................. 15,030.2 14,536.2
Allowance for Credit Losses (Note 6)...... (559.9) (498.2)
----------- ----------
Net Finance Receivables...................... 14,470.3 14,038.0
Investment Securities (Note 7)............... 866.2 686.1
Property and Equipment....................... 229.3 204.9
Other Assets (Note 8)........................ 1,825.4 1,722.6
---------- ----------
TOTAL ASSETS.............................. $17,645.1 $16,931.2
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-Term Debt (Note 10).................... $ 4,585.1 $ 4,169.3
Deposits Payable............................. 555.3 635.0
Long-Term Debt (Note 11)..................... 8,887.2 8,631.1
---------- ---------
Total Interest-Bearing Debt............... 14,027.6 13,435.4
Accounts Payable and Accrued Liabilities (Note 9) 708.0 534.0
Insurance Policy and Claim Reserves.......... 1,137.2 1,267.0
---------- ----------
Total Liabilities......................... $15,872.8 $15,236.4
========= =========
Shareholders' Equity:
Preferred Stock (Note 12)................... 114.8 114.8
Common Stock (160.0 shares authorized; 53.3
and 54.0 shares outstanding) (Note 12)... 53.3 54.0
Additional Capital (Note 13)................ 250.7 305.3
Net Unrealized Gain on Investment Securities
(Note 7)................. 5.2 2.6
Accumulated Foreign Currency Translation
Adjustments.................. (48.2) (45.4)
Retained Earnings........................... 1,396.5 1,263.5
--------- ---------
Total Shareholders' Equity.............. 1,772.3 1,694.8
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY. $17,645.1 $16,931.2
========= =========
See Notes to Financial Statements.
</TABLE>
<PAGE>
BENEFICIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31
<S> <C> <C> <C>
1997 1996 1995
(in millions, except per share amounts)
REVENUE
Finance Charges and Fees.......... $2,317.1 $2,143.5 $2,014.6
Interest Expense.................. 855.0 812.8 816.2
-------- -------- --------
Lending Spread................. 1,462.1 1,330.7 1,198.4
Insurance Premiums................ 177.8 168.7 152.7
Other (Note 18)................... 460.8 459.7 230.9
-------- -------- --------
Total.......................... 2,100.7 1,959.1 1,582.0
-------- -------- --------
OPERATING EXPENSES
Salaries and Employee Benefits.... 434.9 412.6 384.6
Insurance Benefits................ 71.1 82.8 80.4
Provision for Credit Losses....... 485.3 398.8 280.2
Provision for Loss on German Disposal
(Note 3).................... 58.8 -- --
Provision for Credit Losses on German
Liquidating Loan Portfolio (Note 3). -- -- 15.0
Provision for Restructuring (Note 4)... -- -- 9.8
Other (Note 19)........................ 677.3 606.4 541.6
-------- -------- --------
Total............................... 1,727.4 1,500.6 1,311.6
-------- -------- --------
Income Before Income Taxes............. 373.3 458.5 270.4
Provision for Income Taxes (Note 17)... 119.6 177.5 119.9
-------- -------- --------
NET INCOME............................. 253.7 281.0 150.5
Retained Earnings, Beginning of Period. 1,263.5 1,093.0 1,042.2
Dividends Paid (Note 21)............... 120.7 110.5 99.7
-------- -------- --------
RETAINED EARNINGS, END OF PERIOD....... $1,396.5 $1,263.5 $1,093.0
======== ======== ========
BASIC EARNINGS PER COMMON SHARE (Note 23)$ 4.68 $ 5.19 $ 2.77
======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
(Note 23)....................... $ 4.54 $ 5.05 $ 2.71
======== ======== ========
DIVIDENDS PER COMMON SHARE......... $ 2.18 $ 1.98 $ 1.80
======== ======== ========
AVERAGE COMMON SHARES OUTSTANDING
(Note 23)....................... 54.7 54.6 53.7
======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
Years Ended December 31
<S> <C> <C> <C>
1997 1996 1995
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.............................$ 253.7 $ 281.0 $ 150.5
Reconciliation of Net Income to Net
Cash Provided by
Operating Activities:
Provision for Credit Losses...... 485.3 398.8 280.2
Provision for Loss on German
Disposal..................... 58.8 -- --
Gain on Securitized Receivables.. (73.5) (55.3) (15.4)
Provision for Credit Losses on German
Liquidating Loan Portfolio.... -- -- 15.0
Provision for Restructuring...... -- -- 9.8
Provision for Deferred Income
Taxes......................... (71.5) (32.5) (35.0)
Depreciation and Amortization.... 46.8 49.6 48.8
Insurance Policy and Claim
Reserves...................... (129.8) 1.5 180.8
Accounts Payable and Accrued
Liabilities................... 108.2 24.1 50.2
---------- --------- ----------
Net Cash Provided by Operating
Activities................ 678.0 667.2 684.9
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Receivables Originated or Acquired...(13,898.9) (12,341.8) (9,860.3)
Receivables Collected................ 11,505.2 8,954.0 7,443.3
Receivables Securitized.............. 1,607.8 1,919.3 1,103.8
Available-For-Sale Investments
Purchased....................... (463.3) (492.8) (313.9)
Held-To-Maturity Investments Purchased (7.4) (13.0) (78.2)
Available-For-Sale Investments Sold... 347.8 1,058.5 97.5
Available-For-Sale Investments Matured 61.6 372.9 154.5
Held-To-Maturity Investments Matured.. 16.2 5.3 21.1
Property and Equipment Purchased...... (62.6) (62.6) (37.2)
Deposit from Reinsurers............... 120.4 (908.3) --
Interest in Residual Certificates..... (127.4) (10.8) (34.1)
Other................................. (43.6) 72.5 34.1
-------- --------- ---------
Net Cash Used in Investing
Activities............... (944.2) (1,446.8) (1,469.4)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-Term Debt, Net Change........... 190.8 88.9 556.4
Deposits Payable, Net Change.......... (28.7) 9.2 (29.4)
Long-Term Debt Issued................. 2,829.5 2,782.3 3,102.1
Long-Term Debt Repaid.................(2,550.4) (1,983.8) (2,661.3)
Dividends Paid........................ (120.7) (110.5) (99.7)
Common Stock Repurchased.............. (80.0) -- --
--------- --------- --------
Net Cash Provided by Financing
Activities............... 240.5 786.1 868.1
--------- --------- --------
NET (DECREASE) INCREASE IN CASH AND
EQUIVALENTS.......................... (25.7) 6.5 83.6
Cash and Equivalents at Beginning of
Period....................... 279.6 273.1 189.5
--------- --------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD.. $ 253.9 $ 279.6 $ 273.1
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid...................... $ 847.8 $ 816.2 $ 823.4
Income Taxes Paid.................. 181.5 222.9 154.8
See Notes to Financial Statements.
</TABLE>
<PAGE>
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(in millions, except per share amounts)
1. NATURE OF OPERATIONS
Beneficial Corporation (Company) is a holding company, subsidiaries of
which provide financial services through their various consumer finance,
banking and insurance operations located throughout the United States,
Canada, Germany, Ireland and the United Kingdom. The Beneficial consumer
finance loan office network includes more than 1,200 offices, offering
both real estate secured loans and unsecured loans, as well as
credit-related insurance products. Additionally, other subsidiaries offer
credit card products (largely private-label), tax refund anticipation
loans and selected non-credit-related insurance products. Approximately
40% of loans owned outstanding are secured by real estate. The majority of
net income is derived from the consumer finance operations and credit
insurance products related to the consumer finance business. Operations in
any one country outside the United States are not significant in relation
to the Company's overall operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES
a) Basis of Consolidation. The consolidated financial statements include
the accounts of the Company and its subsidiaries, after elimination of all
significant intercompany accounts and transactions, and have been prepared
in accordance with generally accepted accounting principles. Certain
prior-period amounts have been reclassified to conform with the 1997
presentation.
b) Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
c) Finance Operations. The financial statements are prepared on the
accrual basis. Finance charges are recognized as income using the interest
method or methods that produce similar results. The net amount of loan
origination fees and direct loan origination costs are deferred and
amortized into interest income over the estimated lives of the related
loans. Direct origination costs for credit cards are deferred and
amortized over 12 months. Income accrual is generally suspended after 30
days on delinquent loans.
Premiums paid on receivables purchased are amortized using straight-line
and accelerated methods generally over the estimated life of the loans.
Provisions for credit losses are charged to income in amounts sufficient
to maintain the allowance for credit losses at a level considered adequate
to cover the losses of principal and interest in the finance receivables
portfolio.
Delinquent real estate secured receivables are reviewed individually by
management, and accounts known to be uncollectible are charged off. In
general, other receivables are automatically charged off after no payment
has been made for six months. For all types of loans, collection efforts
are generally continued.
<PAGE>
Real estate properties acquired through foreclosure are carried at the
lower of cost or estimated fair market value, minus estimated costs to
sell, determined on an individual asset basis. Valuations are periodically
performed by management, and an allowance for possible losses is
established if the book value exceeds the estimated fair market value
minus estimated costs to sell. Residual gains or losses on disposition are
recorded in expense as incurred.
Certain real estate secured loans are accounted for as foreclosed property
(in-substance foreclosure) even though the actual foreclosure has not
occurred. Such loans continue to be reported in finance receivables. These
loans are carried at the lower of cost or estimated fair market value when
the borrower has little or no equity in the collateral at its current
estimated fair market value and it appears unlikely that the borrower will
repay the loan other than through liquidation of the property.
d) Receivables Sold with Servicing Retained. Periodically, subsidiaries of
the Company sell home equity loans to trusts created as real estate
mortgage investment conduits and retain the servicing. At the date of such
securitizations, the Company allocates the total cost of the home equity
loans to mortgage servicing rights and the loans based on their relative
fair values. Fair values are determined based on present valuing the
expected future cash flows using a discount rate commensurate with the
risks involved, adjusted for prepayments and bad debts.
On January 1, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." For
each servicing contract in existence before January 1, 1997, previously
recognized excess servicing assets that do not exceed contractually
specified servicing fees were combined and recognized as a servicing
asset.
Previously recognized servicing assets that exceed contractually specified
servicing fees were reclassified as interest-only strips and are carried
at fair value. Both the servicing assets and the interest-only strips are
included in other assets on the balance sheet. The servicing assets are
amortized in proportion to, and over the period of, estimated net future
servicing fee income. The servicing assets are periodically reviewed for
valuation impairment. This review is performed on a disaggregated basis
for the predominate risk characteristics of the underlying loans which are
loan type, term, interest rate, prepayment rate and loss rate. The fair
value of the servicing assets and interest-only strips are determined by
present valuing the estimated net future cash flows. The weighted-average
assumptions used in the fair value calculations include: discount rate -
15%, prepayment rate - 34%, loss rate - 1.3%, and servicing fees - 1.0%.
e) Insurance Operations. The Company's insurance subsidiaries are engaged
in writing credit life, credit accident and health insurance, credit
property, credit involuntary unemployment insurance and ordinary life
insurance. Premiums on credit life insurance are taken into income using
the sum-of-the-months or actuarial methods, except in the case of
level-term contracts, which are taken into income using the straight-line
method over the lives of the policies. Premiums on credit accident and
health insurance are generally taken into income using an average of the
sum-of-the-digits and the straight-line methods. Premiums for credit
property and credit involuntary unemployment insurance are generally taken
into income using the sum-of-the-months method or on a pro rata basis.
Premiums for ordinary life insurance are included in income when due.
Premiums collected on annuity contracts are included as a liability in
insurance policy and claim reserves. Policy reserves for credit life,
credit accident and health insurance, credit property, and credit
involuntary unemployment insurance are equal to related unearned premiums.
Additionally, claim reserves for credit life, credit accident and health
insurance, credit property, and credit involuntary unemployment insurance
are adjusted to reflect claim experience. Liabilities for future life
insurance policy benefits associated with ordinary life contracts are
accrued when premium revenue is recognized and are computed on the basis
of assumptions as to investment yields, mortality, morbidity and
withdrawals.
<PAGE>
f) Valuation of Investment Securities. Investments are owned principally
by the insurance subsidiaries and consist primarily of debt securities.
Investments in debt securities that the subsidiaries have both the ability
and the intention of holding until maturity are classified as
held-to-maturity securities and reported at amortized cost (remaining
principal net of unamortized premiums or discounts). Investments that may
be sold prior to maturity to support the subsidiaries' investment
strategy, such as in response to changes in interest rates or tax
deductibility of interest, are considered as available-for-sale securities
and reported at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of shareholders' equity.
Gains and losses from trading securities are included in income from
operations. The cost of investments sold is determined on the specific
cost identification basis.
g) Translation of Foreign Currencies. Operations outside the United States
are conducted through subsidiaries located in Canada, Germany, Ireland and
the United Kingdom. Assets and liabilities of these subsidiaries are
translated at the rates of exchange at the balance sheet dates, while
income and expense items are translated at the average exchange rates for
each period covered by the statement of income and retained earnings. The
resulting translation adjustments are included in accumulated foreign
currency translation adjustments, a separate component of shareholders'
equity.
h) Derivative Financial Instruments. To hedge its investment in foreign
subsidiaries and to moderate its exposure to interest-rate fluctuations,
the Company enters into various transactions involving off-balance-sheet
financial instruments. These transactions include options, currency swaps
and forwards for foreign currency risk management and interest-rate swaps
and forward-rate agreements for interest rate exposure management.
Gains or losses on foreign currency instruments designated as hedges of
the Company's net investments in foreign subsidiaries are included with
translation adjustments in shareholders' equity. Gains or losses on these
instruments in excess of the amount needed to offset net investment losses
or gains are included in income. The net amount of interest income and
interest expense on agreements used to hedge interest-rate exposure is
recognized in interest expense over the lives of the instruments. The
indices on derivatives used to hedge interest-rate exposure match an index
corresponding to either a specific long-term debt instrument or to a pool
of short-term debt. The Company does not terminate these derivatives prior
to maturity. In the unlikely event of termination, gain or loss would be
reflected in the income statement, or deferred and recognized over the
remaining life of the hedged instrument.
The Company does not serve as a financial intermediary to make markets in
any off-balance-sheet financial instruments nor does it hold or issue
derivative financial instruments for trading purposes.
i) Amortization of Intangible Assets. Excess cost applicable to
acquisitions is generally amortized on a straight-line basis over 20
years.
j) Earnings per Common Share. Basic earnings per common share are computed
by deducting dividend requirements on preferred stock of the Company from
net income and dividing the remainder by weighted-average common shares
outstanding. Diluted earnings per common share are computed by deducting
dividend requirements on non-convertible preferred stocks of the Company
from net income and dividing the remainder by weighted-average common
shares outstanding adjusted for all dilutive potential common shares that
were outstanding during the period.
k) Cash Equivalents. The Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
<PAGE>
l) Computer Software Costs. The Company capitalizes costs of purchased
software or software developed internally when the project is in the
application development stage. Costs of developed software that is
considered to be in the preliminary project stage or the
post-implementation stage are expensed as incurred. Costs incurred in
conjunction with Year 2000 remediation are expensed as incurred.
3. DIVESTITURE OF CANADA AND GERMANY
As part of a number of strategic initiatives to enhance growth and build
shareholder value, the Company recently announced its intent to sell its
Canadian consumer finance subsidiary and its German consumer banking
subsidiary. On February 10, 1998, the Company entered into a definitive
agreement for the sale of its Canadian operations and on March 2nd closed
the transaction. The sale generated a net aftertax gain in excess of $100.
The Company anticipates the sale of its German subsidiary to occur in the
near term. The sale is expected to result in a loss of $27.8 after
consideration of a $31.0 tax benefit, primarily generated by the expected
utilization of capital losses, and has been accrued at December 31, 1997.
As of December 31, 1997, the net assets subject to sale totaled $137.2 and
were comprised of the following:
<TABLE>
<CAPTION>
Canada Germany Total
<S> <C> <C> <C>
Net Finance Receivables..... $775.1 $271.6 $1,046.7
Other Assets................ 14.7 129.5 144.2
------ ------- --------
Total Assets............. 789.8 401.1 1,190.9
------ ------- --------
Short-Term Debt............ 344.2 -- 344.2
Long-Term Debt............. 308.8 32.5 341.3
Deposits................... -- 277.6 277.6
Other Liabilities.......... 15.3 75.3 90.6
------ ------- ---------
Total Liabilities.......... 668.3 385.4 1,053.7
------ ------- ---------
Net Assets................... $121.5 $ 15.7 $ 137.2
====== ======= =========
</TABLE>
In 1997, the Canadian operations reported pretax earnings of $21.2 while
the German operating pretax loss was $6.7.
The Company had previously announced its intent, in December of 1994, to
sell its German subsidiary. However, in December of 1995, the Company
announced the decision to retain the operation because no acceptable
offers were received. Since negotiations and other efforts did not
progress as anticipated in the original loss estimates, the Company
recorded a $15.0, or $0.28 per share, charge in 1995 for additional
potential losses relating to a significant liquidating loan portfolio.
4. PROVISION FOR RESTRUCTURING
In the fourth quarter of 1995, the Company implemented an
expense-reduction program, principally within its headquarters operations.
The resulting restructuring charge reduced net income by $5.9, or $0.11
per share, and was largely related to early retirement and severance
expenses corresponding to workforce reductions of 225.
<PAGE>
5. FINANCE RECEIVABLES
<TABLE>
<CAPTION>
Finance receivables at December 31 consisted of the following:
<S> <C> <C>
1997 1996
---- ----
Receivables Owned:
Real Estate Secured............... $ 5,905.3 $ 5,931.7
Personal Unsecured................ 3,262.4 2,982.9
Credit Cards...................... 4,685.4 4,595.8
Sales Finance Contracts........... 994.3 926.3
Commercial........................ 182.8 99.5
--------- ---------
Total Owned..................... 15,030.2 14,536.2
Receivables Sold with Servicing Retained
(all real estate secured)...... 2,912.7 2,324.8
--------- ---------
Total Managed........................ $17,942.9 $16,861.0
========= =========
</TABLE>
Includes receivables of $1,084.2 and $1,103.0 in 1997 and 1996,
respectively, relating to the Company's German and Canadian subsidiaries.
Average receivables during the years ended December 31 were as follows:
1997 1996
<TABLE>
---- ----
<S> <C> <C>
Average Receivables Owned............ $14,459.6 $13,520.8
Average Receivables Sold With
Servicing Retained............... 2,600.4 1,798.1
--------- ---------
Average Managed...................... $17,060.0 $15,318.9
========= =========
</TABLE>
From time to time, subsidiaries of the Company have sold home equity loans
through securitizations and have retained collection and administrative
responsibilities as servicer for the trust holding the home equity loans.
Scheduled contractual maturities of finance receivables owned to be
received after December 31, 1997, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1999 2000 2001 Beyond
---- ---- ---- ---- ------
Real Estate Secured...... 18% 12% 12% 13% 45%
Personal Unsecured....... 43 32 17 4 4
Credit Cards............. 43 7 7 6 37
Sales Finance Contracts.. 72 20 6 1 1
Commercial............... 25 20 13 8 34
Overall.................. 35% 16% 11% 8% 30%
</TABLE>
While the statutes of several states place no maximum limit on the
contractual term of closed-end loans secured by real estate, the consumer
finance subsidiaries generally limit loans of this type to periods ranging
from 60 to 180 months. Terms of closed-end unsecured loans and sales
finance contracts generally do not exceed 60 months. It is the Company's
experience that a substantial portion of all consumer receivables is
renewed or repaid prior to contractual maturity dates. Accordingly, the
previous tabulation should not be viewed as a forecast of future cash
collections. During the years ended December 31, 1997 and 1996, cash
collections totaled $11,505.2 and $8,954.0, respectively. The monthly
collections of cash principal as a percentage of average receivables were
6.66% in 1997 and 5.51% in 1996.
<PAGE>
6. ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---- ----
Balance at Beginning of Year.................. $ 498.2 $ 406.1
Accounts Charged Off.......................... (468.2) (363.3)
Recoveries on Accounts Previously Charged Off. 56.0 46.4
Provision for Credit Losses................... 485.3 398.8
Other......................................... (11.4) 10.2
------- -------
Balance at End of Year......................... $ 559.9 $ 498.2
======= =======
</TABLE>
Year-end balances include $37.5 and $57.3 in 1997 and 1996,
respectively, relating to the Company's German and Canadian subsidiaries.
7. INVESTMENT SECURITIES
In the fourth quarter of 1995, the Company decided to exit its annuity
business. The actual disposition of the annuity business and the capital
gain from the sale of corresponding investments increased net income by
$8.4, or $0.16 per share, in March 1996. As of December 31, 1997,
shareholders' equity included a net unrealized gain of $5.2, consisting of
an $8.0 net gain on the Available-For-Sale portfolio, offset by $2.8 of
applicable income taxes.
Investments at December 31 were as follows:
<TABLE>
<CAPTION>
Gross Gross Est.
Amortized Unrealized Unrealized Market
1997 Cost Gains Losses Value
---- --------- ---------- ---------- ------
Available-For-Sale
Debt Securities:
<S> <C> <C> <C> <C>
Corporate............... $294.7 $6.5 $1.1 $300.1
Mortgage-backed......... 29.8 .9 -- 30.7
Municipal............... 5.2 .1 -- 5.3
U.S. Government......... 115.8 1.0 -- 116.8
Foreign Government...... 59.8 .7 -- 60.5
Other................... 5.6 .1 -- 5.5
------ ----- ----- -----
510.9 9.2 1.2 518.9
Equity Securities.......... .6 -- -- .6
------ ----- ----- -----
Total................... $511.5 $9.2 $1.2 $519.5
====== ==== ==== ======
Held-To-Maturity
Debt Securities:
Corporate............... $48.8 $ .4 $ .1 $49.1
Mortgage-backed......... 2.2 -- -- 2.2
Municipal............... 10.8 .3 -- 11.1
U.S. Government......... 10.4 -- .1 10.3
Foreign Government...... 1.1 -- .1 1.0
Other................... 10.2 -- -- 10.2
----- ---- --- ----
Total............. $83.5 $ .7 $ .3 $83.9
===== ==== ==== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Est.
Amortized Unrealized Unrealized Market
1996 Cost Gains Losses Value
---- --------- ----------- ---------- ------
Available-For-Sale
Debt Securities
<S> <C> <C> <C> <C>
Corporate......... $273.6 $5.3 $3.4 $275.5
Mortgage-backed... 35.1 1.2 .2 36.1
Municipal......... 7.3 .1 .1 7.3
U.S. Government... 93.9 .6 .2 94.3
Foreign Government. 42.4 .5 -- 42.9
---- ---- ---- ----
452.3 7.7 3.9 456.1
Equity Securities.... .6 -- -- .6
---- ---- ---- ----
Total............. $452.9 $7.7 $3.9 $456.7
====== ==== ==== ======
Held-To-Maturity
Debt Securities:
Corporate.......... $48.9 $ .1 $ .7 $48.3
Mortgage-backed.... 2.6 -- .1 2.5
Municipal.......... 8.5 .2 -- 8.7
U.S. Government.... 14.4 -- .2 14.2
Foreign Government. 1.1 -- -- 1.1
Other.............. 18.1 -- -- 18.1
---- --- --- ----
Total........ $93.6 $ .3 $1.0 $92.9
===== ==== ==== =====
</TABLE>
Included in investments is $263.2 and $135.8, in 1997 and 1996,
respectively, classified as trading securities. These amounts represent
residual interests in securitized receivables resulting from the early
payment of principal to certificate holders.
The contractual maturities of debt securities at December 31, 1997, are
shown in the table that follows. Actual maturities may differ from
contractual maturities because some borrowers may have the right to prepay
obligations, with or without prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Market Value
1997
Available-For-Sale
<S> <C> <C>
Due within one year............... $ 29.1 $ 29.1
Due one through five years........ 156.1 158.4
Due five through ten years........ 317.4 322.9
Due after ten years............... 8.3 8.5
------ ------
Total.......................... $510.9 $518.9
------ ------
Held-To-Maturity
Due within one year.............. $ 7.3 $ 7.3
Due one through five years....... 47.3 47.5
Due five through ten years....... 17.1 17.3
Due after ten years.............. 11.8 11.8
------- -------
Total......................... $ 83.5 $ 83.9
======= =======
</TABLE>
Proceeds from sales of Available-For-Sale securities totaled $347.8 in
1997, compared with $1,508.5 in 1996. Gross gains of $6.8 in 1997 and
$27.5 in 1996, and gross losses of $0.4 in 1997 and $1.6 in 1996, were
realized on those sales.
<PAGE>
8. OTHER ASSETS
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
<S> <C> <C>
Annuity Deposits...................... $ 787.9 $ 908.3
Deferred Income Tax Benefits.......... 302.7 232.3
Excess Cost of Net Assets Acquired.... 43.7 14.6
Interest-Only Residual................ 72.8 46.9
Investments in and Advances to Discontinued
Operations.............. 6.5 15.0
Miscellaneous Accounts and Notes
Receivable......................... 75.7 70.1
Prepaid Expenses..................... 178.9 130.7
Property Acquired by Foreclosure..... 85.5 100.2
Recoverable Income Taxes............. 43.4 44.6
Servicing Asset...................... 11.4 8.0
Unamortized Insurance Policy Acquisition
Costs...................... 33.2 36.0
Other................................ 183.7 115.9
-------- --------
Total............................. $1,825.4 $1,722.6
======== ========
</TABLE>
The activity in the servicing asset is summarized as follows: balance
January 1, 1997 - $8.0, recognized during the period - $6.9,
amortization - $3.5, balance at December 31, 1997 - $11.4.
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
<S> <C> <C>
Accounts Payable...................... $347.3 $191.5
Accrued and Deferred Compensation..... 76.4 72.1
Accrued Interest...................... 81.0 69.5
Accrued Postretirement Benefits....... 72.2 61.1
Accrued Pension Cost.................. 16.8 18.4
Income Taxes Payable.................. 46.1 42.0
Insurance Premiums Payable............ 27.7 32.2
Other................................. 40.5 47.2
------ ------
Total.............................. $708.0 $534.0
====== ======
</TABLE>
10. SHORT-TERM DEBT
Short-term debt, includes $1,277.4 and $916.9 relating to foreign
subsidiaries at year-end 1997 and 1996, respectively, of which $344.2 and
$228.4 at year-end 1997 and 1996, respectively, relate to the German and
Canadian subsidiaries. Short-term debt consisted of the following:
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
<S> <C> <C>
Commercial Paper.......................... $3,770.5 $3,695.4
Bank Borrowings........................... 814.6 473.9
-------- --------
Total................................. $4,585.1 $4,169.3
======== ========
</TABLE>
<PAGE>
Selected details of short-term borrowings are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Highest Aggregate at Any Month-End. $4,585.1 $4,571.3 $4,023.9
Daily Average Amount............... 3,977.1 3,846.2 3,366.3
Weighted Average Interest Rates:
At Year-End:
Commercial Paper............. 5.74% 5.38% 5.85%
Bank Borrowings.............. 7.48 6.17 6.71
Overall................... 6.09 5.49 5.98
Paid During Year*:
Commercial Paper............. 5.52 5.52 6.24
Bank Borrowings.............. 6.89 6.46 7.19
Overall................... 5.68% 5.63% 6.37%
</TABLE>
*Weighted average interest rates paid during the year have been determined
by relating short-term interest costs (including the costs of maintaining
lines of credit) for each year to the daily average dollar amounts
outstanding.
The Company maintains committed revolving credit agreements in support of
its outstanding commercial paper. At December 31, 1997, the Company had
lines of credit of $4,307.5, of which $3,850.7 was unused. The most
significant of these credit agreements has a net-worth test of $1,000.
Annual commitment fee requirements to support availability of credit
agreements at the end of 1997, 1996 and 1995 totaled $3.9, $4.1 and $5.8,
respectively.
The impact of interest rate hedging activities on the Company's weighted
average short-term borrowing rates and on the reported short-term interest
expense were increases as follows: .08% and $3.1 in 1997; .13% and $5.1 in
1996; and .05% and $1.7 in 1995.
11. LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
<S> <C> <C>
United States.............. $7,814.8 $7,832.2
Canada..................... 308.8 338.6
Germany.................... 32.5 31.6
United Kingdom............. 731.1 428.7
-------- --------
Total................... $8,887.2 $8,631.1
======== ========
</TABLE>
Long-term debt, including weighted average interest rates by year of
maturity on debt outstanding at December 31, 1997, is shown below in the
earliest year it could become payable:
<TABLE>
<CAPTION>
Average Rates
Maturity 1997 1997 1996
-------- ------------- ---- ----
<S> <C> <C> <C> <C>
1997................. $2,610.1
1998................. 7.13% $2,246.1 1,982.0
1999................. 6.73 1,990.7 1,669.7
2000................. 6.71 1,254.1 554.9
2001.................. 7.05 946.3 632.4
2002.................. 6.82 1,293.4 558.3
2003-2007............. 6.77 959.3 426.4
2008-2023............. 7.85 197.3 197.3
--------- ---------
Total.............. 6.90% $8,887.2 $8,631.1
======== ========
</TABLE>
<PAGE>
The weighted average annual interest rates on debt outstanding at year-end
were 6.90%, 6.84% and 7.24% for 1997, 1996 and 1995, respectively.
Weighted average interest rates (including issuance costs) paid during the
year on average long-term debt outstanding were 6.92%, 7.07% and 7.56% for
years ended December 31, 1997, 1996 and 1995, respectively.
Long-term debt outstanding at December 31, 1997 and 1996, includes
$4,174.6 and $3,815.7, respectively, of variable-rate debt that reprices
based on various indices. Such variable-rate debt generally has an
original maturity of one to two years.
The impact of interest rate hedging activities on the Company's weighted
average long-term borrowing rates and on the reported long-term interest
expense were increases as follows: .02% and $2.0 in 1997; .06% and $4.8 in
1996; and .05% and $3.7 in 1995.
12. CAPITAL STOCK
Shares of capital stock outstanding were as follows:
<TABLE>
<CAPTION>
At December 31....................... 1997 1996 1995
-------------- ---- ---- ----
5% Cumulative Preferred - $50 par value.
<S> <C> <C> <C>
Authorized, 585,730..............407,718(a 407,718(a 407,718(a
$5.50 Dividend Cumulative
Convertible Preferred - no par
value - $20 stated value (each
share convertible into nine
shares of Common; maximum
liquidation value, $1,653,800,
$1,845,700, and $2,031,000).
Authorized, 1,164,077
Outstanding Shares Beginning of
Year................... 18,457 20,310 22,362
Conversion into Common..... (1,919) (1,853) (2,052)
-------- -------- --------
Outstanding Shares End of Year 16,538 18,457 20,310
-------- -------- --------
$4.50 Dividend Cumulative Preferred
- $100 par value.
Authorized, 103,976............. 103,976 103,976 103,976
-------- -------- -------
$4.30 Dividend Cumulative Preferred
- no par value -
$100 stated value.
Authorized, 1,069,204........... 836,585 836,585 836,585
-------- ------- -------
Common - $1 par value. Authorized
160,000,000
Outstanding Shares Beginning
of Year.................... 54,041,214 53,197,422 52,509,728
Conversion of $5.50 Preferred
into Common............... 17,271 16,677 18,468
Exercise of Stock Options.. 453,363 827,115 669,903
Tendered Shares............ (29,510) -- --
Repurchased Shares......... (1,205,000) -- --
Direct Investment Plan..... 13,271 -- --
Transfer into Treasury from
Treasury
Shares Held as an Asset.. -- -- (677)
Outstanding Shares End
of Year................. 53,290,609(b 54,041,214(b 53,197,422(b
---------- ---------- ----------
After deducting treasury shares:
a) 5% Cumulative
Preferred........ 178,012 178,012 178,012
b) Common............. 3,581,451 2,800,304 3,627,419
</TABLE>
<PAGE>
In addition, the Company is authorized to issue 500,000 shares of
preferred stock (no par value) and 2,500,000 shares of preferred stock
($1.00 par value). Included within such shares are 570,000 shares of
Series A Participating Preferred Stock ($1.00 par value) that the Company
is authorized to issue in connection with Preferred Stock Purchase Rights
(see Note 14). None of these authorized preferred shares are issued or
outstanding.
At December 31, 1997, a total of 148,842 shares of common stock was
reserved for conversion of $5.50 Dividend Cumulative Convertible Preferred
Stock. During the year, 17,271 shares of common stock were issued upon
conversion of the $5.50 Dividend Cumulative Convertible Preferred Stock,
and 453,363 common stock treasury shares were reissued in connection with
the exercise of stock options.
13. ADDITIONAL CAPITAL
Additional capital decreased by $54.6 in 1997 and increased by $35.3 in
1996. The decrease in 1997 resulted from common stock repurchases of $78.8
offset by issuances in connection with various employee stock plans,
primarily the non-qualified stock option plan described in Note 20. The
increase in 1996 resulted from stock issuances in connection with various
employee stock plans.
14. PREFERRED STOCK PURCHASE RIGHTS
On August 22, 1996, the Board of Directors of the Company adopted a
Renewed Rights Agreement which became effective November 23, 1997. One new
Preferred Stock Purchase Right (Right) was issued for each share of common
stock, par value $1.00 per share, of the Company outstanding on November
23, 1997, and a Right will be issued for each share of common stock issued
thereafter. Under certain circumstances, each Right entitles the
registered holder to purchase from the Company one one-hundredth of a
share of the Company's Series A Participating Preferred Stock at a price
of $235, subject to adjustment. Until the Rights become exercisable,
expire or are redeemed, they will automatically trade with the common
stock but will at no time have voting power.
The Rights will be exercisable under circumstances generally involving
certain acquisitions of, or tender offers for, the common stock, or if a
10% stockholder is declared an "Adverse Person" by the Board of Directors.
If, at any time after the Rights become exercisable, but before they
expire or are redeemed, the Company is acquired in a merger or other
business combination or sells 50% or more of its assets or earning power,
the holder of a Right will be entitled to buy, at the exercise price, a
number of shares of Common Stock of the acquiring or surviving company
having a market value of twice the exercise price of each Right.
Generally, the Rights may be redeemed by the Company for $.01 per Right at
any time prior to the expiration of the Rights on August 22, 2006, and the
Company may alter the exercise price of the Rights and extend the duration
of the Renewed Rights Agreement beyond its 10-year term.
The Renewed Rights Agreement, which became effective on November 23, 1997,
replaced the original Rights Agreement adopted in 1987. The original
Rights Agreement was substantially identical to the Renewed Rights
Agreement, except that (i) the exercise price per Preferred Stock Purchase
Right was $87.50 per share, subject to adjustment; (ii) the redemption
price was $.025 per Right; (iii) each Right entitled the registered holder
to purchase from the Company one two-hundredth of a share of the Company's
Series A Participating Preferred Stock; and (iv) the amendment provision
did not permit the Company to alter the exercise price of the Rights or to
extend the original Rights agreement beyond its 10-year term.
<PAGE>
15. EMPLOYEE RETIREMENT PLANS
The Company has a non-contributory defined benefit pension plan (Plan)
covering substantially all employees of the Company and its subsidiaries
in the United States. The benefits provided are based on the employee's
age, years of service and average compensation during the highest three
consecutive years of earnings. The Company has made annual contributions
at least equal to the amounts accrued for retirement expense. Plan assets
are invested primarily in equity securities and corporate bonds.
The Company also has a supplemental retirement plan to restore those
benefits which have been earned under the Plan but which are not payable
to participants because of the limits imposed by the Internal Revenue Code
on qualified plan benefit distributions.
Employees of subsidiaries outside the United States generally receive
retirement benefits from Company-sponsored plans or from statutory plans
administered by governmental agencies in other countries.
In addition, the Company funds two 401(k) savings plans, which
collectively cover substantially all employees of the Company and its
subsidiaries in the United States, under which basic contributions are
made annually up to 2.5% of each eligible employee's annual compensation
up to $0.15. Related costs charged to income for the years ended December
31, 1997, 1996 and 1995, were $5.4, $4.8 and $4.6, respectively.
The Plan's funded status and amounts recognized in the Company's balance
sheet are as follows:
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
Actuarial Present Value of Benefit Obligation:
<S> <C> <C>
Vested Benefits............................ $ 51.5 $ 45.4
Non-Vested Benefits........................ 12.5 15.0
------- -------
Accumulated Benefit Obligation................ 64.0 60.4
Effect of Future Salary Increases............. 48.8 43.5
------- -------
Projected Benefit Obligation.................. 112.8 103.9
Less Plan Assets at Fair Value................ 78.9 65.0
------- -------
Projected Benefit Obligation in Excess of Plan
Assets..................... 33.9 38.9
Less Unrecognized Net Loss.................... 17.1 20.5
------- -------
Accrued Pension Cost Included in Accounts Payable
and Accrued Liabilities...................... $ 16.8 $ 18.4
====== ======
</TABLE>
For 1997, the projected benefit obligation was determined using an assumed
discount rate of 7.00% (compared with 7.50% in 1996), an assumed long-term
rate of return on assets of 9.00%, and an assumed long-term rate of
increase in future compensation levels of 4.50%.
The following table details the components of net pension expense for the
Plan:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service Cost - Benefits Earned During Period...$ 5.5 $ 5.4 $ 4.4
Interest Cost on Projected Benefit Obligation.. 7.3 7.6 7.6
Actual Return on Plan Assets...................(13.3) (7.1) (12.3)
Net Amortization and Deferral.................. 7.9 1.6 7.1
----- ----- -----
Net Periodic Pension Cost..................... $ 7.4 $ 7.5 $ 6.8
===== ===== =====
</TABLE>
Pension expense related to the Company's supplemental pension plan was
$1.3, $1.3 and $1.2 in 1997, 1996 and 1995, respectively. Pension expense
for the Company's subsidiaries outside the United States was $2.8, $2.7
and $2.6 for 1997, 1996 and 1995, respectively.
<PAGE>
16. POSTRETIREMENT BENEFITS
The Company provides postretirement health and dental care benefits to
eligible employees in the United States, along with their spouses and
eligible dependents. Employees become eligible for these benefits if they
meet minimum age and service requirements and if they agree to contribute
a portion of the cost. The associated plans are unfunded, and approved
claims are paid from Company funds. Under the terms of the plans, the
Company reserves the right to modify or terminate the plans. Most
employees outside the United States are covered by government health care
programs. The cost of such programs is not significant to the Company.
The cost to the Company of postretirement benefits consisted of the
following components:
<TABLE>
<CAPTION>
At December 31 1997 1996 1995
-------------- ---- ---- ----
Postretirement Benefit Cost:
Service Cost - benefits
attributable to service
<S> <C> <C> <C>
during the year... $2.0 $2.0 $1.5
Interest Cost on Accumulated
Benefit Obligation............ 4.2 4.1 4.2
Amortization of Deferred Gain.. (0.8) (0.3) (0.8)
---- ---- ----
Total....................... $5.4 $5.8 $4.9
==== ==== ====
</TABLE>
The actuarial and recorded liabilities for these benefits were as follows:
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
Accumulated Postretirement Benefit Obligation:
<S> <C> <C>
Retirees.................................... $45.1 $38.8
Fully Eligible Active Plan Participants..... 12.4 10.3
Other Active Plan Participants.............. 14.7 12.0
----- -----
Total.................................... $72.2 $61.1
===== =====
</TABLE>
For measurement purposes, a 10.2% pre-65 trend rate was used for 1997 and
1996, with an ultimate rate of 5.0% in 2013. In addition, a 9.7% post-64
trend rate was used for 1997 and 1996, with an ultimate rate of 5.0% in
2018. For dental costs, a trend rate of 6.0% was used for 1997 and 1996,
with an ultimate rate of 4.0% in 2001. The discount rate was 7.00% at
December 31, 1997, and 7.50% at December 31, 1996. A one-percentage-point
increase in the health care trend rate would have increased the
accumulated postretirement benefit obligation by $3.9 at year-end 1997 and
would have added $.6 to the benefit cost for the year.
17. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Federal:
Current:
<S> <C> <C> <C>
U.S..................... $153.5 $177.0 $124.1
Foreign................. 17.4 16.0 18.4
------ ------ ------
Total................ 170.9 193.0 142.5
------ ------ ------
Deferred:
U.S..................... (71.3) (32.8) (34.2)
Foreign................. (0.2) 0.3 (0.8)
------ ------ ------
Total................ (71.5) (32.5) (35.0)
State and Local............... 20.2 17.0 12.4
------ ------ ------
Total Provision for
Income Taxes......... $119.6 $177.5 $119.9
====== ====== ======
</TABLE>
<PAGE>
Temporary differences that gave rise to deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
At December 31 1997 1996
-------------- ---- ----
Deferred Tax Assets:
<S> <C> <C>
Allowance for Credit Losses............ $187.2 $163.9
Capital Losses - Germany............... 33.0 --
Retiree Benefit Plans.................. 31.5 29.8
Accrued and Deferred Compensation...... 19.4 19.2
Deferred Commission Income............. 12.8 10.4
Insurance Reserves..................... 10.1 3.3
Foreign Tax Credits*................... 1.3 8.0
All Other............................... 73.0 64.2
------ ------
Subtotal............................. 368.3 298.8
====== ======
Deferred Tax Liabilities:
Real Estate Partnership Losses.......... 27.4 23.7
Deferred Acquisition Costs.............. 17.8 15.7
All Other............................... 17.1 19.1
------ ------
Subtotal............................. 62.3 58.5
------ ------
Valuation Allowance*....................... (3.3) (8.0)
------ ------
Net Deferred Taxes.................... $302.7 $232.3
====== ======
</TABLE>
*Foreign Tax Credits are fully offset by valuation allowances because
utilization is uncertain. The tax credits expire over the next five years.
A reconciliation of the differences between income taxes computed at the
statutory U.S. income tax rate and the consolidated tax provisions is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Tax Rate................... 35.0% 35.0% 35.0%
Increase (Decrease):
Differential Due to Operations Outside
U.S............... (.8) (1.4) 4.0*
State and Local Income Taxes........... 3.5 2.4 3.0
Capital Losses - Germany............... (7.7) -- --
Other.................................. 2.0 2.7 2.3
---- ---- ----
Effective Tax Rate..................... 32.0% 38.7% 44.3%
==== ==== ====
</TABLE>
*Includes 3.2% in 1995 resulting from the non-deductibility of credit
losses at the German banking subsidiary.
The foreign tax credit utilization resulted from the Company's election to
modify the limitation calculation. U.S. income taxes were not provided at
December 31, 1997, on $19.0 of undistributed earnings of foreign
subsidiaries, which are expected to be permanently invested in foreign
countries, and on $77.8 of undistributed earnings of life insurance
subsidiaries accumulated as policyholders' surplus under tax laws in
effect prior to 1984. Should these amounts be distributed, the additional
income taxes payable would be approximately $1.0 and $27.2, respectively.
18. OTHER REVENUE
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Investment Income................$ 56.6 $ 80.2 $ 67.8
Net Tax Service (RAL) Revenue.... 105.7 140.9 (14.9)
Securitization Revenue........... 237.8 192.3 123.6
Other............................ 60.7 46.3 54.4
---- ---- ----
Total.......................... $460.8 $459.7 $230.9
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
19. OTHER EXPENSES
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Collection Expense................. $ 27.4 $ 20.4 $ 16.4
Data Processing Costs.............. 57.8 42.1 35.6
Depreciation....................... 38.8 40.8 40.0
Insurance Commissions.............. 19.9 18.5 21.7
Licenses and Taxes................. 20.9 17.6 17.0
Losses on Real Estate Foreclosures. 26.1 38.1 45.9
Marketing.......................... 111.9 77.1 58.2
Occupancy.......................... 80.7 78.1 75.8
Origination Costs.................. 18.0 29.1 26.7
Postage............................ 35.8 32.3 26.6
Premium Amortization............... 33.4 35.2 25.3
Printing........................... 23.3 27.6 22.6
Professional Services.............. 46.0 29.9 26.6
Telecommunications................. 32.8 32.6 30.6
Travel............................. 23.0 21.4 20.3
Other.............................. 81.5 65.6 52.3
------ ------ ------
Total........................... $677.3 $606.4 $541.6
====== ====== ======
</TABLE>
20. STOCK OPTIONS
The Company has a non-qualified stock option plan (Non-Qualified Plan),
adopted in 1990, which provides for grants of options to officers,
directors and key employees of the Company and its participating
subsidiaries. Under the Non-Qualified Plan, the option price shall not be
less than 100% of fair market value on the date the option is granted.
Options generally become exercisable in cumulative annual increments of
25% each year, commencing one year after date of grant and expiring after
10 years. The aggregate number of options for any calendar year may not
exceed 1.75% of the total issued and outstanding common stock of the
Company as measured on the first day of any such calendar year. If during
any such calendar year the total number of authorized options is not
granted, the remainder will be available for granting during any
succeeding year during the term of the Non-Qualified Plan. Shares of
common stock to be issued upon exercise of options may be treasury shares
reacquired by the Company or authorized and unissued common shares or a
combination of both.
The Company adopted an equity participation plan (Plan) in 1997, that
provides for grants of options to each eligible employee. It is the intent
of the Plan that there be no overlap in eligibility between the Plan and
the Non-Qualified Plan. Under the Plan, the option price shall be 120% of
the fair market value on the date the option is granted. Options are fully
exercisable when granted and expire after 10 years.
<PAGE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the Non-Qualified Plan or the Plan. Had
compensation cost for the Non-Qualified Plan or the Plan been determined
based on the fair value at the grant date of awards in 1997, 1996 and 1995
consistent with the provisions of SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Income - Reported.................. $253.7 $281.0 $150.5
Net Income - Pro Forma................. 248.9 278.8 150.3
Basic Earnings per share:
Reported............................ 4.68 5.19 2.77
Pro Forma........................... 4.59 5.15 2.77
Diluted Earnings per share:
Reported............................ 4.54 5.05 2.71
Pro Forma........................... 4.45 5.01 2.71
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1997, 1996 and 1995, respectively:
dividend yield of 3.07%,3.54% and 4.00%; risk-free interest rate of 5.82%,
5.95% and 5.77%; expected volatility of 26.3% and expected lives of 5.5
for all years. The pro forma effect on net income for 1997, 1996 and 1995
is not representative of the pro forma effect on net income in future
years because it does not take into consideration pro forma compensation
expense related to grants made prior to 1995. The weighted average fair
value at the date of grant for options granted during 1997, 1996 and
1995 was $16.06, $16.21 and $13.10 per option, respectively.
The following table summarizes the activity relating to the Plan:
<TABLE>
<CAPTION>
Weighted-Average
Number Exercise Price
Shares Under Option
<S> <C> <C>
Options Outstanding December 31, 1994.. 3,634,566 $33.05
Options Exercised................... (669,903) 28.82
Options Canceled.................... (132,425) 35.26
Options Granted..................... 955,130 49.19
---------- -------
Options Outstanding December 31, 1995.. 3,787,368 37.79
========= =======
Options Exercised................... (827,115) 32.79
Options Canceled.................... (68,056) 40.38
Options Granted..................... 1,042,350 64.32
--------- -------
Options Outstanding December 31, 1996.. 3,934,547 45.82
========= =======
Options Exercised................... (453,363) 38.52
Options Canceled.................... (485,088) 72.10
Options Granted..................... 3,031,800 82.53
--------- ------
Options Outstanding December 31, 1997.. 6,027,896 $62.72
========= ======
Options Exercisable December 31, 1997.. 3,605,679 $60.92
========= ======
</TABLE>
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
-------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
$21.75 - $22.44 42,477 3 years $22.04 42,477 $22.04
29.16 - 31.13 519,727 4.6 years 29.95 519,727 29.95
37.44 - 38.78 1,053,375 6.5 years 37.70 862,737 37.76
49.19 - 49.25 752,414 8 years 49.19 331,814 49.19
61.81 - 64.44 965,313 9 years 64.32 254,834 63.98
75.44 - 79.44 1,100,500 10 years 77.04 - -
81.00 - 90.53 1,594,090 9.6 years 86.54 1,594,090 86.54
--------------- --------- --------- ----- --------- -----
$21.75 - $90.53 6,027,896 8.4 years $62.72 3,605,679 $60.92
=============== ========= ========= ====== ========= ======
</TABLE>
21. DIVIDENDS PAID
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Preferred Stock:
<S> <C> <C> <C> <C>
5%............................. $ 1.0 $ 1.0 $ 1.0
$5.50 Convertible.............. .1 .1 .1
$4.50.......................... .5 .5 .5
$4.30.......................... 3.6 3.6 3.6
--- --- ---
5.2 5.2 5.2
Common Stock...................... 115.5 105.3 94.5
----- ----- ----
Total Dividends.............. $120.7 $110.5 $99.7
====== ====== =====
</TABLE>
22. GEOGRAPHIC INFORMATION
Data by geographic area for the years ended December 31 are shown in the
following table:
<TABLE>
<CAPTION>
Inter-
United Company
States Foreign Eliminations Total
1997
<S> <C> <C> <C> <C>
Revenue.......................$ 2,507.8 $ 462.2 $(14.3) $ 2,955.7
Income before Income Taxes.... 389.9 (16.6) -- 373.3
Net Assets.................... 1,380.5 391.8 -- 1,772.3
Total Assets.................. 14,339.9 3,396.9 (91.7) 17,645.1
1996
Revenue....................... 2,371.2 409.6 (8.9) 2,771.9
Income before Income Taxes.... 423.9 34.6 -- 458.5
Net Assets.................... 1,398.6 296.2 -- 1,694.8
Total Assets.................. 14,410.0 2,589.7 (68.5) 16,931.2
1995
Revenue....................... 2,018.5 389.0 (9.3) 2,398.2
Income before Income Taxes.... 251.7 18.7 -- 270.4
Net Assets.................... 1,250.0 253.0 -- 1,503.0
Total Assets.................. 13,572.3 2,219.2 (54.2) 15,737.3
</TABLE>
23. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
1997
<S> <C>
Net Income........................... $253.7
Less: Preferred stock dividends.. (5.2)
--------
Basic Earnings per Share:
Income available to common
<S> <C> <C> <C>
stockholders.................... 248.5 53.0 $4.68
----- ---- -----
Convertible preferred stock....... 0.1 0.2
Options........................... -- 1.2
Employee stock purchase plan...... -- 0.3
Diluted Earnings per Share:
Income available to common
stockholders and assumed
conversions.................. $248.6 54.7 $4.54
====== ==== =====
1996
Net Income........................... $281.0
Less: Preferred stock dividends.. (5.2)
--------
Basic Earnings per Share:
Income available to common
stockholders.................... 275.8 53.1 $5.19
----- ---- -----
Convertible preferred stock....... 0.1 0.2
Options........................... -- 1.0
Employee stock purchase plan...... -- 0.3
Diluted Earnings per Share:
Income available to common
stockholders and assumed
conversions.................. $275.9 54.6 $5.05
====== ==== =====
1995
Net Income........................... $150.5
Less: Preferred stock dividends.. (5.2)
---------
Basic Earnings per Share:
Income available to common
stockholders.................... 145.3 52.5 $2.77
----- ---- -----
Convertible preferred stock....... 0.1 0.2
Options........................... -- 0.7
Employee stock purchase plan...... -- 0.3
Diluted Earnings per Share:
Income available to common
stockholders and assumed
conversions.................. $145.4 53.7 $2.71
====== ==== =====
</TABLE>
24. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward agreements, options
and currency swaps to hedge its net investment in foreign subsidiaries.
The forward agreements do not subject the Company to risk caused
by exchange-rate movements because gains and losses on these
agreements offset losses and gains on the assets and liabilities being
hedged. The forward agreements generally have maturities that do not
exceed six months.
<PAGE>
Outstanding forward agreements as of December 31, 1997, consisted of a
sale of (pound)46.0 in exchange for US$71.6 and a net forward purchase of
DM17.0 in exchange for US$9.6. This compares to forward sales of
(pound)46.0 and DM38.0 in exchange for US$71.6 and US$24.7, respectively,
at December 31, 1996.
The Company sells at-the-money (spot) call options and buys
out-of-the-money (spot) put options on British pounds. The strike rate of
each call option is set at the then-current exchange rate, and the strike
rate of each put option purchased is set at a rate whereby the premium
received on the related call option exactly offsets the premium paid for
such put option, resulting in no out-of-the-pocket cost. With the
exception of the strike rates, all terms of the call and put are
identical. The notional amount of each option is an amount that will
generally produce offsetting gains or losses (on an aftertax basis) to the
gains or losses produced by the underlying net investment. Further, the
combination of these instruments (a so-called "no cost collar") is
effectively a partial hedge, as hedging gains or losses occur only when
the spot rates fluctuate outside the range of the respective strike rates.
These option transactions generally have a maturity of three to six
months.
At December 31, 1997, the Company had purchased options to deliver British
pounds in exchange for US$386.3, as compared with December 31, 1996, when
the Company owned the right to deliver British pounds for US$166.0.
Concurrently, the Company had sold options to buy British pounds for
US$391.2 at December 31, 1997, as compared with sales of call options on
British pounds for US$166.3 at year-end 1996.
Through the use of currency swaps, the Company exchanges principal
denominated in U.S. dollars for principal denominated in a foreign
currency at the then-current exchange rate and agrees to make the opposite
exchanges on the swaps' termination date. Semi-annual interest payments
are made on the notional amounts over the life of the agreements.
Currency swaps outstanding at year-end obligate the Company to pay DM47.0
in exchange for US$31.1 in September 1998, to pay C$165.0 in exchange for
US$120.4 in July 1999 and to pay C$100.0 in exchange for US$74.5 in
November 2000. There has been no change in currency swaps outstanding
since December 31, 1996.
The Company recorded unrealized pretax gains of $6.0 at December 31, 1997,
and unrealized pretax losses of $18.5 at December 31, 1996, on open
hedges. These gains and losses represent a mark to spot on all open hedges
and are recognized in a separate component of equity.
There were no gains or losses recognized in net income attributable to the
above hedging programs during the three years ended December 31, 1997.
Gains and losses in excess of the amount needed to offset gains or losses
on investments in foreign subsidiaries due to currency fluctuations are
not expected given the above hedging strategy.
The Company and its subsidiaries utilize interest rate swaps to manage
interest rate risk. The agreements effectively changed interest rates on
certain medium-term notes and other indebtedness issued by the Company and
its subsidiaries to variable commercial paper or LIBOR indices or fixed
rate, with interest received exactly offsetting interest paid on such
medium-term notes or other indebtedness. The risks inherent in interest
rate swaps are the potential inability of a counterparty to meet the terms
of each contract. These agreements to exchange fixed and floating, or
floating versus floating, interest rate payments are with major
international financial institutions that are expected to fully perform
under the terms of the agreements, thereby mitigating credit risk from the
transactions.
<PAGE>
The amounts to be paid or received under the agreements are accrued in
interest expense consistent with the terms of the agreements. At December
31, 1997, accrued interest payable related to these interest rate swaps
totaled $12.0, which is offset by $12.8 of accrued interest receivable.
The impacts of the interest rate hedging activities on the Company's
weighted average borrowing rates and on the reported interest expense were
increases as follows: .04% and $5.1 in 1997; .08% and $9.9 in 1996; and
.05% and $5.4 in 1995.
The following table summarizes the interest-rate swaps outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Weighted Average Weighted
Notional Interest Rates Average
Amount Pay Receive Maturity*
Pay fixed-rate - receive
<S> <C> <C> <C> <C>
floating-rate $ 732.5 7.40% 7.37% 2.6
Pay floating-rate - receive
fixed-rate
Denominated in:
US$ 153.0 6.13 6.51 8.4
British pounds 141.0 7.89 7.94 1.5
Pay floating-rate - receive
floating-rate 853.2 6.09 5.75 1.4
-------- ---- ---- ---
Total $1,879.7 6.74% 6.61% 2.5
======== ==== ==== ===
</TABLE>
*Remaining term in years.
25. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to finance receivables are
limited because the Company's subsidiaries primarily lend to consumers
across many different geographic areas. The highest percentage of owned
receivables in any geographic area is in California (16%), with no other
state or country having more than 13%. About 65% of receivables in
California are real estate secured, compared with 39% for the Company in
total. Second mortgage loans are generally limited to 75% of the appraised
value of the home as determined by certified, independent appraisers. In
the case of first mortgages, the lending cap is 80%. In addition, a
rigorous discipline of credit approval is enforced regarding borrower
debt-to-income ratios and overall consumer credit quality.
In meeting the financing needs of its customers, subsidiaries of the
Company issue commitments to extend additional credit to customers under
revolving real estate (including loans securitized), credit cards and
sales finance contracts as long as there is no violation of any conditions
established in the contract. The commitments generally have fixed
expiration dates or other termination clauses and generally require
payment of a fee. The Company uses the same credit procedures when
entering into such commitments as it does for traditional lending
products. At December 31, 1997, committed lines totaled $20,627.2,
compared with $18,598.1 at year-end 1996, of which 56% at the end of 1997
was available for further loans. A large majority of these commitments
expire without being exercised. As a result, total contractual commitments
do not represent future credit exposure or liquidity requirements.
<PAGE>
26. LEASES
The consumer finance system operates from premises under leases generally
having an original term of five years with a renewal option for a like
term. The Company leases its headquarters in Wilmington, Delaware, under a
lease expiring in 2010. Also, a subsidiary leases an office complex in
Peapack, New Jersey, with a primary term expiring in 2010 and renewal
options totaling 47 years. Data processing equipment lease terms range
from one to four years and are generally renewable. The minimum rental
commitments under noncancelable operating leases at December 31, 1997,
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998......................................................... $ 72.8
1999......................................................... 64.2
2000......................................................... 53.9
2001......................................................... 45.8
2002......................................................... 41.3
2003-2007.................................................... 177.7
2008-2021.................................................... 88.2
------
Total..................................................... $543.9
======
</TABLE>
27. FAIR VALUE OF FINANCIAL INSTRUMENTS
The information provided below is required by SFAS No. 107, "Disclosures
About Fair Value of Financial Instruments." These amounts represent
estimates of fair value of financial instruments at a point in time.
Significant estimates using available market information and appropriate
valuation methodologies were used for the purposes of this disclosure. The
estimates are not necessarily indicative of the amounts the Company could
realize in a current market exchange, and the use of different market
assumptions or methodologies could have a material effect on the estimated
fair value amounts.
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Estimated Carrying Estimated
At December 31 Value Fair Value Value Fair Value
-------------- ---------- ---------- --------- ----------
Assets
------
<S> <C> <C> <C> <C>
Cash and Equivalents.. $ 253.9 $ 253.9 $ 279.6 $ 279.6
Investment Securities. 866.2 866.6 686.1 685.4
Finance Receivables,
Net............ 14,470.3 15,646.2 14,038.0 15,090.9
Servicing Asset....... 11.4 11.4 8.0 8.0
Interest-Only Residual. 72.8 72.8 46.9 46.9
Liabilities
-----------
Short-Term Debt........ 4,585.1 4,585.1 4,169.3 4,169.3
Deposits............... 555.3 555.3 635.0 635.0
Long-Term Debt......... 8,887.2 9,033.2 8,631.1 8,812.6
Accounts Payable....... 708.0 708.0 534.0 534.0
</TABLE>
December 31
1997 1996
Net Unrealized Gain (Loss) on Derivative
Financial Instruments.............. $10.1 $(33.9)
The fair value of investment securities is based on quoted market prices.
The fair market value of real estate secured and personal unsecured loans
was estimated by discounting the future cash flows over the estimated
remaining term, based on past cash collection experience. For credit cards
and sales finance products, the carrying amount is a reasonable estimate
of fair value. The discount factor was determined by taking into
consideration current funding costs, chargeoff experience and premiums
paid on acquisitions of receivables with similar characteristics.
Demand deposits are shown at their face values. For short-term and
long-term debt, the fair values are estimated, using the interest rates
currently offered for debt with similar terms and remaining maturities.
The estimated fair value of accounts payable approximates their carrying
value. The fair value of interest-rate swap agreements, forward exchange
contracts and foreign exchange options is the estimated amount the Company
would receive or pay to terminate the agreements at the balance sheet
date, taking into account current interest rates, foreign exchange rates
and the creditworthiness of the counterparties.
The fair value estimates presented were based on information available to
the Company at December 31, 1997 and 1996. While management is not aware
of any significant factors that would affect the year-end 1997 estimate
since that date, current estimates of fair value could differ
significantly from the amounts disclosed.
28. CONTINGENT LIABILITIES
In July 1992, the Internal Revenue Service (IRS) completed its examination
of the Company's federal income tax returns for 1984 through 1987. The IRS
proposed $142.0 in adjustments relating to 1986 and 1987 additions to the
loss reserves of the Company's former subsidiary, American Centennial
Insurance Company (ACIC), prior to the Company's sale of its entire
interest in ACIC in May 1987.
In order to limit the further accrual of interest on the proposed
adjustments, the Company paid $105.5 of tax and interest during the third
quarter of 1992.
The issues were not resolved during the administrative appeals process,
and the IRS issued a statutory Notice of Deficiency asserting the
unresolved adjustments and increased the disallowance to $195.0 in the
third quarter of 1996.
The Company has initiated litigation in the United States Tax Court to
oppose the disallowance. While the conclusion of this matter cannot be
predicted with certainty, management does not anticipate the ultimate
resolution to differ materially from amounts accrued. Complete resolution
is not expected to occur within one year.
The Company and subsidiaries are involved in various other claims and
lawsuits incidental to the business. In the opinion of management, these
claims and suits in the aggregate will not have a material adverse effect
on the Company's consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in millions, except per share amounts)
Quarter Ended 3/31 6/30 9/30 12/31
- ------------- ---- ---- ---- -----
1997
<S> <C> <C> <C> <C>
Gross Revenue................ $772.6 $734.0 $744.3 $704.8
Income (Loss) before Income
Taxes...................... 162.4 133.4 120.6 (43.1)
Net Income (Loss)........... 100.7 88.3 77.5 (12.8)
Diluted Earnings (Loss) per
Common Share............... 1.80 1.59 1.40 (.25)
Dividends per Common Share.. .52 .52 .57 .57
1996
Gross Revenue............... $751.1 $682.4 $678.8 $659.6
Income before Income Taxes.. 184.7 139.6 109.5 24.7
Net Income.................. 107.4 82.4 67.9 23.3
Diluted Earnings per Common
Share...................... 1.96 1.48 1.22 .39
Dividends per Common Share.. .47 .47 .52 .52
</TABLE>
<PAGE>
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Executive Officers of the Registrant
Name Age Position and Offices Held as of March 2, 1998
- ---- --- ---------------------------------------------
Finn M. W. Caspersen .. 56 Director (1975 to present),
Chairman of the Board of
Directors, Chief Executive
Officer and Chairman of
Executive Committee (1976 to
present), Member of Executive
Committee (1975 to present),
and Member of Finance Committee
(1975 to present) of the
Company.
David J. Farris....... 62 Director (1982 to present),
Member of Office of the
President (1984 to present),
Chief Operating Officer (1987
to present),
Member of Executive Committee
(1983 to present) and Member of
Finance Committee (1988 to
present) of the Company;
President and Chief Executive
Officer (1982 to present) of
Beneficial Management
Corporation, a subsidiary of
the Company.
James H. Gilliam, Jr. .... 52 Director (1984 to present),
Executive Vice President
(1989 to
present), General Counsel
(1986 to present), Secretary
(1987 to 1992), and Member of
Executive Committee (1987 to
present) of the Company;
Chairman (1987 to present)
of Beneficial
National Bank, a subsidiary of
the Company.
Andrew C. Halvorsen ..... 51 Director (1984 to present),
Member of Office of the
President,
First Vice President and
Chief Financial Officer
(1986 to present) and Member of
Executive and Finance
Committees (1984 to present)
of the Company.
Patti Prairie ......... 46 Chief Information Officer
(1997 to present) of the
Company; Executive Vice
President (1997 to present)
of Beneficial
Management Corporation and
President (1997 to present) of
Beneficial Technology
Corporation, subsidiaries of
the Company; Senior Vice
President of Global Corporate
Systems (1995 to 1997) and
Senior Vice President of
Corporate Business Systems
(1994 to 1995) of American
Express Company;Vice President
of Financial Services of
International Business Machines
Consulting Group (1992 to
1994).
Jonathan Macey ........... 41 Senior Vice President,
Controller and Chief Accounting
Officer
(1997 to present) of the
Company; Vice President -
Financial
Controls of Beneficial
Management Corporation, a
subsidiary of the Company
(1992 to 1997).
<PAGE>
Scott A. Siebels .......... 43 Senior Vice President (1998 to
present), Vice President (1995
to 1997), Secretary (1995 to
present), Assistant General
Counsel (1998 to present) and
Associate Counsel (1990 to
1997), Assistant Vice President
(1993 to 1995); and Assistant
Secretary (1991 to 1995) of the
Company.
Officers of the Company hold office until the next Annual Meeting of
the Directors, to be held May 21, 1998, or until their successors are otherwise
elected as provided in the By-Laws.
Information required under this Item relating to disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K and to the directors of
the Company will be contained in the Company's Proxy Statement for the 1998
Annual Meeting of Stockholders, which is incorporated herein by reference.
<PAGE>
Item 11. EXECUTIVE COMPENSATION.
Information required under this Item will be contained in the Company's
Proxy Statement for the 1998 Annual Meeting of Stockholders, which is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required under this Item will be contained in the Company's
Proxy Statement for the 1998 Annual Meeting of Stockholders, which is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item will be contained in the Company's
Proxy Statement for the 1998 Annual Meeting of Stockholders, which is
incorporated herein by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following represents a listing of all financial statements, financial
statement schedules, and exhibits filed as part of this report.
(1) Financial Statements
The following financial statements of Beneficial Corporation and
Subsidiaries and Independent Auditors' Report are included in Item
8:
Independent Auditors' Report.
Balance Sheet at December 31, 1997 and 1996.
Statement of Income and Retained Earnings for the three years
ended December 31, 1997. Statement of Cash Flows for the three
years ended December 31, 1997.
Notes to Financial Statements.
Selected Quarterly Financial Data (unaudited).
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts and Reserves.
(3) Exhibits
The Exhibit Index on pages 58-60 of this Annual Report on Form
10-K lists the exhibits that are filed as part of this report.
The Company filed the following reports on Form 8-K during the last quarter of
the period covered by this report:
(1) A report on Form 8-K, dated October 27, 1997, was filed relating
to the Company's third-quarter earnings, which were announced on
October 27, 1997, and the Company's announcement of a number of
initiatives to enhance earnings growth and build shareholder
value.
<PAGE>
BENEFICIAL CORPORATION
SUPPLEMENTAL FINANCIAL DATA
The Financial Statements and Notes to Financial Statements of
Beneficial Corporation and Subsidiaries are supplemented by the information in
the following Schedule II. All other schedules are omitted because of the
absence of the conditions under which they are required or because all material
information called for is set forth in the Financial Statements and the Notes
referred to in this Item.
SCHEDULE II
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 1997, 1996, and 1995
(in millions)
- --------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -------------------------- -------- -------- -------- --------
-------------------------
Additions
-------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End
Description of Year Expenses Accounts Deductions of Year
- ---------------------- ----------- ---------------------- ---------- --------
YEAR ENDED DECEMBER 31, 1997
Reserves shown separately:
Insurance policy and
claim reserves:
<S> <C> <C> <C> <C> <C>
Policy reserves. $1,200.9 $ -- $173.5(A) $177.8(C) $1,065.5
51.9(I) 171.0(G)
12.0(H)
Claim reserves.. 66.1 71.1(D) -- 65.5(E) 71.7
-------- ------- ------- ------ --------
Total....... $1,267.0 $ 71.1 $225.4 $426.3 $1,137.2
======== ======= ====== ====== ========
Allowance for credit
losses on
finance
receivables... $ 498.2 $485.3 $(11.4) $412.2(F)$ 559.9
======== ====== ======= ====== =========
YEAR ENDED DECEMBER 31, 1996
Reserves shown separately:
Insurance policy and
claim reserves:
Policy reserves. $1,215.2 $ -- $212.2(A) $168.7(C) $1,200.9
49.0(G)
8.8(H)
Claim reserves... 50.3 82.8(D) -- 67.0(E) 66.1
-------- ------- ------ ------ --------
Total........ $1,265.5 $ 82.8 $212.2 $293.5 $1,267.0
======== ======= ====== ====== ========
Allowance for credit
losses on
finance
receivables... $ 406.1 $398.8 $ 10.2 $316.9(F)$ 498.2
========= ====== ======== ====== =========
YEAR ENDED DECEMBER 31, 1995
Reserves shown separately:
Insurance policy and
claim reserves:
Policy reserves. $1,041.5 $ -- $192.7(A) $152.7(C) $1,215.2
133.7(B)
Claim reserves.. 43.2 80.4(D) -- 73.3(E) 50.3
-------- ------- ------ ------ --------
Total........ $1,084.7 $ 80.4 $326.4 $226.0 $1,265.5
======== ======= ====== ====== ========
Allowance for credit
losses on
finance
receivables... $ 331.6 $295.2 $ 3.7 $224.4(F) $ 406.1
======== ====== ====== ====== =======
</TABLE>
NOTES
(A) Net premiums written and reinsurance assumed. (F) Finance receivables
(B) Premiums collected on annuity contracts. charged off (after
(C) Earned premiums. offsetting recoveries).
(D) Provision for insurance claims. (G) Change in annuity
(E) Claims paid. policy reserve.
(H) Foreign currency
translation.
(I) Adjustment for ordinary
co-insurance.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BENEFICIAL CORPORATION
Date: March 26, 1998 By /s/ Andrew C. Halvorsen
-----------------------------------------
Andrew C. Halvorsen, Member of the Office
of the President, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board of
Directors and Chief Executive
Officer and Director (Principal
/s/ Finn M.W. Caspersen Executive Officer) March 26, 1998
- -----------------------------------
(Finn M.W. Caspersen)
Member of the Office of the
President, Chief Financial
Officer and Director
/s/ Andrew C. Halvorsen (Principal Financial Officer) March 26, 1998
- ------------------------------------
(Andrew C. Halvorsen)
Senior Vice President
and Controller (Principal
/s/ Jonathan Macey Accounting Officer) March 26, 1998
- -------------------------------------
(Jonathan Macey)
/s/ Robert J. Callander Director March 26, 1998
- --------------------------------------
(Robert J. Callander)
/s/ Robert C. Clark Director March 26, 1998
- --------------------------------------
(Robert C. Clark)
/s/ Leonard S. Coleman, Jr. Director March 26, 1998
- --------------------------------------
(Leonard S. Coleman, Jr.)
/s/ David J. Farris Director March 26, 1998
- --------------------------------------
(David J. Farris)
/s/ James H. Gilliam, Jr. Director March 26, 1998
- --------------------------------------
(James H. Gilliam, Jr.)
/s/ Roland A. Hernandez Director March 26, 1998
- --------------------------------------
(Roland A. Hernandez)
/s/ J. Robert Hillier Director March 26, 1998
- --------------------------------------
(J. Robert Hillier)
/s/ Gerald L. Holm Director March 26, 1998
- --------------------------------------
(Gerald L. Holm)
/s/ Thomas H. Kean Director March 26, 1998
- --------------------------------------
(Thomas H. Kean)
/s/ Steven Muller Director March 26, 1998
- --------------------------------------
(Steven Muller)
/s/ Susan Julia Ross Director March 26, 1998
- --------------------------------------
(Susan Julia Ross)
Director March 26, 1998
- --------------------------------------
(Robert A. Tucker)
Director March 26, 1998
- --------------------------------------
(Susan M. Wachter)
/s/ Charles H. Watts, II Director March 26, 1998
- --------------------------------------
(Charles H. Watts, II)
Andrew C. Halvorsen, pursuant to Powers of Attorney (executed by
each of the directors listed above as signing) filed with the Securities and
Exchange Commission, does hereby sign and execute this report on behalf of such
directors.
/s/ Andrew C. Halvorsen
---------------------------------------------
Andrew C. Halvorsen
March 26, 1998
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Copy of the Company's Restated Certificate of Incorporation, as
amended.
3.2 Copy of the Company's By-Laws, as amended.
4.1 Amended and Restated Standard Multiple-Series Indenture
Provisions (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (Reg. No.
33-38287)).
4.2 First Supplemental and Restated Indenture dated as of
December 1, 1990 between the Company and The Chase
Manhattan Bank (National Association), as Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (Reg. No.
33-51833)).
4.3 A form of the Fixed Rate Medium-Term Notes (Global)
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-3 (Reg. No. 33-51833)).
4.4 A form of the Fixed Rate Medium-Term Notes (Certificated)
(incorporated by reference to Exhibit 4.8 to the Company's
Registration Statement on Form S-3 (Reg. No. 33-51833)).
4.5 A form of the Floating Rate Medium-Term Notes (Global)
(incorporated by reference to
Exhibit 4.9 to the Company's Registration Statement on Form S-3
(Reg. No. 33-51833)).
4.6 A form of the Floating Rate Medium-Term Notes (Certificated)
(incorporated by reference to Exhibit 4.10 to the Company's
Registration Statement on Form S-3 (Reg. No. 33-51833)).
4.7 Copy of Credit Agreement dated as of November 15, 1995
among Beneficial Corporation as a borrower and as a
guarantor, the borrowers defined in Article I, the lenders
defined in Article I, Bank of America National Trust and
Savings Association, Chemical Bank and Union Bank of
Switzerland as co-arrangers, and Credit Suisse as
administrative agent for the lenders (incorporated by
reference to Exhibit 10(t) to the Annual Report on Form
10-K for the year ended December 31, 1995).
10.1 Copies of forms of agreement by and between Beneficial
Corporation and certain key management employees of the
Company and its subsidiaries (incorporated by reference to
Exhibit 10(a) to the Quarterly Report on Form 10-Q for the
period ended March 31, 1996).
10.2 Copies of forms of Severance Agreements by and between
Beneficial Corporation and key executive officers of the
Company and its subsidiaries (incorporated by reference to
Exhibit 10(b) to the Quarterly Report on Form 10-Q for the
period ended March 31, 1996).
10.3 Copy of Lease, dated as of June 28, 1982, between
Hamilton Associates Limited Partnership and Beneficial
Management Corporation (incorporated by reference to Exhibit
10(f) to the Annual Report on Form 10-K for the year ended
December 31, 1982).
Exhibit
Number Exhibit
10.4 Copy of First Amendment to Lease dated as of July 2, 1997
between Hamilton Associates Limited Partnership and Beneficial
Management Corporation (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
10.5 Copy of Guaranty dated as of July 2, 1997 of Beneficial
Corporation relating to the Lease, as amended, between
Hamilton Associates Limited Partnership and Beneficial
Management Corporation (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
10.6 Copy of Form of Indemnification Agreement between
Beneficial Corporation and its directors, dated
August 21, 1986, (incorporated by reference to Exhibit 10(s)
to the Annual Report on Form 10-K for the year ended
December 31, 1986).
10.7 Copy of Amended and Restated Directors' Annuity Plan
dated May 23, 1996 between Beneficial Corporation and its
directors and directors emeriti (incorporated by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996).
10.8 Copy of the Company's Renewed Rights Agreement dated as of
August 22, 1996 (incorporated by reference to Exhibit 10(a)
of the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996). The Renewed Rights Agreement became
effective on November 23, 1997.
10.9 Copy of Refund Anticipation Loan Operations Agreement dated
July 19, 1996 among H & R Block Tax Services, Inc., HRB Royalty,
Inc., Beneficial Tax Masters Inc., Beneficial National Bank,
and Beneficial Franchise Company, Inc. (incorporated by
reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996).
10.10 Copy of Refund Anticipation Loan Participation Agreement
dated as of July 19, 1996 among Block Financial
Corporation, Beneficial National Bank and Beneficial Tax
Masters, Inc. (incorporated by reference to Exhibit 10(c)
to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996). Confidential treatment has been
requested with respect to certain portions of the
agreement; such portions have been separately filed with
the Securities and Exchange Commission.
10.11 Copy of Beneficial Corporation Key Employees Stock Bonus
Plan, as amended, (incorporated by reference to Exhibit 10
to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997).
10.12 Copy of Beneficial Corporation 1990 Non-Qualified Stock
Option Plan.
10.13 Copy of Beneficial Corporation Supplemental Pension Plan
(incorporated by reference to Exhibit 10(n) to the Annual
Report on Form 10-K for the year ended December 31, 1992).
10.14 Copy of Beneficial Corporation Deferred Compensation Plan
(incorporated by reference to Exhibit 10(r) to the Annual
Report on Form 10-K for the year ended December 31, 1994).
Exhibit
Number Exhibit
10.15 Copy of letter agreement entered into by the Company and
MDE Associates, Inc. relating to personal financial
counseling services to be made available to certain key
officers of the Company and its subsidiaries (incorporated
by reference to Exhibit 10(s) to the Annual Report on Form
10-K for the year ended December 31, 1995).
12 Computation of Ratios of Earnings to Fixed Charges of
Beneficial Corporation and Subsidiaries (continuing operations
only).
21 List of the names and states of incorporation of the Company's
subsidiaries.
23 Consent of independent auditors.
24 Powers of Attorney.
27 Financial Data Schedule (in EDGAR filing only).
The Company agrees to furnish to the Securities and Exchange Commission, upon
request, a copy of each instrument defining the rights of holders of its
long-term debt where the securities authorized thereunder does not exceed 10
percent of the total assets of the Company and its subsidiaries on a
consolidated basis.
The Company will furnish to each stockholder, upon written request, copies of
the exhibits referred to above. Requests should be addressed to Scott A.
Siebels, Senior Vice President and Corporate Secretary, Beneficial Corporation,
301 North Walnut Street, Wilmington, Delaware 19801.
<PAGE>
EXHIBIT 3.1
<PAGE>
[Conformed Copy]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESTATED CERTIFICATE OF INCORPORATION
of
BENEFICIAL CORPORATION
(A Delaware Corporation)
------------------------------------
As amended through November 20, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
of
BENEFICIAL CORPORATION
-------------------------------------
BENEFICIAL CORPORATION, a corporation organized and existing under the laws
of the State of Delaware, HEREBY CERTIFIES AS FOLLOWS:
FIRST: That (i) the name of the corporation is BENEFICIAL CORPORATION,
(ii) the name under which the corporation was originally incorporated was
"Beneficial Industrial Loan Corporation", and (iii) such incorporation was
effected by the filing of an Agreement and Act of Consolidation with the
Secretary of State on May 9, 1929.
SECOND: That this Restated Certificate of Incorporation was duly adopted
by vote of the directors and thereafter by vote of the stockholders in
accordance with Section 245 of the General Corporation Law of the State of
Delaware.
THIRD: That the text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth
in full.
ARTICLE I
The name of the Corporation is BENEFICIAL CORPORATION.
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at One Christina Centre, 301 North Walnut Street, P.O. Box 911,
Wilmington, County of New Castle. The name and address of the Corporation's
registered agent is Southern Trust Company, One Christina Centre, 301 North
Walnut Street, P.O. Box 911, Wilmington, Delaware 19899.
ARTICLE III
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 the
State of Delaware.
ARTICLE IV
Section 1. The total number of shares of all classes of stock which the
Corporation shall be authorized to issue is 165,922,987.
Section 2. The Corporation shall have authority to issue seven classes of
stock, in the total authorized amounts and with the par value per share and in
the aggregate as set forth below.
<TABLE>
<CAPTION>
Total Number of Par Value Aggregate
Class of Stock Shares Authorized Per Share Par Value
- --------------------------------------------------------------------------------
Preferred Stock without
<S> <C> <C> <C>
nominal or par value 500,000 None None
Preferred Stock with par value 2,500,000 $ 1 $ 2,500,000
5% Cumulative Preferred Stock 585,730 $ 50 $ 29,286,500
$4.50 Dividend Cumulative
Preferred Stock 103,976 $100 $ 10,397,600
$4.30 Dividend Cumulative
Preferred Stock 1,069,204 None None
$5.50 Dividend Cumulative
Convertible Preferred
Stock 1,164,077 None None
Common Stock 160,000,000 $ 1 $160,000,000
</TABLE>
<PAGE>
Section 3. A statement of the designations and the powers, preferences and
rights of such classes of stock and the qualifications, limitations or
restrictions, thereof, the fixing of which by this Certificate of Incorporation
is desired, and the authority of the Board of Directors to fix by resolution or
resolutions the powers, preferences and rights of such classes of stock and the
qualifications, limitations or restrictions thereof, which are not fixed hereby,
are as follows:
Preferred Stock Without Nominal or Par Value
A. (1) Shares of Preferred Stock without nominal or par value may be
issued from time to time in one or more series. The preferences and relative,
participating, optional and other special rights of each such series and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series already outstanding; and the Board of
Directors of the Corporation is hereby expressly granted authority to fix, by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock without nominal or par value, the
designations, preferences and relative, participating, optional and other
special rights, or the qualifications, limitations or restrictions thereof, of
such series, including but without limiting the generality of the foregoing, the
following:
(i) The rate and times at which, and the terms and conditions on which,
dividends on the Preferred Stock without nominal or par value of such
series shall be paid;
(ii) The right, if any, of holders of Preferred Stock without nominal
or par value of such series to convert the same into, or exchange the same
for, other classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(iii) The redemption price or prices and the time at which, and the
terms and conditions on which, Preferred Stock without nominal or par
value of such series may be redeemed;
(iv) The rights of the holders of Preferred Stock without nominal or
par value of such series upon the voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding up of the
Corporation (which in no event shall entitle any holder to receive an
amount per share exceeding 105% of the consideration received for each
share by the Corporation upon the original issuance thereof plus a sum
equal to accrued and unpaid dividends thereon, whether or not earned or
declared); and
(v) The terms of the sinking fund or redemption or purchase account, if
any, to be provided for the Preferred Stock without nominal or par value
of such series.
(2) All shares of each series shall be identical in all respects, and all
shares of Preferred Stock without nominal or par value of all series shall be of
equal rank in respect of the preference as to dividends and to payments upon the
liquidation, distribution or sale of assets, dissolution and winding up of the
Corporation. The rights of the Common Stock of the Corporation shall be subject
to the preferences and relative, participating, optional and other special
rights of the Preferred Stock without nominal or par value of each series as
fixed from time to time by the Board of Directors as aforesaid.
(3) (a) Except as otherwise provided herein and except as provided by statute,
the Preferred Stock without nominal or par value shall have no voting rights. In
case at any time three or more full semiannual dividends (whether consecutive or
not) on the Preferred Stock without nominal or par value shall be in arrears,
then during the period (hereinafter in this Section 3A(3) called the Voting
Period) commencing with such time and ending with the time when all arrears in
dividends on the Preferred Stock without nominal or par value shall have been
paid and the full dividend on the Preferred Stock without nominal or par value
for the then current semiannual dividend period shall have been declared and
paid or set aside for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the
<PAGE>
Voting Period, the holders of Preferred Stock without nominal or par value
present in person or represented by proxy at said meeting, shall be entitled, as
a class, to the exclusion of the holders of all other classes of stock of the
Corporation, to elect two directors of the Corporation, each share of Preferred
Stock without nominal or par value entitling the holder to one vote.
(b) Any director who shall have been elected by holders of Preferred
Stock without nominal or par value or by any director so elected as herein
contemplated, may be removed at any time during a Voting Period, either for or
without cause, by, and only by, the affirmative votes of the holders of record
of a majority of the outstanding shares of Preferred Stock without nominal or
par value given at a special meeting of such stockholders called for the
purpose, and any vacancy thereby created may be filled during such Voting Period
by the holders of Preferred Stock without nominal or par value present in person
or represented by proxy at such meeting. Any director to be elected by the Board
of Directors of the Corporation to replace a director elected by holders of
Preferred Stock without nominal or par value or elected by a director as in this
sentence provided shall be elected by the remaining director theretofore elected
by the holders of Preferred Stock without nominal or par value. At the end of
the Voting Period the holders of Preferred Stock without nominal or par value
shall be automatically divested of all voting power vested in them under this
Section 3A(3) but subject always to the subsequent vesting hereunder of voting
power in the holders of Preferred Stock without nominal or par value in the
event of any similar default or defaults thereafter
(4) All shares of Preferred Stock without nominal or par value of all
series shall be of equal rank in respect of the preference as to dividends and
to payments upon the liquidation, distribution or sale of assets, dissolution or
winding up of the Corporation with all shares of the Preferred Stock with par
value, the 5% Cumulative Preferred Stock, the $4.50 Dividend Cumulative
Preferred Stock, the $4.30 Dividend Cumulative Preferred Stock and the $5.50
Dividend Cumulative Convertible Preferred Stock.
(5) While any Preferred Stock without nominal or par value is outstanding
the Corporation shall not alter or change the preferences, special rights or
powers of the Preferred Stock without nominal or par value so as to adversely
affect the Preferred Stock without nominal or par value without the affirmative
consent (given in writing or at a meeting duly called for that purpose) of the
holders of at least two-thirds (2/3rds) of the aggregate number of shares of
Preferred Stock without nominal or par value then outstanding.
Preferred Stock with Par Value
B.(1) Shares of Preferred Stock with par value may be issued from time to
time in one or more series, as may be determined from time to time by the Board
of Directors, each of said series to be distinctly designated. All shares of any
one series of Preferred Stock with par value shall be alike in every particular,
except that shares of any one series issued at different times may differ as to
the dates from which dividends thereon shall be cumulative. The Board of
Directors is hereby authorized to fix the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), and the redemption price or prices of any wholly
unissued series of preferred shares, and any other powers, designations,
preferences and relative, participating, optional or other special rights of
such series, and any qualifications, limitations, or restrictions on any of the
rights of such series, and the number of shares constituting any such series and
the designation thereof, or any of them, and to increase or decrease the number
of shares of any series subsequent to the issue of shares of that series, but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
<PAGE>
(2) All shares of Preferred Stock with par value of all series shall be
of equal rank in respect of the preference as to dividends and to payments upon
the liquidation, distribution or sale of assets, dissolution or winding up of
the Corporation with all shares of Preferred Stock without nominal or par value,
the 5% Cumulative Preferred Stock, the $4.50 Dividend Cumulative Preferred
Stock, the $4.30 Dividend Cumulative Preferred Stock and the $5.50 Dividend
Cumulative Convertible Preferred Stock.
(3) The rights of the Common Stock of the Corporation shall be subject
to the preferences and relative, participating, optional and other special
rights of the Preferred Stock with par value of each series as fixed from time
to time by the Board of Directors as aforesaid.
5% Cumulative Preferred Stock
C.(1) Dividends. The holders of 5% Cumulative Preferred Stock, in
preference to the holders of Common Stock of the Corporation, shall be entitled
to receive, as and when declared by the Board of Directors, dividends at the
rate of 5% per annum and no more, payable on the last day of December 1957, and
semi-annually thereafter on the last days of June and December in each year.
Such preferential dividends shall accrue, with respect to shares of 5%
Cumulative Preferred Stock issued prior to January 1, 1958, from May 1, 1957,
and with respect to shares of such stock issued on or after January 1, 1958,
from the first day of the semi-annual dividend period in which such shares shall
be issued, and shall be cumulative so that if dividends in respect of any
dividend period at the rate of 5% per annum shall not have been paid upon or
declared and set apart for the 5% Cumulative Preferred Stock, the deficiency
shall be fully paid or declared and set apart before any dividend shall be paid
upon or declared or set apart for the Common Stock. Preferential dividends on
the 5% Cumulative Preferred Stock shall be deemed to accrue from day to day. A
dividend period shall begin on the day following each dividend payment date set
forth above and end on the next succeeding dividend payment date.
(2) Liquidation, Dissolution or Winding Up. The 5% Cumulative Preferred
Stock shall be preferred as to assets over the Common Stock, so that in the
event of the voluntary or involuntary liquidation, dissolution or winding up of
the Corporation the holders of 5% Cumulative Preferred Stock shall be entitled
to have set apart for them, or to be paid, out of the assets of the Corporation
before any distribution is made to or set apart for the holders of Common Stock
an amount in cash equal to and in no event more than $50.00 per share plus a sum
equal to accrued and unpaid dividend thereon, whether or not earned or declared.
(3) Optional Redemption.
(a) At the option of the Corporation, by vote of the Board of Directors,
the 5% Cumulative Preferred Stock may be redeemed as a whole or in part at any
time or from time to time at a redemption price equal to $50.00 per share, plus
an amount equal to accrued and unpaid dividends thereon to the date fixed for
redemption, whether or not earned or declared, and no more. If less than all of
the outstanding shares of 5% Cumulative Preferred Stock are to be redeemed the
shares to be redeemed shall be determined by lot in such usual manner and
subject to such regulations as the Board of Directors in its sole discretion
shall prescribe.
(b) At least 30 days prior to the date fixed for the redemption of
shares of the 5% Cumulative Preferred Stock a written notice shall be mailed to
each holder of record of shares of 5% Cumulative Preferred Stock to be redeemed
in a postage prepaid envelope addressed to such holder at his post office
address as shown on the records of the Corporation, notifying such holder of the
election of the Corporation to redeem such shares, stating the date fixed for
redemption thereof (hereinafter referred to as the redemption date), and calling
upon such holder to surrender to the Corporation on the redemption date at the
place designated in such notice his certificate or certificates representing the
number of shares specified in such notice of redemption.
(c) On or after the redemption date each holder of shares of 5%
Cumulative Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
(d) In case less than all the shares represented by any such certificate
are redeemed a new certificate shall be issued representing the unredeemed
shares.
(e) From and after the redemption date (unless default shall be made by
the Corporation in payment of the redemption price) all dividends on the shares
of 5% Cumulative Preferred Stock designated for redemption in such notice shall
cease to accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price thereof upon the
surrender of certificates representing the same, shall cease and determine and
such shares shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation, and such shares shall not be
deemed to be outstanding for any purpose whatsoever.
(f) At its election the Corporation prior to the redemption date may
deposit the redemption price of the shares of 5% Cumulative Preferred Stock so
called for redemption in trust for the holders thereof with a bank or trust
company (having a capital and surplus of not less than $1,000,000) in the City
of Wilmington, Delaware or in the Borough of Manhattan, City and State of New
York or in any other city in which the Corporation at the time shall maintain a
transfer agency with respect to such stock, in which case such redemption notice
shall state the date of such deposit, shall specify the office of such bank or
trust company as the place of payment of the redemption price, and shall call
upon such holders to surrender the certificates representing such shares at such
place on or after the date fixed in such redemption notice (which shall not be
later than the redemption date) against payment of the redemption price. From
and after the making of such deposit, the shares of 5% Cumulative Preferred
Stock so designated for redemption shall not be deemed to be outstanding for any
purpose whatsoever, and the rights of the holders of such shares shall be
limited to the right to receive the redemption price of such shares, without
interest, upon surrender of the certificates representing the same to the
Corporation at said office of such bank or trust company.
(g) Any moneys so deposited which shall remain unclaimed by the holders
of such 5% Cumulative Preferred Stock at the end of six years after the
redemption date shall be returned by such bank or trust company to the
Corporation after which the holders of the 5% Cumulative Preferred Stock shall
have no further interest in such moneys.
(4) Voting Rights.
(a) Except as otherwise provided herein and except as provided by
statute, the 5% Cumulative Preferred Stock shall have no voting rights. In case
at any time three or more full semi-annual dividends (whether consecutive or
not) on the 5% Cumulative Preferred Stock shall be in arrears, then during the
period (hereinafter in this Section 3C(4) called the Voting Period) commencing
with such time and ending with the time when all arrears in dividends on the 5%
Cumulative Preferred Stock shall have been paid and the full dividend on the 5%
Cumulative Preferred Stock for the then current semi-annual dividend period
shall have been declared and paid or set aside for payment, at any meeting of
the stockholders of the Corporation held for the election of directors during
the Voting Period, the holders of 5% Cumulative Preferred Stock present in
person or represented by proxy at said meeting shall be entitled, as a class, to
the exclusion of the holders of all other classes of stock of the Corporation,
to elect two directors of the Corporation, each share of 5% Cumulative Preferred
Stock entitling the holder thereof to one vote.
<PAGE>
(b) Any director who shall have been elected by holders of 5% Cumulative
Preferred Stock or by any director so elected as herein contemplated, may be
removed at any time during a Voting Period, either for or without cause, by,
and only by, the affirmative votes of the holders of record of a majority of
the outstanding shares of 5% Cumulative Preferred Stock given at a special
meeting of such stockholders called for the purpose, and any vacancy thereby
created may be filled during such Voting Period by the holders of 5%
Cumulative Preferred Stock present in person or represented by proxy at such
meeting. Any director to be elected by the Board of Directors of the
Corporation to replace a director elected by holders of 5% Cumulative
Preferred Stock or elected by a director as in this sentence provided shall be
elected by the remaining director theretofore elected by the holders of 5%
Cumulative Preferred Stock. At the end of the Voting Period the holders of 5%
Cumulative Preferred Stock shall be automatically divested of all voting power
vested in them under this Section 3C(4) but subject always to the subsequent
vesting hereunder of voting power in the holders of 5% Cumulative Preferred
Stock in the event of any similar default or defaults thereafter.
(5) Ranking. All shares of 5% Cumulative Preferred Stock shall be of equal
rank in respect of the preference as to dividends and to payments upon
liquidation, distribution or sale of assets, dissolution or winding up of the
Corporation with all shares of the Preferred Stock without nominal or par value,
the Preferred Stock with par value, the $4.50 Dividend Cumulative Preferred
Stock, the $4.30 Dividend Cumulative Preferred Stock and the $5.50 Dividend
Cumulative Convertible Preferred Stock.
(6) Amendments. While any 5% Cumulative Preferred Stock is outstanding the
Corporation shall not alter or change the preferences, special rights or powers
of the 5% Cumulative Preferred Stock so as to adversely affect the 5% Cumulative
Preferred Stock without the affirmative consent (given in writing or at a
meeting duly called for that purpose) of the holders of at least two-thirds
(2/3rds) of the aggregate number of shares of 5% Cumulative Preferred Stock then
outstanding.
$4.50 Dividend Cumulative Preferred Stock
D.(1) Dividends. The holders of $4.50 Dividend Cumulative Preferred Stock
in preference to the holders of Common Stock of the Corporation, shall be
entitled to receive, as and when declared by the Board of Directors, dividends
at the rate of $4.50 per share per annum and no more, payable semi-annually on
the last days of June and December in each year, commencing December 31, 1961.
Such preferential dividends shall accrue, with respect to shares of $4.50
Dividend Cumulative Preferred Stock issued prior to January 1, 1962, from
October 27, 1961, and with respect to shares of such Stock issued on or after
January 1, 1962, from the first day of the semi-annual dividend period in which
such shares shall be issued, and shall be cumulative so that if dividends in
respect of any semi-annual dividend period at the rate of $4.50 per share per
annum shall not have been paid upon or declared and set apart for the $4.50
Dividend Cumulative Preferred Stock, the deficiency shall be fully paid or
declared and set apart before any dividend shall be paid upon or declared or set
apart for the Common Stock. Preferential dividends on the $4.50 Dividend
Cumulative Preferred Stock shall be deemed to accrue from day to day. A
semi-annual dividend period shall begin on the day following each dividend
payment date set forth above and end on the next succeeding dividend payment
date.
(2) Liquidation, Dissolution or Winding Up. The $4.50 Dividend Cumulative
Preferred Stock shall be preferred as to assets over the Common Stock, so that
in the event of the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation the holders of $4.50 Dividend Cumulative Preferred Stock
shall be entitled to have set apart for them, or to be paid, out of the assets
of the Corporation before any distribution is made to or set apart for the
holders of Common Stock an amount in cash equal to and in no event more than
$100.00 per share plus a sum equal to accrued and unpaid dividends thereon,
whether or not earned or declared.
<PAGE>
(3) Optional Redemption.
(a) At the option of the Corporation, by vote of the Board of Directors,
the $4.50 Dividend Cumulative Preferred Stock may be redeemed on or after
November 1, 1966 as a whole, or in part at any time or from time to time, at a
redemption price equal to $103.00 per share plus an amount equal to accrued and
unpaid dividends thereon to the date fixed for redemption, whether or not earned
or declared, and no more. If less than all of the outstanding shares of $4.50
Dividend Cumulative Preferred Stock are to be redeemed the shares to be redeemed
shall be determined by lot in such usual manner and subject to such regulations
as the Board of Directors in its sole discretion shall prescribe.
(b) At least 30 days prior to the date fixed for the redemption of shares
of the $4.50 Dividend Cumulative Preferred Stock a written notice shall be
mailed to each holder of record of shares of $4.50 Dividend Cumulative Preferred
Stock to be redeemed in a postage prepaid envelope addressed to such holder at
his post office address as shown on the records of the Corporation, notifying
such holder of the election of the Corporation to redeem such shares, stating
the date fixed for redemption thereof (hereinafter referred to as the redemption
date), and calling upon such holder to surrender to the Corporation on the
redemption date at the place designated in such notice his certificate or
certificates representing the number of shares specified in such notice of
redemption.
(c) On or after the redemption date each holder of shares of $4.50
Dividend Cumulative Preferred Stock to be redeemed shall present and surrender
his certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
(d) In case less than all the shares represented by any such certificate
are redeemed a new certificate shall be issued representing the unredeemed
shares.
(e) From and after the redemption date (unless default shall be made by
the Corporation in payment of the redemption price) all dividends on the shares
of $4.50 Dividend Cumulative Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof upon the surrender of certificates representing the same, shall
cease and determine and such shares shall not thereafter be transferred (except
with the consent of the Corporation) on the books of the Corporation, and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
(f) At its election the Corporation prior to the redemption date may
deposit the redemption price of the shares of $4.50 Dividend Cumulative
Preferred Stock so called for redemption in trust for the holders thereof with a
bank or trust company (having a capital and surplus of not less than $1,000,000)
in the City of Wilmington, Delaware or in the Borough of Manhattan, City and
State of New York or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such stock, in which case such
redemption notice shall state the date of such deposit, shall specify the office
of such bank or trust company as the place of payment of the redemption price,
and shall call upon such holders to surrender the certificates representing such
shares at such place on or after the date fixed in such redemption notice (which
shall not be later than the redemption date) against payment of the redemption
price. From and after the making of such deposit, the shares of $4.50 Dividend
Cumulative Preferred Stock so designated for redemption shall not be deemed to
be outstanding for any purpose whatsoever, and the rights of the holders of such
shares shall be limited to the right to receive the redemption price of such
shares, without interest, upon surrender of the certificates representing the
same to the Corporation at said office of such bank or trust company.
(g) Any moneys so deposited which shall remain unclaimed by the holders of
such $4.50 Dividend Cumulative Preferred Stock at the end of six years after the
redemption date, shall be returned by such bank or trust company to the
Corporation after which the holders of the $4.50 Dividend Cumulative Preferred
Stock shall have no further interest in such moneys.
(4) Voting Rights.
(a) Except as otherwise provided herein and except as provided by statute,
the $4.50 Dividend Cumulative Preferred Stock shall have no voting rights. In
case at any time three or more full semi-annual dividends (whether consecutive
or not) on the $4.50 Dividend Cumulative Preferred Stock shall be in arrears,
then during the period (hereinafter in this Section 3D(4) called the Voting
Period) commencing with such time and ending with the time when all arrears in
dividends on the $4.50 Dividend Cumulative Preferred Stock shall have been paid
and the full dividend on the $4.50 Dividend Cumulative Preferred Stock for the
then current semi-annual dividend period shall have been declared and paid or
set aside for payment, at any meeting of the stockholders of the Corporation
held for the election of directors during the Voting Period, the holders of
$4.50 Dividend Cumulative Preferred Stock represented in person or by proxy at
said meeting shall be entitled, as a class, to the exclusion of the holders of
all other classes of stock of the Corporation, to elect two directors of the
Corporation, each share of $4.50 Dividend Cumulative Preferred Stock entitling
the holder thereof to one vote.
(b) Any director who shall have been elected by holders of $4.50 Dividend
Cumulative Preferred Stock or by any director so elected as herein contemplated,
may be removed at any time during a Voting Period, either for or without cause,
by, and only by, the affirmative votes of the holders of record of a majority of
the outstanding shares of $4.50 Dividend Cumulative Preferred Stock given at a
special meeting of such stockholders called for the purpose, and any vacancy
thereby created may be filled during such Voting Period by the holders of $4.50
Dividend Cumulative Preferred Stock present in person or represented by proxy at
such meeting. Any director to be elected by the Board of Directors of the
Corporation to replace a director elected by holders of $4.50 Dividend
Cumulative Preferred Stock or elected by a director as in this sentence provided
shall be elected by the remaining director theretofore elected by the holders of
$4.50 Dividend Cumulative Preferred Stock. At the end of the Voting Period the
holders of $4.50 Dividend Cumulative Preferred Stock shall be automatically
divested of all voting power vested in them under this Section 3D(4) but subject
always to the subsequent vesting hereunder of voting power in the holders of
$4.50 Dividend Cumulative Preferred Stock in the event of any similar default or
defaults thereafter.
(5) Ranking. All shares of $4.50 Dividend Cumulative Preferred Stock shall
be of equal rank in respect of the preference as to dividends and to payments
upon the liquidation, distribution or sale of assets, dissolution or winding up
of the Corporation with all shares of Preferred Stock without nominal or par
value, the Preferred Stock with par value, the 5% Cumulative Preferred Stock,
the $4.30 Dividend Cumulative Preferred Stock and the $5.50 Dividend Cumulative
Convertible Preferred Stock.
(6) Amendment. While any of the $4.50 Dividend Cumulative Preferred Stock
is outstanding the Corporation shall not alter or change the preferences,
special rights or powers of the $4.50 Dividend Cumulative Preferred Stock so as
to adversely affect the $4.50 Dividend Cumulative Preferred Stock without the
affirmative consent (given in writing or at a meeting duly called for that
purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number
of shares of $4.50 Dividend Cumulative Preferred Stock then outstanding.
<PAGE>
$4.30 Dividend Cumulative Preferred Stock
E.(1) Dividends. The holders of $4.30 Dividend Cumulative Preferred Stock
in preference to the holders of Common Stock of the Corporation, shall be
entitled to receive, as and when declared by the Board of Directors, dividends
at the rate of $4.30 per share per annum and no more, payable semi-annually on
the last days of March and September in each year, commencing on the last day of
the semi-annual dividend period in which dividends on such shares commence to
accrue. Such preferential dividends shall accrue, with respect to shares of
$4.30 Dividend Cumulative Preferred Stock issued prior to April 1, 1966, from
November 1, 1965, and with respect to shares of such Stock issued on or after
April 1, 1966, from the first day of the semi-annual dividend period in which
such shares shall be issued, and shall be cumulative so that if dividends in
respect of any semi-annual dividend period at the rate of $4.30 per share per
annum shall not have been paid upon or declared and set apart for the $4.30
Dividend Cumulative Preferred Stock, the deficiency shall be fully paid or
declared and set apart before any dividend shall be paid upon or declared or set
apart for the Common Stock. Preferential dividends on the $4.30 Dividend
Cumulative Preferred Stock shall be deemed to accrue from day to day. A
semi-annual dividend period shall begin on the day following each dividend
payment date set forth above and end on the next succeeding dividend payment
date.
(2) Liquidation, Dissolution or Winding Up. The $4.30 Dividend Cumulative
Preferred Stock shall be preferred as to assets over the Common Stock, so that
in the event of the liquidation, dissolution or winding up of the Corporation
the holders of $4.30 Dividend Cumulative Preferred Stock shall be entitled to
have set apart for them, or to be paid, out of the assets of the Corporation
before any distribution is made to or set apart for the holders of Common Stock
an amount in cash equal to and in no event more than (i) $100.00 per share plus
a sum equal to accrued and unpaid dividends thereon, whether or not earned or
declared, in the event of an involuntary liquidation, dissolution or winding up,
or (ii) the then applicable redemption price per share, in the event of a
voluntary liquidation, dissolution or winding up.
(3) Optional Redemption.
(a) At the option of the Corporation, by vote of the Board of Directors,
the $4.30 Dividend Cumulative Preferred Stock may be redeemed on or after
November 1, 1970 as a whole, or in part at any time or from time to time, at a
redemption price which shall be (i) the greater of (x) $105.00 per share minus
the sum of fifty cents for each November 1 during the period after November 1,
1970 and up to and including the date fixed for redemption or (y) $100.00 per
share, plus (ii) an amount equal to accrued and unpaid dividends thereon to the
date fixed for redemption, whether or not earned or declared.
(b) The term "Common Stock", as used in this Section 3E(3), shall mean
Common Stock of the character authorized at the date of the initial issuance of
the $4.30 Dividend Cumulative Preferred Stock, or, in case of a reclassification
or exchange of such Common Stock, the Stock into or for which such Common Stock
shall be reclassified or exchanged.
(c) If less than all of the outstanding shares of $4.30 Dividend
Cumulative Preferred Stock are to be redeemed the shares to be redeemed shall be
determined by lot in such usual manner and subject to such regulations as the
Board of Directors in its sole discretion shall prescribe.
(d) At least 30 days prior to the date fixed for the redemption of shares
of the $4.30 Dividend Cumulative Preferred Stock a written notice shall be
mailed to each holder of record of shares of $4.30 Dividend Cumulative Preferred
Stock to be redeemed in a postage prepaid envelope addressed to such holder at
his post office address as shown on the records of the Corporation, notifying
such holder of the
<PAGE>
election of the Corporation to redeem such shares, stating the date fixed
for redemption thereof (hereinafter referred to as the redemption date), and
calling upon such holder to surrender to the Corporation on the redemption date
at the place designated in such notice his certificate or certificates
representing the number of shares specified in such notice of redemption.
(e) On or after the redemption date each holder of shares of $4.30
Dividend Cumulative Preferred Stock to be redeemed shall present and surrender
his certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
(f) In case less than all the shares represented by any such certificate
are redeemed a new certificate shall be issued representing the unredeemed
shares.
(g) From and after the redemption date (unless default shall be made by
the Corporation in payment of the redemption price) all dividends on the shares
of $4.30 Dividend Cumulative Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof upon the surrender of certificates representing the same, shall
cease and determine and such shares shall not thereafter be transferred (except
with the consent of the Corporation) on the books of the Corporation, and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
h) At its election the Corporation prior to the redemption date may
deposit the redemption price of the shares of $4.30 Dividend Cumulative
Preferred Stock so called for redemption in trust for the holders thereof with a
bank or trust company (having a capital and surplus of not less than $1,000,000)
in the City of Wilmington, Delaware or in the Borough of Manhattan, City and
State of New York or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such stock, in which case such
redemption notice shall state the date of such deposit, shall specify the office
of such bank or trust company as the place of payment of the redemption price,
and shall call upon such holders to surrender the certificates representing such
shares at such price on or after the date fixed in such redemption notice (which
shall not be later than the redemption date) against payment of the redemption
price. From and after the making of such deposit, the shares of $4.30 Dividend
Cumulative Preferred Stock so designated for redemption shall not be deemed to
be outstanding for any purpose whatsoever, and the rights of the holders of such
shares shall be limited to the right to receive the redemption price of such
shares, without interest, upon surrender of the certificates representing the
same to the Corporation at said offices of such bank or trust company. Any
interest accrued on any funds so deposited shall be paid to the Corporation from
time to time.
(i) Any moneys so deposited which shall remain unclaimed by the holders of
such $4.30 Dividend Cumulative Preferred Stock at the end of six years after the
redemption date, shall be returned by such bank or trust company to the
Corporation after which the holders of the $4.30 Dividend Cumulative Preferred
Stock shall have no further interest in such moneys.
(4) Voting Rights.
(a) Each holder of $4.30 Dividend Cumulative Preferred Stock shall be
entitled to one vote for each share held on each matter submitted to a vote of
stockholders of the Corporation and, except as otherwise herein or by law
provided, the $4.30 Dividend Cumulative Preferred Stock, the Common Stock of the
Corporation, and any other capital stock of the Corporation at the time entitled
thereto, shall vote together as one class, except that while the holders of
$4.30 Dividend Cumulative Preferred Stock, voting as a class, are entitled to
elect two directors as hereinafter provided, they shall not be entitled to
participate with the Common Stock (or any other capital stock as aforesaid) in
the election of any other directors.
<PAGE>
(b) In case at any time three or more full semi-annual dividends (whether
consecutive or not) on the $4.30 Dividend Cumulative Preferred Stock shall be in
arrears, then during the period (hereinafter in this Section 3E(4) called the
Class Voting Period) commencing with such time and ending with the time when all
arrears in dividends on the $4.30 Dividend Cumulative Preferred Stock shall have
been paid and the full dividend on the $4.30 Dividend Cumulative Preferred Stock
for the then current semi-annual dividend period shall have been declared and
paid or set aside for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the Class Voting Period,
the holders of $4.30 Dividend Cumulative Preferred Stock represented in person
or by proxy at said meeting shall be entitled, as a class, to the exclusion of
the holders of all other classes of stock of the Corporation, to elect two
directors of the Corporation, each share of $4.30 Dividend Cumulative Preferred
Stock entitling the holder thereof to one vote.
(c) Any director who shall have been elected by holders of $4.30 Dividend
Cumulative Preferred Stock or by any director so elected as herein contemplated,
may be removed at any time during a Class Voting Period, either for or without
cause, by, and only by, the affirmative votes of the holders of record of a
majority of the outstanding shares of $4.30 Dividend Cumulative Preferred Stock
given at a special meeting of such stockholders called for the purpose, and any
vacancy thereby created may be filled during such Class Voting Period by the
holders of $4.30 Dividend Cumulative Preferred Stock present in person or
represented by proxy at such meeting. Any director to be elected by the Board of
Directors of the Corporation to replace a director elected by holders of $4.30
Dividend Cumulative Preferred Stock or elected by a director as in this sentence
provided shall be elected by the remaining director theretofore elected by the
holders of $4.30 Dividend Cumulative Preferred Stock. At the end of the Class
Voting Period the holders of $4.30 Dividend Cumulative Preferred Stock shall be
automatically divested of all voting power vested in them under this Section
3E(4) but subject always to the subsequent vesting hereunder of voting power in
the holders of $4.30 Dividend Cumulative Preferred Stock in the event of any
similar default or defaults thereafter.
(5) Retirement. Shares of $4.30 Dividend Cumulative Preferred Stock
converted prior to November 1, 1977 shall not be reissued.
(6) Ranking. All shares of $4.30 Dividend Cumulative Preferred Stock shall
be of equal rank in respect of the preference as to dividends and to payments
upon the liquidation, distribution or sale of assets, dissolution or winding up
of the Corporation with all shares of the Preferred Stock without nominal or par
value, the Preferred Stock with par value, the 5% Cumulative Preferred Stock,
the $4.50 Dividend Cumulative Preferred Stock and the $5.50 Dividend Cumulative
Convertible Preferred Stock.
(7) Amendment. While any of the $4.30 Dividend Cumulative Preferred Stock
is outstanding the Corporation shall not alter or change the preferences,
special rights or powers of the $4.30 Dividend Cumulative Preferred Stock so as
to adversely affect the $4.30 Dividend Cumulative Preferred Stock without the
affirmative consent (given in writing or at a meeting duly called for that
purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number
of shares of $4.30 Dividend Cumulative Preferred Stock then outstanding.
<PAGE>
$5.50 Dividend Cumulative Convertible Preferred Stock
F.(1) Dividends. The holders of $5.50 Dividend Cumulative Convertible
Preferred Stock, in preference to the holders of the Common Stock of the
Corporation, shall be entitled to receive, as and when declared by the Board of
Directors, dividends at the rate of $5.50 per share per annum and no more,
payable quarterly on the last days of January, April, July, October in each
year, commencing on the last day of the quarterly dividend period in which
dividends on such shares commence to accrue. Such preferential dividend on
shares of $5.50 Dividend Cumulative Convertible Preferred Stock shall commence
to accrue:
(i) if such stock is issued on or prior to the record date for the
first dividend on shares of $5.50 Dividend Cumulative Convertible
Preferred Stock, then from the date of issue thereof;
(ii) if such stock is issued during the period commencing immediately
after the record date for a dividend on shares of the $5.50 Dividend
Cumulative Convertible Preferred Stock and ending at the close of business
on the payment date for such dividends, then from such last mentioned
dividend payment date; and
(iii) otherwise from the dividend payment date next preceding the
date of issue of such shares.
Preferential dividends on the $5.50 Dividend Cumulative Convertible Preferred
Stock shall be deemed to accrue from day to day. A quarterly dividend period
shall begin on the day following each dividend payment date set forth above and
end on the next succeeding dividend payment date. Such preferential dividends
shall be cumulative, so that if dividends in respect of any quarterly dividend
period at the rate of $5.50 per share per annum shall not have been paid upon
and declared and set apart for the $5.50 Dividend Cumulative Convertible
Preferred Stock, the deficiency shall be fully paid or declared and set apart
before any dividend which shall be paid upon or declared or set apart for the
Common Stock. Accumulations of dividends on shares of $5.50 Dividend Cumulative
Convertible Preferred Stock shall not bear interest.
(2) Liquidation, Dissolution or Winding Up. The $5.50 Dividend Cumulative
Convertible Preferred Stock shall be preferred as to assets over the Common
Stock, so that in the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of $5.50 Dividend
Cumulative Convertible Preferred Stock shall be entitled to have set apart for
them, or to be paid out of the assets of the Corporation, before any
distribution is made to or set apart for the holders of Common Stock, an amount
in cash equal to $20.00 per share plus a sum equal to accrued and unpaid
dividends thereon, whether or not declared, and after payment of such amount
such shares of $5.50 Dividend Cumulative Convertible Preferred Stock shall
participate with the shares of Common Stock of the Corporation and any other
class or series of stock entitled to share with the Common Stock in the
distribution of the remaining assets of the Corporation available for
distribution to stockholders after the payment of all preferential distributions
as if the shares of the $5.50 Dividend Cumulative Convertible Preferred Stock
had been converted into shares of Common Stock of the Corporation; provided,
however, that in no event shall the holders of the $5.50 Dividend Cumulative
Convertible Preferred Stock be entitled to receive upon such voluntary or
involuntary liquidation, dissolution or winding up an amount in excess of
$100.00 (including the $20.00 per share preferential distribution) for each
share of $5.50 Dividend Cumulative Convertible Preferred Stock plus a sum equal
to accrued and unpaid dividends thereon, whether or not declared.
<PAGE>
(3) Optional Redemption.
(a) At the option of the Corporation, by vote of the Board of Directors,
the $5.50 Dividend Cumulative Convertible Preferred Stock may be redeemed as a
whole or in part at any time or from time to time on or after February 1, 1983
at a redemption price equal to $100.00 per share, plus an amount equal to
accrued and unpaid dividends thereon to the date fixed for redemption, whether
or not earned or declared, and no more. If less than all of the outstanding
shares of $5.50 Dividend Cumulative Convertible Preferred Stock are to be
redeemed, the shares to be redeemed shall be determined by lot in such manner as
the Board of Directors in its sole discretion shall prescribe.
(b) At least thirty days prior to the date fixed for the redemption of
shares of the $5.50 Dividend Cumulative Convertible Preferred Stock, a written
notice shall be mailed to each holder of record of shares of $5.50 Dividend
Cumulative Convertible Preferred Stock to be redeemed in a postage prepaid
envelope addressed to such holder at his post office address as shown on the
records of the Corporation, notifying such holder of the election of the
Corporation to redeem such shares, stating the date fixed for redemption thereof
(hereinafter referred to as the "redemption date"), and calling upon such holder
to surrender to the Corporation on the redemption date at the place designated
in such notice his certificate or certificates representing shares specified in
such notice of redemption.
(c) On or after the redemption date each holder of shares of $5.50
Dividend Cumulative Convertible Preferred Stock to be redeemed shall present and
surrender his certificate or certificates for such shares to the Corporation at
the place designated in such notice and thereupon the redemption price of such
shares shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled.
(d) In case less than all the shares represented by any such certificate
are redeemed a new certificate shall be issued representing the unredeemed
shares.
(e) From and after the redemption date (unless default shall be made by
the Corporation in payment of the redemption price) all dividends on the shares
of $5.50 Dividend Cumulative Convertible Preferred Stock designated for
redemption in such notice shall cease to accrue, and all rights of the holders
thereof as stockholders of the Corporation, except the right to receive the
redemption price thereof upon the surrender of certificates representing the
same, shall cease and terminate and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the books of the
Corporation, and such shares shall not be deemed to be outstanding for any
purpose whatsoever.
(f) At its election the Corporation prior to the redemption date may deposit the
redemption price of the shares of $5.50 Dividend Cumulative Convertible
Preferred Stock so called for redemption in trust for the holders thereof with a
bank or trust company (having a capital and surplus of not less than $1,000,000)
in the City of Wilmington, Delaware or in the Borough of Manhattan, City and
State of New York or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such stock, in which case such
redemption notice shall state the date of such deposit, shall specify the office
of such bank or trust company as the place of payment of the redemption price,
and shall call upon such holders to surrender the certificates representing such
shares at such price on or after the date fixed in such redemption notice (which
shall not be later than the redemption date) against payment of the redemption
price. From and after the making of such deposit, the shares of $5.50 Dividend
Cumulative Convertible Preferred Stock so designated for redemption shall not be
deemed to be outstanding for any purpose whatsoever, and the rights of the
holders of such shares shall be limited to the right to receive the
<PAGE>
redemption price of such shares, without interest, upon surrender of the
certificates representing the same to the Corporation at said office of such
bank or trust company, and the right of conversion (on or before the tenth day
prior to the date fixed for redemption) herein provided. Any funds so deposited
which shall not be required for such redemption because of the exercise of such
right of conversion after the date of such deposit shall be returned to the
Corporation forthwith. Any interest accrued on such funds shall be paid to the
Corporation from time to time.
(g) Any moneys so deposited which shall remain unclaimed by the holders of
such $5.50 Dividend Cumulative Convertible Preferred Stock at the end of six
years after the redemption date, shall be returned by such bank or trust company
to the Corporation after which the holders of the $5.50 Dividend Cumulative
Convertible Preferred Stock shall have no further interest in such moneys.
(h) All shares of the $5.50 Dividend Cumulative Convertible Preferred
Stock redeemed shall be cancelled and retired and no shares shall be issued in
place thereof.
(4) Voting Rights.
(a) Except as otherwise herein or by law provided, (i) on each matter
submitted to a vote of stockholders of the Corporation (including mergers or
consolidations unless such multiple voting is prohibited by statute in
connection therewith), each holder of $5.50 Dividend Cumulative Convertible
Preferred Stock shall, for each share held by him, be entitled to the number of
votes equal to the number of shares (including fractions thereof) of Common
Stock into which such share of $5.50 Dividend Cumulative Convertible Preferred
Stock may be converted pursuant to Section 3F(5) below on the record date for
determining stockholders entitled to vote, and (ii) the $5.50 Dividend
Cumulative Convertible Preferred Stock, the Common Stock of the Corporation, and
any other capital stock of the Corporation at the time entitled thereto, shall
vote together as one class, and notwithstanding that the holders of $5.50
Dividend Cumulative Convertible Preferred Stock, voting as a class, may be
entitled to elect two directors as hereinafter provided, they shall be entitled
to participate with the Common Stock (or any other capital stock as aforesaid)
in the election of any other directors.
(b) In case at any time three or more full quarterly dividends (whether
consecutive or not) on the $5.50 Dividend Cumulative Convertible Preferred Stock
shall be in arrears, then during the period (hereinafter in this Section 3F(4)
called the Class Voting Period) commencing with such time and ending with the
time when all arrears in dividends on the $5.50 Dividend Cumulative Convertible
Preferred Stock shall have been paid and the full dividend on the $5.50 Dividend
Cumulative Convertible Preferred Stock for the then current quarterly dividend
period shall have been declared and paid or set aside for payment, at any
meeting the stockholders of the Corporation held for the election of directors
during the Class Voting Period, the holders of $5.50 Dividend Cumulative
Convertible Preferred Stock represented in person or by proxy at said meeting
shall be entitled, as a class, to the exclusion of the holders of all other
classes of stock of the Corporation, to elect two directors of the Corporation,
each share of $5.50 Dividend Cumulative Convertible Preferred Stock entitling
the holder thereof to one vote.
(c) Any director who shall have been elected by holders of $5.50 Dividend
Cumulative Convertible Preferred Stock or by any director so elected as herein
contemplated, may be removed at any time during a Class Voting Period, either
for or without cause, by, and only by, the affirmative votes of the holders of
record of a majority of the outstanding shares of $5.50 Dividend Cumulative
Convertible Preferred Stock given at a special meeting of such stockholders
called for the purpose, and any vacancy thereby created may be filled during
such Class Voting Period by the holders of $5.50 Dividend Cumulative Preferred
Stock present in person or represented by proxy at such a meeting. Any director
to be elected by the Board of Directors of the Corporation to replace a director
elected by holders of $5.50 Dividend Cumulative Convertible Preferred Stock or
elected by a director as in this sentence provided shall be elected by the
<PAGE>
remaining director theretofore elected by the holders of $5.50 Dividend
Cumulative Convertible Preferred Stock. At the end of the Class Voting Period
the holders of $5.50 Dividend Cumulative Convertible Preferred Stock shall be
automatically divested of all voting power vested in them under this Section
3F(4), but subject always to the subsequent vesting hereunder of voting power in
the holders of $5.50 Dividend Cumulative Convertible Preferred Stock in the
event of any similar default or defaults thereafter.
(d) A meeting for the removal of a director elected by the holders of the
$5.50 Dividend Cumulative Convertible Preferred Stock as a class and the filling
of the vacancy created thereby shall be called by the Secretary of the
Corporation within ten (10) days after receipt of a request therefor, signed by
the holders of not less than 25% of the then outstanding shares of $5.50
Dividend Cumulative Convertible Preferred Stock, and such meeting shall be held
at the earliest practicable date thereafter. At such meeting, the presence in
person or by proxy of the holders of a majority of the outstanding shares of
$5.50 Dividend Cumulative Convertible Preferred Stock shall be required to
constitute a quorum; in the absence of a quorum, a majority of the holders
present in person or by proxy shall have power to adjourn the meeting from time
to time without notice, other than announcement at the meeting, until a quorum
shall be present.
(5) Conversion Option.
(a) Each share of the $5.50 Dividend Cumulative Convertible Preferred
Stock may be converted, at the option of the holder thereof, at any time (but in
case the same shall be called for redemption, only until the close of business
on the tenth day prior to the date fixed for the redemption thereof) into nine
shares of fully paid and non-assessable Common Stock of the Corporation, the
respective number of shares of Common Stock in any case being subject to
adjustment, however, as hereinafter in Section 3F(6) provided. The period during
which shares of $5.50 Dividend Cumulative Convertible Preferred Stock may be so
converted is hereinafter in this Section 3F called the conversion period. Upon
any such conversion of shares of $5.50 Dividend Cumulative Convertible Preferred
Stock no allowance or adjustment shall be made with respect to the dividends
upon either class of stock.
(b) Such option to convert shares of $5.50 Dividend Cumulative Convertible
Preferred Stock into shares of Common Stock may be exercised by, and only by,
surrendering for such purpose to the Corporation, at the office of one of its
Transfer Agents for its Common Stock for the time being, located in the City of
New York or in Wilmington, Delaware, certificates representing the shares to be
converted, duly endorsed or accompanied by proper instruments of transfer, if so
required by the Corporation or any such Transfer Agent. At the time of such
surrender, the person exercising such option to convert shall be deemed to be
the holder of the shares of Common Stock issuable upon such conversion,
notwithstanding that the stock transfer books of the Corporation may then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to such person.
(c) The term "Common Stock," as used in this Section 3F, shall mean Common
Stock of the character authorized at the date of the initial issuance of the
$5.50 Dividend Cumulative Convertible Preferred Stock or, in case of a
reclassification or exchange of such Common Stock, shares of the stock into or
for which such Common Stock shall be reclassified or exchanged and all
provisions of this Section 3F shall be applied appropriately thereto and to any
stock resulting from any subsequent reclassification or exchange thereof.
(6) Conversion Adjustments. The number of shares of Common Stock into
which the shares of $5.50 Dividend Cumulative Convertible Preferred Stock may be
converted shall be subject to adjustment from time to time in certain instances
as follows:
<PAGE>
(a) If at any time during the conversion period the outstanding shares of
Common Stock of the Corporation shall be subdivided or combined into a greater
or smaller number of shares (by way of reclassification or split up of shares or
in any other manner), then the number of shares of Common Stock into which each
share of $5.50 Dividend Cumulative Convertible Preferred Stock may be converted
shall be increased or reduced in the same proportion.
(b) If at any time during the conversion period there is declared on the
Common Stock of the Corporation any dividend payable in Common Stock of the
Corporation, then the number of shares of Common Stock into which each share of
$5.50 Dividend Cumulative Convertible Preferred Stock may be converted shall be
increased in the same proportion as the aggregate number of shares of Common
Stock issued on account of such dividend (other than treasury shares) bears to
the aggregate number of shares of Common Stock on which such dividend is paid.
(c) If the Corporation shall issue or sell any shares of Common Stock
(excluding certain shares hereinafter set forth in Section 3F(6)(d)) for a
consideration per share less than the conversion price (determined by dividing
One Hundred Dollars ($100) by the number of shares of Common Stock deliverable
upon conversion of each share of $5.50 Dividend Cumulative Convertible Preferred
Stock, immediately before the time provided for such adjustment), said
conversion price shall be adjusted to a price determined by dividing:
(i) an amount equal to (A) the number of issued shares of Common Stock
immediately prior to such issuance or sale multiplied by the then current
conversion price plus (B) the consideration, if any, received by the
Corporation upon such issuance or sale and plus (C) the net excess, if
any, of the aggregate proceeds actually received from the sale or issuance
of Common Stock (except as provided in Section 3F(6)(d)) over the then
current conversion price less (D) the deficiency in the aggregate
proceeds, received or deemed to be received, from the sale or issuance of
Common Stock (except as provided in Section 3F(6)(d)) under the then
current conversion price (excluding the consideration received under (B)
above) all as determined since the last required change in the conversion
price as a result of this formula, by
(ii) the number of issued shares of Common Stock immediately after such
issuance or sale.
After such calculation, the number of shares of Common Stock deliverable
upon conversion of each share of the $5.50 Dividend Cumulative Convertible
Preferred Stock shall be the quotient obtained by dividing One Hundred Dollars
($100) by the conversion price so adjusted; provided, however, that
notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 3F(6)(c) which would result in a reduction of the number of shares of
Common Stock deliverable upon such conversion, except for an adjustment
occurring after a prior increase as provided in Sections 3F(6)(c)(B)(iv) and
(v).
For the purpose of this Section 3F(6)(c), the following provisions shall be
applicable:
(A) In case of the issuance or sale of Common Stock for cash, the
consideration shall be deemed to be the cash proceeds received by the
Corporation before deducting any discounts, commissions or other expenses
incurred in connection therewith. In the case of issuance or sale of Common
Stock (otherwise than upon conversion or exchange of securities by their terms
convertible or exchangeable into Common Stock) for a consideration other than
cash, the amount of such consideration shall be deemed to be the fair value
thereof as determined by the Board of Directors, irrespective of the accounting
treatment thereof.
<PAGE>
(B) If the Corporation issues options or rights to subscribe for shares of
Common Stock or issues securities convertible into, exchangeable for, or
carrying rights of purchase of, shares of Common Stock, and if the consideration
per share of the Common Stock deliverable upon exercise of such options or
rights or upon conversion or exchange of such securities (determined by dividing
the total amount received or receivable by the Corporation as consideration for
the granting of such options or rights or the issue or sale of such convertible
or exchangeable securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange thereof, by the total maximum number of shares of Common Stock
issuable upon such exercise, conversion or exchange), is less than the
conversion price in effect as to the $5.50 Dividend Cumulative Convertible
Preferred Stock immediately prior to such issuance:
(i) In the case of options or rights, the shares of Common Stock
deliverable upon their exercise shall be considered to have been issued at
the time of issuance of such options or rights and the aggregate
consideration shall be the minimum purchase price payable to the
Corporation upon exercise of such options or rights plus any additional
consideration received by it for such options or rights at the time of
their issuance.
(ii) In the case of convertible or exchangeable securities, the maximum
number of shares of Common Stock initially deliverable upon their
conversion or exchange shall be considered to have been issued at the time
of issuance or sale of such securities and for a consideration equal to
the consideration received by the Corporation for such securities, before
deducting any discounts, commissions or other expenses in connection with
the issuance and sale of such securities, plus the minimum additional
consideration, if any, receivable by the Corporation upon the conversion
or exchange thereof.
(iii) No further adjustment of a conversion price shall be made upon
the actual issue of such Common Stock upon the exercise of such rights or
options or upon the conversion or exchange of such convertible or
exchangeable securities.
(iv) Upon the expiration of such options or rights, or the termination
of such right to convert or exchange, the conversion price shall forthwith
be readjusted to such conversion price as would have obtained had the
adjustment made upon the issuance of such options, rights, or convertible
or exchangeable securities been made upon the basis of the issuance or
sale of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights or upon the conversion or exchange of
such securities.
(v) In the event that, prior to the expiration of such options or
rights or the termination of such right to convert or exchange, the
consideration payable on the issuance, sale or delivery of the shares of
Common Stock shall increase, or the number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable security shall decrease, the conversion price shall forthwith
be readjusted to such conversion price as would have obtained had the
adjustment made upon the issuance of such options, rights or convertible
or exchangeable securities been made (except with respect to options or
rights exercised or securities converted or exchanged prior to such
readjustment) upon the basis of such increased consideration payable or
decreased number of shares deliverable.
(vi) Options or rights issued or granted pro rata to stockholders
without consideration and securities convertible into, exchangeable for,
or carry rights of purchase of, shares of Common Stock, which securities
are issuable by way of dividend or other distribution to stockholders,
shall be deemed to have been issued or granted at the close of business on
the date fixed for the determination of stockholders and shall be deemed
to have been issued without consideration.
<PAGE>
(C) Any shares of Common Stock or other securities held in the treasury of
the Corporation shall be deemed issued and the sale or other disposition thereof
shall not be deemed an issuance or sale thereof.
(d) The conversion price shall not be adjusted by reason of,
(i) the issuance of shares upon the conversion of the $5.50 Dividend
Cumulative Convertible Preferred Stock;
(ii) the issuance of shares pursuant to options or stock purchase
agreements granted to, or entered into with, officers and employees of the
Corporation or of any subsidiary, provided that such shares shall not
exceed 150,000 shares of Common Stock, and provided further that such
number of 150,000 shares shall be increased or decreased proportionately
in the event of the subdivision or combination of the outstanding shares
of Common Stock of the Corporation into a greater or smaller number of
shares (by way of reclassification or split up of shares or in any other
manner) or the declaration of stock dividends on the Common Stock of the
Corporation; and
(iii) the issuance or sale of shares of Common Stock or of other
securities by their terms convertible or exchangeable into Common Stock
for a consideration other than cash (except to the extent that cash may be
included in all or substantially all of the assets of a business being
acquired by the Corporation), provided that the number of shares of Common
Stock issued or sold or the number of shares of Common Stock into which
such other securities are convertible or exchangeable does not exceed in
the aggregate 250,000 shares, and provided further that such number of
250,000 shares shall be increased or decreased proportionately in the
event of the subdivision or combination of the outstanding shares of
Common Stock of the Corporation into a greater or smaller number of shares
(by way of reclassification or split up of shares or in any other manner)
or the declaration of stock dividends on the Common Stock of the
Corporation.
(e) No adjustment in the conversion prices resulting from the application
of the foregoing provisions is to be given effect unless, by making such
adjustment, the conversion price in effect immediately prior to such adjustment
would be changed by fifty cents or more, and such adjustment shall be made only
in amounts of fifty cents or a multiple thereof, but any adjustment which would
change the conversion price by less than fifty cents or a multiple thereof is to
be carried forward and given effect in making future adjustments. All
calculations under this Section 3F(6) shall be made to the nearest cent or to
the nearest one-hundredth (1/100th) of a share, as the case may be.
(7) Miscellaneous Conversion Provisions.
(a) Whenever the number of shares of Common Stock deliverable upon the
conversion of the shares of $5.50 Dividend Cumulative Convertible Preferred
Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall
forthwith file at its principal office and with the transfer agent or agents for
the $5.50 Dividend Cumulative Convertible Preferred Stock and for such Common
Stock a statement, signed by the President or one of the Vice-Presidents of the
Corporation and by its Treasurer or one of its Assistant Treasurers stating the
adjusted number of shares of Common Stock deliverable per share of $5.50
Dividend Cumulative Convertible Preferred Stock and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required.
(b) The Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares of $5.50
Dividend Cumulative Convertible Preferred Stock and all other outstanding shares
and other securities which are convertible into Common Stock, and upon exercise
of any outstanding rights or options to purchase Common Stock.
<PAGE>
(c) In connection with the conversion of shares of $5.50 Dividend
Cumulative Convertible Preferred Stock into Common Stock, no fractions of shares
of $5.50 Dividend Cumulative Convertible Preferred Stock nor of Common Stock
shall be issued; and, in lieu thereof, non-dividend bearing non-voting scrip
(exchangeable when combined for full shares) may be issued, or the Board of
Directors may make such provisions for the stockholders in lieu of the issue of
scrip as it may determine, including payment in cash or sale of stock to the
extent of any fractions of shares and distribution of the net proceeds or
otherwise. The Board of Directors may determine and fix the form of such scrip,
whether bearer or otherwise, the denomination thereof, the expiration dates
thereof, any provisions permitting sale of the full shares of which such scrip
is exchangeable for the account of the holder of such scrip (or in lieu of sale
of such full shares, provisions for the determination of the value thereof,
based upon quotations therefor on the New York Stock Exchange on any specified
date or dates or based upon any other method or methods of determination of
value, and for payment of the value so determined to the holders of such scrip),
and any other terms or provisions of such scrip as it may deem advisable.
(8) Retirement. Shares of $5.50 Dividend Cumulative Convertible Preferred
Stock converted shall not be reissued.
(9) Ranking. All shares of $5.50 Dividend Cumulative Convertible Preferred
Stock shall be of equal rank in respect of the preference as to dividends and to
preferential payments upon the liquidation, distribution or sale of assets,
dissolution or winding up of the Corporation with all shares of the Preferred
Stock without nominal or par value, the Preferred Stock with par value, the 5%
Cumulative Preferred Stock, the $4.50 Dividend Cumulative Preferred Stock and
the $4.30 Dividend Cumulative Preferred Stock.
(10) Amendment. While any of the $5.50 Dividend Cumulative Convertible
Preferred Stock is outstanding the Corporation shall not alter or change the
preferences, special rights or powers of the $5.50 Dividend Cumulative
Convertible Preferred Stock so as to adversely affect the $5.50 Dividend
Cumulative Convertible Preferred Stock without the affirmative consent (given in
writing or at a meeting duly called for that purpose) of the holders of at least
two-thirds (2/3rds) of the aggregate number of shares of $5.50 Dividend
Cumulative Convertible Preferred Stock then outstanding; provided, however, that
the authorization, increase in the authorized amount of, or issue of any class
or series of stock ranking on a parity with the $5.50 Dividend Cumulative
Convertible Preferred Stock as to the payment of dividends and the preferential
distribution of assets shall not be deemed to be such an alteration or change.
(11) Consolidation or Merger. If at the time any of the $5.50 Dividend
Cumulative Convertible Preferred Stock is outstanding, the Corporation will not,
without the affirmative consent (given in writing or at a meeting duly called
for that purpose) of the holders of at least two-thirds (2/3rds) of the
aggregate number of shares of $5.50 Dividend Cumulative Convertible Preferred
Stock then outstanding, at any time during the conversion period, consolidate or
merge with or into another corporation (whether or not the Corporation is the
surviving corporation), or sell all or substantially all of its assets to
another corporation, unless in connection therewith lawful and adequate
provision is made whereby the holders of $5.50 Dividend Cumulative Convertible
Preferred Stock shall receive the right to convert during the conversion period
into the kind and amount of shares of stock and other securities to be received
by holders of the number of shares of Common Stock of the Corporation into which
the $5.50 Dividend Cumulative Convertible Preferred Stock might have been
converted immediately prior to such consolidation, merger or sale, which right
shall be subject to adjustment, as nearly equivalent as may be practicable to
the adjustments provided for in this Section 3F.
<PAGE>
G. No preferential dividend shall be paid upon or declared or set apart
for any share of Preferred Stock of any class or series thereof of the
Corporation for any quarterly or semi-annual dividend period, as the case may
be, unless at the same time a preferential dividend shall be paid upon or
declared and set apart for all shares of such Preferred Stock of any class or
series thereof then issued and outstanding upon which a dividend is then due and
payable, and if the amount of any preferential dividend declared upon such
Preferred Stock shall be less than the full preferential dividend then due and
payable upon all such Preferred Stock of all classes and series thereof then
issued and outstanding, the preferential dividend paid upon the several classes
or series thereof of such Preferred Stock then issued and outstanding shall be
proportionate to the amount so due and payable with respect to such several
classes and series thereof.
COMMON STOCK
H. (1) Dividends. After the requirements with respect to preferential
dividends upon the Preferred Stock of all classes and series thereof shall have
been met and after the Corporation shall have complied with all requirements, if
any, with respect to the setting aside of sums as a sinking fund or redemption
or purchase account for the benefit of any class or series thereof of Preferred
Stock, then and not otherwise, the holders of Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the Board of
Directors.
(2) Liquidation, Dissolution or Winding Up. After distribution in full of
the preferential amounts to be distributed to the holders of all classes and
series thereof of Preferred Stock then outstanding in the event of the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the Common Stock shall be entitled to receive all the remaining
assets of the Corporation available for distribution to its stockholders ratably
in proportion to the number of shares of Common Stock held by them respectively,
subject to the rights of holders of $5.50 Dividend Cumulative Convertible
Preferred Stock to share in such distribution to the extent specified in Section
3F(2).
(3) Voting Rights. Each holder of Common Stock shall have one vote in
respect of each share of such stock held by him.
I. A liquidation, dissolution or winding up of the Corporation, as such
terms are used in this Article IV, shall not be deemed to be occasioned by or to
include (a) any consolidation or merger of the Corporation with or into any
other corporation or corporations, or (b) any sale, lease, exchange or other
transfer of any or all of the assets of the Corporation to another corporation
or corporations pursuant to a plan which shall provide for the receipt by the
Corporation or its stockholders, as all or the major portion of the
consideration for such sale, lease, exchange or transfer, of securities of such
other corporation or corporations of any company or companies subsidiary to,
controlled by, or affiliated with such other corporation or corporations.
J. The amount of the authorized stock of the Corporation of any class or
classes may be increased or decreased, in the manner provided by law, by an
affirmative vote of holders of the stock of the Corporation having a majority of
the voting power.
The Board of Directors of the Corporation may authorize the issuance from
time to time, without any vote or other action by stockholders, of all or any
shares of stock of the Corporation of any class now or hereafter authorized,
part paid receipts or allotment certificates in respect of any such shares, and
any securities convertible into or exchangeable for any such shares (whether
such shares, receipts, certificates or securities be unissued or issued and
thereafter acquired by the Corporation), in each case to such
<PAGE>
corporations, associations, partnerships, firms, individuals or others,
for such consideration and on such terms as the Board of Directors from time to
time in its discretion lawfully may determine. In the discretion of the Board of
Directors any such shares, receipts, certificates, securities, warrants or other
instruments may be offered from time to time to the holders of any class or
classes of stock of the Corporation to the exclusion of the holders of any or
all other classes of stock at the time outstanding.
K. No holder of any stock of the Corporation of any class now or hereafter
authorized shall have any right as such holder (other than such right, if any,
as the Board of Directors in its discretion may determine) to purchase,
subscribe for or otherwise acquire any share of stock of the Corporation of any
class now or hereafter authorized, or any part paid receipts, or allotment
certificates in respect of any such shares, or any securities convertible into
or exchangeable for any such shares, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase or otherwise acquire any
such shares, whether such shares, receipts, certificates, securities, warrants
or other instruments be unissued or issued and thereafter acquired by the
Corporation.
L. Except for any action which may be taken solely upon the vote or
consent in writing of holders of Preferred Stock or any series thereof, no
action required to be taken or which may be taken at any annual or special
meeting of stockholders of the Corporation may be taken by consent in writing
without a meeting of stockholders.
M. Pursuant to the authority contained in this Article IV, the Board of
Directors adopted resolutions authorizing the creation and issuance of a series
of Series A Participating Preferred Stock, which such resolutions were set forth
in a Certificate of Designations, Preferences and Rights filed with the
Secretary of State on November 20, 1987 and amended on April 12, 1991 and
November 29, 1993. A copy of such resolutions is attached to this Certificate of
Incorporation as Exhibit A and is incorporated herein by reference.
ARTICLE V
Section 1. Elections of directors need not be by ballot unless the By-laws
of the Corporation shall so provide.
Section 2. Advance notice of nominations for the election of directors
shall be given in the manner and to the extent provided in the By-laws of the
Corporation.
Section 3. At any meeting of the stockholders, duly called as provided in
the By-laws, any director or directors may, by the affirmative vote of holders
of outstanding shares of stock of the Corporation entitled to vote thereon
having 80% or more of the voting power, be removed from office either with or
without cause and his successor or their successors may be elected at such
meeting or a majority of the remaining directors may, to the extent vacancies
are not filled by such election, fill any vacancy or vacancies created by such
removal; provided, however, that any director who shall have been elected by a
class vote of the holders of any class of stock pursuant to Article IV hereof
may be removed, and any such vacancy created thereby shall be filled, only in
the manner specified in such Article IV.
Section 4. In furtherance and not in limitation of the power conferred
upon the Board of Directors by law, the Board of Directors shall have power to
make, adopt, alter, amend and repeal from time to time By-laws of the
Corporation by the affirmative vote of at least a majority of the whole Board of
Directors subject to the right of stockholders entitled to vote with respect
thereto to make, alter and repeal By-laws by the affirmative vote of holders of
outstanding shares of stock of the Corporation entitled to vote thereon having
80% or more of the voting power.
<PAGE>
ARTICLE VI
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of the General Corporation Law of the State of Delaware or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of the General
Corporation Law of the State of Delaware order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
ARTICLE VII
The Corporation shall be deemed, for all purposes, to have reserved the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation in the manner now or hereafter prescribed by
statute and all rights hereunder conferred upon stockholders are granted subject
to such reservations; provided, however, that so long as any share of the $4.50
Dividend Cumulative Preferred Stock or any share of the $4.30 Dividend
Cumulative Preferred Stock or any share of the $5.50 Dividend Cumulative
Convertible Preferred Stock is outstanding, this Certificate of Incorporation
shall not be amended, and the Board of Directors shall not have authority under
Section 3A of Article IV hereof, (a) to create any class or series of stock of
the Corporation which shall, or (b) to reclassify any authorized class or series
of stock of the Corporation to, rank prior to the $4.50 Dividend Cumulative
Preferred Stock or the $4.30 Dividend Cumulative Preferred Stock or the $5.50
Dividend Cumulative Convertible Preferred Stock in respect of the preference as
to dividends and to payments upon liquidation, distribution or sale of assets,
dissolution or winding up of the Corporation without the affirmative consent
(given in writing or at a meeting duly called for that purpose) of the holders
of at least two-thirds (2/3rds) of the aggregate number of shares of $4.50
Dividend Cumulative Preferred Stock, $4.30 Dividend Cumulative Preferred Stock
and $5.50 Dividend Cumulative Convertible Preferred Stock, respectively, then
outstanding, each voting separately as a class; and further provided that the
provisions of this Article VII are subject to any requirement under the
provisions of Article IV hereof of a consent of the holders of such shares or
any thereof under any other circumstances.
ARTICLE VIII
Section 1. Any business combination (as hereinafter defined) shall require
only such affirmative vote as is required by law and any other provision of this
Certificate of Incorporation if all of the following conditions have been
satisfied:
(i) The aggregate amount of the cash and the fair market value of
consideration other than cash to be received per share by holders of
Common Stock in any business combination shall be in the same form and of
the same kind as the consideration paid by the Interested Stockholder (as
hereinafter defined) in acquiring its initial shares representing 20% of
the voting power and shall be at least equal to the highest per share
price (including brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by such Interested Stockholder in acquiring any of
this Corporation's Common Stock;
<PAGE>
(ii) After becoming an Interested Stockholder and prior to the
consummation of any business combination, (A) such Interested Stockholder
shall not have acquired any newly issued shares of capital stock, directly
or indirectly, from this Corporation (except upon conversion of
convertible securities acquired by it prior to becoming an Interested
Stockholder or upon compliance with the provisions of this Article VIII or
as a result of a pro rata stock dividend or stock split) and (B) such
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder) of any loans,
advances, guarantees, pledges or other financial assistance or tax credits
provided by this Corporation, or made any major changes in this
Corporation's business or equity capital structure; and
(iii) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934, whether or not this Corporation is then
subject to such requirements, shall be mailed to the stockholders of this
Corporation for the purpose of soliciting stockholder approval of any
business combination and shall contain at the front thereof in a prominent
place any recommendations as to the advisability (or inadvisability) of
the business combination which the continuing directors (as hereinafter
defined) may choose to state.
Section 2. If the provisions of Section 1 of this Article VIII have not
been satisfied, any business combination shall require the affirmative vote of
holders of outstanding Voting Shares (as hereinafter defined) of the Corporation
entitled to vote thereon having 80% or more of the voting power, considered for
the purpose of this Article VIII as one class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or in any agreement with any national
securities exchange or otherwise.
Section 3. The provisions of Sections 1 and 2 of this Article VIII 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 and any other provision of this Certificate of Incorporation, if such
business combination (a) has been approved prior to its consummation by
two-thirds of the continuing directors, or (b) constitutes a merger or
consolidation of the Corporation with, or any sale or lease to the Corporation
or any Subsidiary (as hereinafter defined) thereof of any assets of, or any sale
or lease by the Corporation or any Subsidiary thereof of any of its assets to,
any corporation of which a majority of the outstanding shares of all classes of
stock entitled to vote in elections of directors is owned of record or
beneficially by the Corporation and its Subsidiaries, provided that this clause
(b) shall not apply to any transaction to which any Affiliate (as hereinafter
defined) of an Interested Stockholder is a party.
Section 4. For the purposes of this Article VIII:
(a) The term "business combination" as used in this Article VIII shall
mean any transaction which is referred to in any one or more of clauses (i)
through (v) of paragraph (a) of this Section 4:
(i) any merger or consolidation of the Corporation or any Subsidiary
with or into (A) any Interested Stockholder or (B) any other corporation
(whether or not itself an Interested Stockholder) which, immediately
before is, or after such merger or consolidation, would be an Affiliate of
an Interested Stockholder, or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) to or
with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary when such
assets have an aggregate fair market value of $25,000,000 or more, or
<PAGE>
(iii) the issuance or transfer to any Interested Stockholder or any
Affiliate of any Interested Stockholder by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any equity
securities of the Corporation or any Subsidiary where such equity
securities have an aggregate fair market value of $10,000,000 or more, or
(iv) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(v) 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 or any
similar transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder.
(b) A "person" shall mean any individual, firm, corporation or other
entity.
(c) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who or
which, as of the record date for the determination of stockholders entitled to
notice of and to vote on such business combination, or immediately prior to the
consummation of any such transaction:
(i) is the beneficial owner (as hereinafter provided), directly or
indirectly, of more than 20% of the Voting Shares of the Corporation or a
Subsidiary, or
(ii) is an assignee of or has otherwise succeeded to any share of
capital stock of the Corporation or a Subsidiary which was at any time
within two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(d) A person shall be the "beneficial owner" of any Voting Shares:
(i) which such person or any of its Affiliates and Associates (as
hereinafter defined) beneficially own, directly or indirectly, or
(ii) which such person or any of its Affiliates or Associates has (A)
the right to acquire (whether such right is exercisable immediately or
only after 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 (B) the right to vote pursuant to
any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned 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 of the Corporation or a Subsidiary, as the case may be.
(e) "Voting Shares" when used with respect to the Corporation or a
Subsidiary shall mean shares of such corporation having general voting power.
The outstanding Voting Shares shall include shares deemed owned by a beneficial
owner through application of Section 4(d) of this Article VIII above but shall
not include any other Voting Shares which may be issuable to any other person
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise.
<PAGE>
(f) "Affiliate" or "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1982.
(g) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on December
31, 1982) is owned, directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in Section 4(c) of this Article VIII, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
(h) "Continuing director" shall mean a person who was a member of the
Board of Directors of the Corporation elected by the stockholders prior to the
date as of which the Interested Stockholder acquired in excess of 20% of the
Voting Shares of the Corporation or a Subsidiary.
Section 5. A majority of the continuing directors shall have the power and
duty to determine for the purposes of this Article VIII on the basis of
information known to them, (a) the number of Voting Shares beneficially owned by
any person, (b) whether a person is an Affiliate or Associate of another, (c)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in Section 4(d) of this Article VIII, (d) whether the
assets of the Corporation or any Subsidiary have an aggregate fair market value
of $25,000,000 or more, or (e) whether the consideration received for the
issuance or transfer of securities by the Corporation or any Subsidiary has an
aggregate fair market value of $10,000,000 or more.
Section 6. Nothing contained in this Article VIII shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
ARTICLE IX
Notwithstanding any other provision of this Certificate of Incorporation
or the By-laws of the Corporation (and in addition to any other vote that may be
required by law, this Certificate of Incorporation or the By-laws), the
affirmative vote of holders of outstanding shares of stock of the Corporation
entitled to vote thereon having 80% or more of the voting power (considered for
this purpose as one class) shall be required to amend, alter or repeal any
provision of Article IV Section 3L, Article V Section 2, Article V Section 3,
Article V Section 4, Article VIII, or this Article IX of the Certificate of
Incorporation or to amend, alter or repeal any By-law or By-laws of the
Corporation.
ARTICLE X
Section 1. A Director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or as may hereafter be amended.
Section 2. If the General Corporation Law of the State of Delaware is
amended hereafter to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as so amended.
<PAGE>
Section 3. Any repeal or modification of this Article shall not adversely
affect any right or protection of a Director of the Corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed by Finn M. W. Caspersen, its Chairman of the Board of
Directors, and attested by Eileen F. Caulfield, its Corporate Secretary, whereby
said Finn M. W. Caspersen affirms, under the penalties of perjury, that this
Restated Certificate of Incorporation is the act and deed of the Corporation and
that the facts stated herein are true, this 1st day of June, 1994.
BENEFICIAL CORPORATION
By /s/ Finn M.W. Caspersen
-----------------------------------
Chairman of the Board of Directors
Attest:
/s/ Eileen F. Caulfield
Corporate Secretary
[Corporate Seal]
<PAGE>
Exhibit A
Certificate of Designations, Preferences and Rights of Series A Participating
Preferred Stock of Beneficial Corporation
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
I, Finn M.W. Caspersen, Chairman of the Board and Chief Executive Officer
of Beneficial Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 151 thereof DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of said Corporation, the said Board of
Directors, by resolutions adopted on November 11, 1987, April 1, 1991 and
November 18, 1993, designated 570,000 shares of the Preferred Stock with par
value as Series A Participating Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock with par value of the
Corporation be and it hereby is 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 such series shall be
designated as "Series A Participating Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting such series shall be 570,000.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose,
(i) cash dividends in an amount per share (rounded to the nearest cent)
equal to 100 times the aggregate per share amount of all cash dividends
declared or paid on the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock") and
(ii) a preferential cash dividend ("Preferential Dividends"), if any,
on the last day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount equal to $25.00 per share of Series A Preferred Stock
less the per share amount of all cash dividends declared on the Series A
Preferred Stock pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock.
(B) In the event the Corporation shall, at any time after the issuance of
any share or fraction of a share of Series A Preferred Stock, make any
distribution on the shares of Common Stock of the Corporation, whether by way of
a dividend or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Corporation or otherwise, which is payable in cash or
any debt security, debt instrument, real or personal property or any other
property (other than cash dividends referred to in Section 2(A) and other than a
distribution of shares of Common Stock or other capital stock of the Corporation
and
<PAGE>
other than a distribution of rights or warrants to acquire any such share
(including any debt security convertible into or exchangeable for all such
shares) at a price less than the Current Market Price (as defined in Section
7(D) (of such share), then and in each such event the Corporation shall
simultaneously pay on each then outstanding share of Series A Preferred Stock of
the Corporation a distribution, in like kind, of 100 times (subject to the
provisions for adjustment hereinafter set forth) such distribution paid on a
share of Common Stock. The dividends and distributions on the Series A Preferred
Stock to which holders thereof are entitled pursuant to clause (i) of Section
2(A) and pursuant to the first sentence of this Section 2(B) are hereinafter
referred to as "Participating Dividends" and the multiple of such cash and
non-cash dividends on the Common Stock applicable to the determination of the
Participating Dividends, which shall be 100 initially but shall be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the
"Dividend Multiple". In the event the Corporation shall at any time after August
22, 1996 (the "Rights Declaration Date") declare or pay any dividend or make any
distribution on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of Participating Dividends which holders of
shares of Series A Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(C) When, as and if the Corporation shall declare a dividend or
distribution on the Common Stock in respect of which a Participating Dividend is
required to be paid, the Corporation shall at the same time declare a
Participating Dividend on the Series A Preferred Stock. No cash or non-cash
dividend on the Common Stock in respect of which a Participating Dividend is
required to be paid shall be paid or set aside for payment on the Common Stock
unless a Participating Dividend in respect of such dividend or distribution on
the Common Stock shall be simultaneously paid, or set aside for payment, on the
Series A Preferred Stock. In the event no dividend or distribution shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
Preferential Dividend on the Series A Preferred Stock shall nevertheless be
payable, when, as and if declared by the Board of Directors, on such subsequent
Quarterly Dividend Payment Date.
(D) Preferential Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock. Accrued but unpaid Preferential Dividends shall not bear
interest. Preferential Dividends paid on the shares of Series A 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 a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the relevant
Quarterly Dividend Payment Date.
(E) If on any Quarterly Dividend Payment Date the Corporation's Restated
Certificate of Incorporation or applicable law shall limit the amount of
Preferential Dividends which may be paid on the Series A Preferred Stock to an
amount less than that provided above, such Preferential Dividends will be paid
in the maximum permissible amount and the shortfall from the amount provided
above shall be a cumulative dividend requirement and be carried forward to
subsequent Quarterly Dividend Payment Dates.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. The
number of votes which a holder of Series A Preferred Stock is entitled to cast,
as the same may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Vote Multiple". In the event the Corporation
shall at any time after the Rights Declaration Date declare or pay any dividend
or make any distribution on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or combination, consolidation or reverse split of
the outstanding shares of Common Stock into a greater or lesser number of shares
of Common Stock, then in each such case the Vote Multiple thereafter applicable
to the determination of the number of votes per share to which holders of shares
of Series A Preferred Stock shall be entitled immediately after such event shall
be adjusted by multiplying the Vote Multiple immediately prior to such event by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided in this Certificate of Designations or by
law, the holders of shares of Series A Preferred Stock, the holders of shares of
Common Stock and the holders of any other 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, and, notwithstanding
that the holders of Series A Preferred Stock, voting as a class, may be entitled
to elect two directors as hereinafter provided, they shall be entitled to
participate with the Common Stock (or any other capital stock as aforesaid), in
the election of any other directors.
(C) In case at any time six or more full quarterly Preferential Dividends
(whether consecutive or not) on the Series A Preferred Stock shall be in arrears
(otherwise than by reason of limitations on the payment thereof contained in the
Corporation's Restated Certificate of Incorporation as in effect on the Rights
Declaration Date), then during the period (hereinafter in this Section 3(C)
called the "Voting Period") commencing with such time and ending with the time
when all arrears in dividends on the Series A Preferred Stock shall have been
paid and the full dividend on the Series A Preferred Stock for the then current
Quarterly Dividend Period shall have been declared and paid or set aside for
payment, at any meeting of the stockholders of the Corporation held for the
election of directors during the Voting Period, the holders of Series A
Preferred Stock present in person or represented by proxy at said meeting, shall
be entitled, together with the holders of all other series of the class of stock
of the Corporation designated "Preferred Stock with par value" then outstanding
as to which the right to vote with the holders of Series A Preferred Stock for
the election of directors in the event of dividend arrearages shall have been
granted (the Series A Preferred Stock together with all such other series of
"Preferred Stock with par value" then outstanding being collectively referred to
herein as "Par Value Preferred Stock"), voting as a class to the exclusion of
the holders of all other classes of stock of the Corporation, to elect two
directors of the Corporation, each share of Par Value Preferred Stock entitling
the holder to one vote.
(D) Any director who shall have been elected by holders of Par Value
Preferred Stock or by any director so elected as herein contemplated may, at any
time during a Voting Period, be removed for cause by, and without cause only by,
the affirmative votes of the holders of record of a majority of the outstanding
shares of Par Value Preferred Stock, voting as a class, given at a special
meeting of such stockholders called for the purpose, and any vacancy thereby or
otherwise created may be filled during such Voting Period by the holders of Par
Value Preferred Stock present in person or represented by proxy at such meeting.
Any director to be elected by the Board of Directors of the Corporation to
replace a director elected by holders of Par Value Preferred Stock or elected by
a director as in this sentence provided shall be elected by the remaining
director theretofore elected by the holders of Par Value Preferred Stock. At the
end of the Voting Period the holders of the Par Value Preferred Stock shall be
automatically divested of all voting power vested in them under Section 3(C) but
subject always to the subsequent vesting hereunder of voting power in the
holders of Par Value Preferred Stock in the event of any similar default or
defaults thereafter.
<PAGE>
(E) Except as set forth in this Certificate of Designations or as required
by law, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock or holders of any other class of capital
stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears
(otherwise than by reason of limitations on the payment thereof contained in the
Corporation's Restated Certificate of Incorporation as in effect on the Rights
Declaration Date), thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) except as permitted by subparagraph (iii) of this Section 4(A) and
except for the redemption of the Corporation's 9.25% Series Preferred
Stock, redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided
that the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iii) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred 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 all 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 stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire shares at such time and in such manner.
(C) The Corporation shall not issue any shares of Series A Preferred Stock
except upon exercise of Rights issued pursuant to that certain Rights Agreement
dated as of November 11, 1987 between the Corporation and Morgan Shareholder
Services Trust Company, a copy of which is on file with the Secretary of the
Corporation at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor addressed to
said Secretary. Notwithstanding the foregoing sentence, nothing contained in
this Certificate of Designations shall prohibit or restrict the Corporation from
issuing for any purpose any series of preferred stock with rights and privileges
similar to or different from those of the Series A Preferred Stock.
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares upon their retirement shall resume the status of authorized but unissued
shares of "Preferred Stock with par value," without designation as to series,
and may be reissued as part of a new series of "Preferred Stock with par value"
to be created by resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(i) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received, subject to adjustment as hereinafter
provided,
(A) $1,000.00 per share, plus an amount equal to accrued and unpaid
dividends thereon, whether or not declared, to the date of such payment,
or
(B) if greater, an amount equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock, or
(ii) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other 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, disregarding for this purpose the
amounts referred to in clause (i) (B) of this Section 6.
The amount to which holders of Series A Preferred Stock may be entitled upon
liquidation, dissolution or winding up of the Corporation pursuant to clause (i)
(B) of the foregoing sentence is hereinafter referred to as the "Participating
Liquidation Amount" and the multiple of the amount to be distributed to holders
of shares of Common Stock upon the liquidation, dissolution or winding up of the
Corporation applicable pursuant to said clause to the determination of the
Participating Liquidation Amount, as said multiple may be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the "Liquidation
Multiple". In the event the Corporation shall at any time after the Rights
Declaration Date declare or pay any dividend or make any distribution on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Liquidation Multiple thereafter applicable to the determination of
the Participating Liquidation Amount to which holders of shares of Series A
Preferred Stock shall be entitled immediately after such event shall be the
Liquidation Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that all holders of shares of Common Stock of the
Corporation receive after the Rights Declaration Date in respect of their shares
of Common Stock any share of capital stock of the Corporation (other than any
share of Common Stock of the Corporation), whether by way of reclassification,
recapitalization, reorganization, dividend or other distribution or otherwise
("Transaction"), then and in each such event the dividend rights, voting rights
and rights upon the
<PAGE>
liquidation, dissolution or winding up of the Corporation of the shares of
Series A Preferred Stock shall be adjusted so that after such event the holders
of Series A Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such adjustment, to
(i) such additional dividends as equal the Dividend Multiple in effect
immediately prior to such Transaction multiplied by the additional
dividends which the holder of a share of Common Stock shall be entitled to
receive by virtue of the receipt in the Transaction of such capital stock,
(ii) such additional voting rights as equal the Vote Multiple in effect
immediately prior to such Transaction multiplied by the additional voting
rights which the holder of a share of Common Stock shall be entitled to
receive by virtue of the receipt in the Transaction of such capital stock,
and
(iii) such additional distributions upon liquidation, dissolution or
winding up of the Corporation as equal the Liquidation Multiple in effect
immediately prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to receive
upon liquidation, dissolution or winding up of the Corporation by virtue
of the receipt in the Transaction of such capital stock.
as the case may be, all as provided by the terms of such capital stock.
(B) In the event that all holders of shares of Common Stock of the
Corporation receive after the Rights Declaration Date in respect of their shares
of Common Stock any right or warrant to purchase Common Stock (including as such
a right, for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the
Current Market Price (as hereinafter defined) of a share of Common Stock on the
date of issuance of such right or warrant, then and in each such event the
dividend rights, voting rights and rights upon the liquidation, dissolution or
winding up of the Corporation of the shares of Series A Preferred Stock shall
each be adjusted so that after such event the Dividend Multiple, the Vote
Multiple and the Liquidation Multiple shall each be the product of the Dividend
Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in
effect immediately prior to such event multiplied 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 maximum number of shares of
Common Stock which could be acquired 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 number of shares of Common Stock which could be purchased, at the Current
Market Price of the Common Stock at the time of such issuance, by the maximum
aggregate consideration payable upon exercise in full of all such rights or
warrants.
(C) In the event that all holders of shares of Common Stock of the
Corporation receive after the Rights Declaration Date in respect of their shares
of Common Stock any right or warrant to purchase capital stock of the
Corporation (other than shares of Common Stock), including as such a right, for
all purposes of this paragraph, any security convertible into or exchangeable
for capital stock of the Corporation (other than Common Stock), at a purchase
price per share less than the Current Market Price of such shares of capital
stock on the date of issuance of such rights or warrant, then and in each such
event the dividend rights, voting rights and rights upon liquidation,
dissolution or winding up of the Corporation of the shares of Series A Preferred
Stock shall each be adjusted so that after such event each holder of a share of
Series A Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such event, to receive
<PAGE>
(i) such additional dividends as equal the Dividend Multiple in effect
immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Common Stock shall be entitled
upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined), and
(ii) such additional voting rights as equal the Vote Multiple in effect
immediately prior to such event multiplied, first, by the additional
voting rights to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital
stock which could be acquired upon such exercise and multiplied again by
the Discount Fraction, and
(iii) such additional distributions upon liquidation, dissolution or
winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional
amount which the holder of a share of Common Stock shall be entitled to
receive upon liquidation, dissolution or winding up of the Corporation
upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the
Discount Fraction.
For purposes of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Current Market Price (as
hereinafter defined) of a share of the capital stock subject to a right or
warrant distributed to all holders of shares of Common Stock of the Corporation
as contemplated by this paragraph immediately prior to the distribution thereof
and the purchase price per share for such share of capital stock pursuant to
such right or warrant and the denominator of which shall be the Current Market
Price of a share of such capital stock immediately prior to the distribution of
such right or warrant.
D) For purposes of this Section 7, the "Current Market Price" of a share
of capital stock of the Corporation (including a share of Common Stock) on any
date shall be deemed to be the average of the daily closing prices per share
thereof over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that, in the event
that such Current Market Price of any such share of capital stock is determined
during a period which includes any date that is within 30 Trading Days after the
ex-dividend date of (i) a dividend or distribution on stock payable in shares of
such stock or securities convertible into shares of such stock, or (ii) any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Current Market
Price shall be appropriately adjusted by the Board of Directors of the
Corporation to reflect the Current Market Price of such stock to take into
account ex-dividend trading. The closing price of any day 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 shares are 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 shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted 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 Quotation System ("NASDAQ") or such other
system then in use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares selected by the Board of
Directors of the Corporation. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares are listed or
admitted to trading is open for the transaction of business or, if the shares
are not listed or admitted to trading on any national securities exchange, on
which the New York Stock Exchange or such other national securities exchange as
may be selected by the Board of Directors of the Company is open. If the shares
are not publicly held or
<PAGE>
not so listed or traded on any day within the period of 30 Trading Days
applicable to the determination of Current Market Price thereof as aforesaid,
"Current Market Price" shall mean the fair market value thereof per share as
determined by an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of Directors of the
Corporation or, if no such investment banking firm is in the good faith judgment
of the Board of Directors available to make such determination, in good faith by
the Board of Directors of the Corporation. In either case referred to in the
foregoing sentence, the determination of Current Market Price shall be described
in a statement filed with the Secretary of the Corporation.
(E) The Company shall give prompt written notice to each holder of a share
of Series A Preferred Stock of the effect of any adjustment to the voting
rights, dividend rights or rights upon liquidation, dissolution or winding up of
the Company of such shares required by this Certificate of Designations.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 8. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case proper
provision shall be made so that the shares of Series A Preferred Stock shall at
the same time be similarly exchanged for or changed into 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 multiplied by the highest of the Vote Multiple, the Dividend Multiple
or the Liquidation Multiple in effect immediately prior to such event. The
Company shall not consummate any such consolidation, merger, combination or
other transaction unless prior thereto the Company and the other party or
parties to such transaction shall have so provided in any agreement relating
thereto.
Section 9. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable. Notwithstanding the foregoing sentence, the Corporation may
acquire shares of the Series A Preferred Stock in any other manner permitted by
law, this Certificate of Designations and the Restated Certificate of
Incorporation of the Corporation.
Section 10. Ranking. All shares of the Series A Preferred Stock shall be
of equal rank in respect of the preference as to dividends and to payments upon
the liquidation, dissolution or winding up of the Corporation with all shares of
the Preferred Stock without nominal or par value, all shares of all other series
of the Preferred Stock with par value, the 5% Cumulative Preferred Stock, the
$4.50 Dividend Cumulative Preferred Stock, the $4.30 Dividend Cumulative
Preferred Stock and the $5.50 Dividend Cumulative Convertible Preferred Stock.
Section 11. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Series A Preferred Stock, voting together
as a single class.
<PAGE>
EXHIBIT 3.2
<PAGE>
BY-LAWS
of
BENEFICIAL CORPORATION
(A Delaware Corporation)
As Amended Through February 17, 1998
<PAGE>
BY-LAWS
of
BENEFICIAL CORPORATION
(A Delaware Corporation)
ARTICLE I.
Meetings of Stockholders
SECTION 1. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as properly may come before the meeting shall be held on such
date, and at such time and place, as may be designated by the Board of
Directors.
SECTION 2. Special Meetings. Special meetings of the holders of stock
of the Corporation entitled to vote, or of any class of such stock or series
thereof, may be called at any time by the Chairman of the Board of Directors or
the President or the Board of Directors. Special meetings of the holders of
stock of the Corporation entitled to vote shall be called by the Chairman of the
Board of Directors or the President or the Secretary, upon the written request
of the holders of shares of such stock having (a) majority of the voting power
entitled to vote thereon when the only action to be taken requires the
affirmative vote of a plurality or a majority of the votes cast or entitled to
be cast, or (b) 80% of the voting power entitled to vote thereon if any action
proposed to be taken requires the affirmative vote of at least 80% of the votes
cast or entitled to be cast. Any such written request shall state a proper
purpose or purposes of the meeting and shall be delivered to the Chairman of the
Board of Directors or the President or the Secretary.
Special meetings of the holders of any class of stock or series
thereof, for the removal of directors elected by such class and the filling of
any vacancy thereby created, pursuant to Article IV of the Certificate of
Incorporation shall be called by the Chairman of the Board of Directors or the
President or the Secretary upon the written request of the holders of one-fifth
or more of the outstanding shares of any such class of stock of the Corporation.
SECTION 3. Place of Meetings. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as shall be
specified in the respective notices or waivers of notice thereof.
SECTION 4. Notice of Meetings. Except as otherwise required by statute,
the Secretary or an Assistant Secretary shall cause notice of the time, place
and purpose or purposes of each meeting of the stockholders (whether annual or
special) to be mailed, at least ten (but not more than sixty) days prior to the
meeting, to each stockholder
<PAGE>
of record entitled to vote at his post office address as the same appears on the
books of the Corporation at the time of such mailing.
SECTION 5. Quorum. At any meeting of the holders of any class or
classes or series thereof of the capital stock of the Corporation, the presence
of a quorum shall be determined with respect to each such class or series which
is entitled to vote on any matter before the meeting as a separate class or
series, and shall also be determined for any combination of any classes or
series which are entitled to vote on any matter before the meeting on a joint
vote of such combined classes or series. Except as otherwise provided by
statute, the presence, in person or by proxy, of the holders of record of shares
then issued and outstanding of such class or series or combination thereof
having a majority of the votes which might be cast on any matter to be voted on
by such class or series or combination thereof shall be necessary and sufficient
to constitute a quorum for the transaction of business by such class or series
or combination thereof. Notwithstanding the absence of a quorum of any class or
series or combination thereof at any meeting, any other class or series or
combination thereof for which a quorum is present may transact all business to
come before it. In the absence of a quorum, a majority in interest of the
holders, present in person or by proxy, of any class or series or combination
thereof for which a quorum is not present (such majority in interest being
determined in accordance with the number of votes attributable to the shares
held by such holders), or if no such holders are present in person or by proxy,
any officer entitled to preside or act as secretary of such meeting, may adjourn
the meeting from time to time until a quorum of such class or series or
combination thereof shall be present.
SECTION 6. Voting. In the event directors are to be elected by the
holders of any class of stock or series thereof pursuant to Article IV of the
Certificate of Incorporation, said directors shall be elected by a plurality of
the votes of each of said classes of stock or series thereof cast at the
election. All directors to be elected by the holders of stock having general
voting power shall be elected by a plurality of the votes cast at the election
by such stockholders. At all meetings of the stockholders, all matters, other
than the election of directors and those the manner of deciding which is
expressly regulated by statute or by the Certificate of Incorporation or these
By-Laws, shall be decided by a majority of the total votes of the shares
entitled to vote whose holders are present in person or by proxy. At each
meeting of the stockholders each stockholder entitled to vote shall be entitled
to vote in person or by proxy; provided, however, that the right to vote by
proxy shall exist only in case the instrument authorizing such proxy to act
shall have been executed in writing (which shall include telegraphing or
cabling) by the stockholder himself or by his attorney thereunto duly authorized
in writing.
SECTION 7. Judges of Election. The Board of Directors may appoint
judges of election to serve at any election of directors and at balloting on any
other matter that may properly come before a meeting of stockholders.
-2-
<PAGE>
If no such appointment shall be made, or if any of the judges so appointed shall
fail to attend, or refuse or be unable to serve, then such appointment may be
made by the presiding officer at the meeting.
SECTION 8. Notice of Nominations. Nominations for the election of
directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. A notice of the intent of a stockholder
to make any such nomination shall be made in writing, delivered or mailed by
first class United States mail, postage prepaid, to the Secretary of the
Corporation not less than 90 days in advance of the annual meeting or, in the
event of a special meeting of stockholders for the election of directors, such
notice shall be delivered or mailed to the Secretary of the Corporation not
later than the close of the seventh day following the day on which notice of the
meeting is first mailed to stockholders.
Every such notice by a stockholder shall set forth:
(a) the name and residence of the stockholder of the
Corporation who intends to make the nomination;
(b) a representation that the stockholder is a holder of
record of the Corporation's voting stock and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice;
(c) a description of all arrangements or understandings among
the stockholders and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(d) such other information regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated, or intended to be
nominated, by the Board of Directors of the Corporation; and
(e) the consent of each nominee to serve as director of the
Corporation if so elected.
Any nomination not made in accordance with the foregoing procedure
shall be disregarded.
Nothing in this Article I shall be construed to affect adversely the
rights of Preferred Shareholders where such rights are granted by the
Certificate of Incorporation.
SECTION 9. Notice of Business. No business may be transacted at an
annual meeting of stockholders, other than business that is either (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
(b) otherwise properly brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized committee thereof)
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or (c) otherwise properly brought before the annual meeting by any stockholder
of the Corporation (i) who is a stockholder of record on the date of the giving
of the notice provided for in this Article I, Section 9, and on the record date
for the determination of stockholders entitled to vote at such annual meeting
and (ii) who complies with the notice procedures set forth in this Article I,
Section 9.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the date on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Article I, Section 9, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Article I, Section 9, shall be deemed to
preclude discussion by any stockholder of any such business. If the Chairman of
an annual meeting determines that business was not properly brought before the
annual meeting in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
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ARTICLE II.
Board of Directors
SECTION 1. Number. The number of directors which shall constitute the
whole Board of Directors shall be fixed from time to time by a resolution of a
majority of the Board of Directors but such number shall not be less than three
nor more than 20. The number of directors constituting the Board shall be 20
until otherwise fixed by a majority of the whole Board.
SECTION 2. Election and Term of Office. Directors shall be elected at
the annual meeting of the stockholders. Each director, whether elected at an
annual meeting or to fill a vacancy or otherwise, shall continue in office until
his successor shall have been elected, or until his death, resignation or
removal in the manner hereinafter provided, or, in the case of directors elected
by a class vote of the holders of any class of stock pursuant to Article IV of
the Certificate of Incorporation, until such time as any "Class Voting Period"
specified in such Article IV of the Certificate of Incorporation shall
terminate. No person who has attained the age of 75 years shall be eligible for
election as a director of the Corporation but any such person may continue to
serve for the unexpired term for which he was elected; provided, however, that
the Board of Directors upon a resolution adopted by a majority of the directors
may waive the age eligibility requirement with respect to any specific member of
the Board of Directors.
SECTION 3. Annual and Regular Meetings; Notice. The annual meeting of
the Board of Directors shall be held on the first business day, other than a
Saturday, of June in each year at the office of the Corporation in the State of
Delaware or at such other time and place (within or outside the State of
Delaware) as the Chairman or President may direct, and at such hour as shall be
specified in the respective notice or waiver of notice thereof, subsequent to
the Annual Meeting of Stockholders, but not later than June 15 in each year.
Regular meetings of the Board of Directors shall be held on the first business
day, other than a Saturday, of March, September and December in each year at the
office of the Corporation in the State of Delaware or at such other time and
place (within or outside the State of Delaware) as the Chairman or President may
direct, and at such hour as shall be specified in the respective notices or
waivers of notice thereof. Notice of each annual and regular meeting shall be
mailed to each director addressed to him at his residence or usual place of
business at least two days before the day on which the meeting is to be held, or
shall be sent to him at such place by telegram, radio or cable or shall be given
to him orally or by telephone, not later than the day before the day on which
the meeting is to be held. Such notice need not state the purpose or purposes
for which the meeting is called, unless otherwise required by statute. Notice of
any annual or regular meeting need not be given to any director who shall attend
such meeting in person, or to any director who shall waive notice thereof in
writing or by telegram, radio or cable, whether before or after the time of such
meeting. No notice of any adjourned meeting need be given.
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SECTION 4. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President or one-third of the directors at such time and place
(within or outside of the State of Delaware) as may be specified in the
respective notices or waivers of notice thereof Notice of each special meeting
shall be mailed to each director addressed to him at his residence or usual
place of business at least two days before the day on which the meeting is to be
held, or shall be sent to him at such place by telegram, radio or cable or shall
be given to him personally or by telephone, not later than the day before the
day on which the meeting is to be held. Such notice need not state the purpose
or purposes for which the meeting is called, unless otherwise required by
statute. Notice of any special meeting need not be given to any director who
shall attend such meeting in person, or to any director who shall waive notice
thereof in writing or by telegram, radio or cable, whether before or after the
time of such meeting. No notice of any adjourned meeting need be given.
SECTION 5. Quorum and Manner of Acting. At all meetings of the Board of
Directors the presence of one-third of the total number of directors
constituting the whole Board, but in no event less than two directors, shall be
necessary and sufficient to constitute a quorum for the transaction of business,
subject, however, to the provisions of Sections 7 and 8 of this Article II.
Except as otherwise required by statute, by Sections 1 and 6 of Article III
hereof and by Section 5 of Article IV hereof, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time until a quorum shall
be present.
SECTION 6. Resignations. Any director may resign at any time by giving
written notice of such resignation to the Board of Directors, the President or
the Secretary of the Corporation. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt thereof by the Board of
Directors or any such officer.
SECTION 7. Removal of Directors. At any special meeting of the
stockholders, duly called as provided in these By-Laws, any director or
directors may, by the affirmative vote of the holders of outstanding shares of
stock of the Corporation entitled to vote thereon having 80% or more of the
voting power be removed from office either with or without cause and his
successor or their successors may be elected at such meeting or a majority of
the remaining directors may, to the extent vacancies are not filled by such
election, fill any vacancy or vacancies created by such removal; provided,
however, that any director who shall have been elected by a class vote of the
holders of any class of stock pursuant to Article IV of the Certificate of
Incorporation may be removed, and any such vacancy created thereby shall be
filled, only in the manner specified in such Article IV.
SECTION 8. Vacancies and Additional Directorships. If any vacancy
shall occur in the Board of Directors by reason of death, resignation or
removal, or as the result of the increase in the number of directorships or
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the termination of any "Class Voting Period" specified in Article IV of the
Certificate of Incorporation, the remaining directors shall continue to act.
Such vacancies may be filled (subject to the provisions of Section 7 of this
Article II) by a majority of the remaining directors, though less than a quorum;
provided, however, that a vacancy caused by the death or resignation of a
director who shall have been elected by the holders of any class of stock
pursuant to Article IV of the Certificate of Incorporation shall be filled only
in the manner specified in such Article IV.
SECTION 9. Compensation. Directors shall receive such reasonable
compensation for their services as such, whether in the form of a salary or a
fixed fee for attendance at meetings, with expenses, if any, as the Board of
Directors may from time to time determine. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE III.
Committees of the Board
SECTION 1. Designation, Power, Alternate Members and Term of Office.
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees (including an Executive Committee), each
committee to consist of two or more of the directors of the Corporation. Any
such committee, to the extent provided in such resolution, shall have and may
exercise the power of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. The Board may designate one or
more directors as alternate members of any committee, who, in the order
specified by the Board may replace any absent or disqualified member at any
meeting of the committee. If at a meeting of any committee one or more of the
members thereof should be absent or disqualified, and if either the Board of
Directors has not so designated any alternate member or members, or the number
of absent or disqualified members exceeds the number of alternate members who
are present at such meeting, then the member or members of such committee
(including alternates) present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
director to act at the meeting in the place of any such absent or disqualified
member. The term of office of the members of each committee shall be as fixed
from time to time by the Board of Directors, subject to these By-Laws; provided,
however, that any committee member who ceases to be a member of the Board of
Directors shall ipso facto cease to be a committee member. Each committee shall
appoint a secretary, who may be the Secretary of the Corporation or any
Assistant Secretary thereof.
SECTION 2. Meetings, Notices and Records. Each committee may provide
for the holding of regular meetings, with or without notice, and may fix the
time and place at which such meeting shall be held. Special meetings of each
committee shall be held upon call by or at the direction of its chairman or, if
there be no chairman,
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by or at the direction of any two of its members, at the time and place
specified in the respective notices or waivers of notice thereof. Notice of each
special meeting of a committee shall be mailed to each member of such committee,
addressed to him at his residence or usual place of business, at least two days
before the day on which the meeting is to be held, or shall be sent by telegram,
radio or cable, addressed to him at such place, or telephoned or delivered to
him personally, not later than the day before the day on which the meeting is to
be held. Notice of any meeting of a committee need not be given to any member
thereof who shall attend the meeting in person or who shall waive notice thereof
by telegram, radio, cable or other writing, whether before or after the time of
such meeting. Notice of any adjourned meeting need not be given. Each committee
shall keep a record of its proceedings.
SECTION 3. Quorum and Manner of Acting. At each meeting of any
committee the presence of a majority of its members then in office shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the act of a majority of the members present at any meeting at which a
quorum is present shall be the act of such committee; in the absence of a
quorum, a majority of the members present at the time and place of any meeting
may adjourn the meeting from time to time until a quorum shall be present.
Subject to the foregoing and other provisions of these By-Laws and except as
otherwise determined by the Board of Directors, each committee may make rules
for the conduct of its business. Any determination made in writing and signed by
all the members of such committee shall be as effective as if made by such
committee at a meeting.
SECTION 4. Resignations. Any member of a committee may resign at any
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. Unless
otherwise specified in such notice, such resignation shall take effect upon
receipt thereof by the Board or any such officer.
SECTION 5. Removal. Any member of any committee may be removed
at any time by the Board of Directors with or without cause.
SECTION 6. Vacancies. If any vacancy shall occur in any committee by
reason of death, resignation, disqualification, removal or otherwise, the
remaining members of such committee, though less than a quorum, shall continue
to act until such vacancy is filled by the Board of Directors.
SECTION 7. Compensation. Committee members shall receive such
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any committee member from serving the Corporation
in any other capacity and receiving compensation therefor.
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ARTICLE IV
Officers
SECTION 1. Number. The officers of the Corporation shall be a Chairman
of the Board of Directors, a First Vice-Chairman and a Second Vice-Chairman of
the Board of Directors (if the Board of Directors so determines), a President, a
First Vice-President (if the Board of Directors so determines), an Executive
Vice-President (if the Board of Directors so determines) and such number of
Senior Vice-Presidents and additional Vice-Presidents as the Board of Directors
from time to time may determine, a Secretary, a Treasurer, a Controller and an
Auditor, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article IV.
SECTION 2. Election; Term of Office. Each officer (except such officers
as may be appointed in accordance with the provisions of Section 3 of this
Article IV) shall be chosen by the Board of Directors at its annual meetings.
Each such officer (whether chosen at an annual meeting of the Board of Directors
or to fill a vacancy or otherwise) shall hold his office until his successor is
chosen and qualified, or until his death, or until he shall resign in the manner
provided in Section 4 of this Article IV, or shall be removed in the manner
provided in Section 5 of this Article IV.
SECTION 3. Subordinate Officers; Appointment. The Board of Directors
from time to time may appoint such other officers or agents, including one or
more Assistant Secretaries or Assistant Treasurers, as it may deem necessary or
advisable, to hold office for such period, have such authority and perform such
duties as the Board of Directors from time to time may determine. The Board of
Directors may delegate to any officer or agent the power to appoint any such
subordinate officers or agents and to prescribe their respective terms of
office, authorities and duties.
SECTION 4. Resignations. Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors, the President or
the Secretary of the Corporation. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt thereof.
SECTION 5. Removal. The officers specifically designated in Section 1
of this Article IV may be removed, either for or without cause, at any special
meeting of the Board of Directors called for the purpose, by the vote of a
majority of the whole Board of Directors. The officers and agents appointed in
accordance with the provisions of Section 3 of this Article IV may be removed,
either for or without cause, at any meeting of the Board of Directors, by the
vote of a majority of the directors present at such meeting, or by any superior
officer or agent upon whom such power of removal shall have been conferred by
the Board of Directors.
SECTION 6. Vacancies. A vacancy in any office by reason of death,
resignation, removal, disqualification or any other cause, shall be filled in
the manner provided in this Article IV for regular election or appointment to
such office.
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SECTION 7. The Chairman and the Vice-Chairmen of the Board of
Directors. The Chairman of the Board of Directors shall be the chief executive
officer of the Corporation and shall be vested with and shall perform all such
powers and duties as are incident to this office and shall have the general
supervisory powers over the Corporation. He shall preside at all meetings of the
stockholders, the Board of Directors and the Executive Committee at which he
shall be present and shall be vested with and perform such other powers and
duties as may be assigned to him by the Board of Directors. In the absence or
disability of the Chairman, the First Vice-Chairman shall be vested with and
shall perform all the powers and duties of the Chairman, and in the absence or
disability of the First Vice-Chairman, the Second Vice-Chairman shall be vested
with and perform all the powers and duties of the Chairman. In the absence or
disability of the Second Vice-Chairman, the President shall be vested with and
shall perform all the powers and duties of the Chairman and in the absence or
disability of the President, the First Vice-President shall be vested with and
shall perform all the powers and duties of the Chairman. In the absence or
disability of the First Vice-President, the Executive Vice-President shall be
vested with and shall perform all the powers and duties of the Chairman.
SECTION 8(a). The President. In the absence of the Chairman, the First
Vice-Chairman and the Second Vice-Chairman of the Board of Directors, the
President shall preside at all meetings of the stockholders and the Board of
Directors, shall sign or countersign all certificates, contracts and other
instruments of the Corporation as authorized by the Board of Directors, and
shall make reports to the Board of Directors and stockholders. The President may
sign certificates representing stock of the Corporation, the issue of which
shall have been authorized by the Board of Directors (the signature of which may
be a facsimile signature). The President shall be vested with and shall perform
such other powers and duties as are incident to the office and as may be
assigned to him by the Board of Directors or by the Chairman .
SECTION 8(b). The Office of the President. In lieu of the President,
the Board of Directors may from time to time create an office of the President
and appoint officers of the Corporation as members of the Office of the
President. Each member of the Office of the President shall be assigned such
powers and duties and such areas of responsibility as the Board of Directors or
the Chairman may from time to time determine and shall report to the Chairman.
Should the Board of Directors create an Office of the President in lieu of a
President then the term President as utilized throughout these By-Laws (except
in this Section 8(b) and in Section 7 and the first sentence of Section 8(a) of
this Article IV) shall refer to the First-Vice Chairman.
SECTION 9. The Vice-Presidents.
(a) In the absence or disability of the President, the First
Vice-President shall be vested with and shall perform all the powers and duties
of the President and shall perform such other duties as may be assigned to him
by the Board of Directors.
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(b) In the absence or disability of the President and the
First Vice-President, the Executive Vice-President shall be vested with and
shall perform all the powers and duties of the President.
(c) In the absence or disability of the President, the First
Vice-President, and the Executive Vice-President, a Senior Vice-President
designated by the Chairman or in his absence by the First Vice-Chairman of the
Board of Directors, shall be vested with and shall perform all the powers and
duties of the President.
(d) In the absence or disability of the
President, the First Vice-President, the Executive Vice-President and the
Senior Vice-Presidents, a Vice-President designated by the Chairman or in his
absence by the First Vice-Chairman of the Board of Directors shall be vested
with and shall perform all the powers and duties of the President.
Any Vice-President may sign certificates representing stock of the Corporation,
the issuance of which shall have been authorized by the Board of Directors (the
signature to which may be a facsimile signature), and shall be vested with and
shall perform such other powers and duties as may be assigned to him by the
Board of Directors.
Section 10. The Secretary. The Secretary shall
(a) record all the proceedings of the meetings of the
stockholders, Board of Directors, Executive Committee and other standing
committees in a book to be kept for that purpose;
(b) cause all notice to be duly given in accordance with the
provisions of these By-Laws and as required by statute;
(c) whenever any Committee shall be appointed in pursuance of
a resolution of the Board of Directors, furnish the Chairman of such Committee
with a copy of such resolution;
(d) be custodian of the records and of the seal of the
Corporation, and cause such seal to be affixed to all certificates representing
stock of the Corporation prior to the issuance thereof and to all instruments
the execution of which on behalf of the Corporation under its seal shall have
been duly authorized in accordance with these By-Laws;
(e) see that the lists, books, reports, statements,
certificates and other documents and records required by statute are properly
prepared, kept and filed;
(f) have charge of the stock books of the Corporation and
cause the stock and transfer books to be kept in such manner as to show at any
time the amount of stock of the Corporation of each class issued and
outstanding, the manner in which and the time when such stock was paid for, the
names alphabetically arranged and the addresses of the holders of record
thereof, the number of shares held by each and the time when each became such
holder of record; and exhibit at all reasonable times to any director, upon
application, the original or duplicate stock register;
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(g) sign (unless the Treasurer, an Assistant Treasurer or an
Assistant Secretary shall sign) certificates representing stock of the
Corporation the issuance of which shall have been authorized by the Board of
Directors (the signature to which may be a facsimile signature); and
(h) in general, perform all duties incident to the office of
Secretary and such other duties as are given to him by these By-Laws or as from
time to time may be assigned to him by the Board of Directors or the President.
SECTION 11. The Treasurer. The Treasurer shall
(a) have charge of and supervision over and be responsible for
the funds, securities, receipts and disbursements of the Corporation;
(b) cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the Corporation in
such banks or trust companies or with such bankers or other depositaries as
shall be selected by him;
(c) cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositaries of the Corporation, and cause
to be taken and preserved proper vouchers for all moneys disbursed;
(d) render to the proper officers or the Board of Directors or
any standing committee whenever requested, a statement of the financial
condition of the Corporation and of all his transactions as Treasurer, and
render a full financial report at the annual meeting of the stockholders, if
called upon to do so;
(e) cause to be kept at the principal business office of the
Corporation correct books of account of all its business and transactions;
(f) sign (unless the Secretary, an Assistant Secretary or an
Assistant Treasurer shall sign) certificates representing stock of the
Corporation the issuance of which shall have been authorized by the Board of
Directors (the signature to which may be a facsimile signature);
(g) be empowered, from time to time to require from the
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial transactions
of the Corporation; and
(h) in general, perform all duties incident to the office of
Treasurer and such other duties as are given to him by these By-Laws or as from
time to time may be assigned to him by the Board of Directors or the President.
SECTION 12. Assistant Secretaries. At the request of the
Secretary or in his absence or disability, the Assistant Secretary
designated by him (or in the absence of such designation, the Assistant
Secretary designated by
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the Board of Directors or the President) shall perform all the duties of the
Secretary, and when so acting shall have all the powers of and be subject to all
restrictions upon the Secretary. The Assistant Secretaries shall perform such
other duties as from time to time may be assigned to them respectively by the
Board of Directors, the President or the Secretary.
SECTION 13. Assistant Treasurers. At the request of the Treasurer or in
his absence or disability, the Assistant Treasurer designated by him (or in the
absence of such designation, the Assistant Treasurer designated by the Board of
Directors or the President) shall perform all the duties of the Treasurer, and
when so acting shall have all the powers of and be subject to all restrictions
upon the Treasurer. The Assistant Treasurers shall perform such other duties as
from time to time may be assigned to them respectively by the Board of
Directors, the President or the Treasurer.
SECTION 14. The Controller. The Controller shall supervise the
keeping of the accounts of the Corporation and shall perform such other duties
as may be assigned to him by the Board of Directors.
SECTION 15. The Auditor. The Auditor shall supervise the auditing
of the accounts of the Corporation and shall perform such other duties as may
be assigned to him by the Board of Directors.
SECTION 16. Salaries. The salaries of the officers of the Corporation
shall be fixed from time to time by the Board of Directors or any committee
thereof which may be authorized by the Board. The Board of Directors may
delegate to any person the power to fix the salaries or other compensation of
any officers or agents appointed in accordance with the provisions of Section 3
of this Article IV. No officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation.
SECTION 17. Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the Corporation shall execute to the
Corporation a bond in such sum and with such surety or sureties as the Board of
Directors may direct, conditioned upon the faithful performance of his duties to
the Corporation, including responsibility for negligence and for the accounting
for all property, funds or securities of the Corporation which may come into his
hands.
ARTICLE V.
Execution of Instruments, Borrowing of Money
and Deposit of Corporate Funds
SECTION 1. Execution of Instruments. The President and any
Vice-President, subject to the approval of the Board of Directors, may enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. The Board of Directors may authorize any officer or
officers, or agent or agents, to enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation, and such
authorization may be general or confined to specific instances.
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SECTION 2. Loans. No loans or advances shall be obtained or contracted
for, by or on behalf of the Corporation and no negotiable paper shall be issued
in its name, unless and except as authorized by the Board of Directors. Such
authorization may be general or confined to special instances. Any officer or
agent of the Corporation thereunto so authorized may effect loans and advances
for the Corporation, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other evidences of indebtedness of the
Corporation. Any officer or agent of the Corporation thereunto so authorized may
pledge, hypothecate or transfer as security for the payment of any and all
loans, advances, indebtedness and liabilities of the Corporation, any and all
stocks, bonds, other securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same and do
every act and thing necessary or proper in connection therewith.
SECTION 3. Notes; Checks; Other Instruments. All notes, drafts,
acceptances, checks, endorsements, and all evidences of indebtedness of the
Corporation whatsoever, shall be signed by such officer or officers or such
agent or agents of the Corporation and in such manner as the Board of Directors
from time to time may determine. Endorsements for deposit to the credit of the
Corporation in any of its duly authorized depositaries shall be made in such
manner as the Board of Directors from time to time may determine.
SECTION 4. Proxies. Proxies to vote with respect to shares of stock of
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
President or a Vice-President and the Secretary or an Assistant Secretary of the
Corporation or by any other person or persons thereunto authorized by the Board
of Directors.
ARTICLE VI.
Record Dates
SECTION 1. Record Dates. For the purpose of any corporate action, in
order that the Corporation may determine the stockholders (1) entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof; (2)
with respect only to holders of Preferred Stock, entitled to express consent to
corporate action in writing without a meeting of holders of Preferred Stock; (3)
entitled to receive payment of any dividend or any distribution or allotment of
any rights; or (4) entitled to exercise any rights in respect to any change,
conversion or exchange of stock, the Board of Directors may fix in advance a
record date which shall be not more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. Only
those stockholders of record on the dates so fixed shall be entitled to any of
the foregoing rights, notwithstanding the transfer of any such stock on the
books of the Corporation after any such record date fixed by the Board of
Directors.
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<PAGE>
ARTICLE VII.
Corporate Seal
The corporate seal shall be circular in form and shall bear the name of
the Corporation and words and figures denoting its organization under the Laws
of the State of Delaware and the year thereof and otherwise shall be in such
form as shall be approved from time to time by the Board of Directors.
ARTICLE VIII.
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of
January in each year and shall end on the thirty-first day of the following
December.
ARTICLE IX.
Indemnification of Directors, Officers and Employees
The Corporation shall indemnify, in the manner and to the full extent
permitted by law, any person (or the estate of any person) who was or is a party
to, or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer
or employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise. The Corporation may, to
the full extent permitted by law, purchase and maintain insurance on behalf of
any such person against any liability which may be asserted against him. To the
full extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses shall be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit the
right of the Corporation to indemnify any other person for any such expenses to
the full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Corporation may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
ARTICLE X.
Amendments
All By-Laws of the Corporation shall be subject to alteration or
repeal, and new By-Laws may be made, either (1) by the affirmative vote of the
holders of outstanding shares of stock of the Corporation entitled to vote
-15-
<PAGE>
thereon having 80% or more of the voting power given at any annual or special
meeting, or (2) by the affirmative vote of at least a majority of the whole
Board of Directors given at any regular or special meeting.
I, , DO HEREBY CERTIFY that I am of Beneficial Corporation, a
Delaware corporation, and that the foregoing is a true and complete copy of
the By-Laws of said Corporation in force at the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said Corporation this day of , 19 .
-16-
<PAGE>
EXHIBIT 10.12
<PAGE>
BENEFICIAL CORPORATION
1990 NON-QUALIFIED STOCK OPTION PLAN
1. Purpose of Plan. The purpose of the Beneficial Corporation 1990
Non-Qualified Stock Option Plan ("Plan") is to attract and retain able and
experienced key management employees and directors and to provide an incentive
to those persons to improve operations and increase profits by affording them an
opportunity to acquire stock ownership in Beneficial Corporation
("Corporation"). The options granted under the Plan are not intended to comply
with Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration of Plan. This Plan shall be administered by the
Compensation Committee ("Committee") of the Board of Directors of the
Corporation ("Board") which shall consist of not less than three members of the
Board, none of whom shall be eligible to participate in this Plan, other than
pursuant to Section 8 hereof, for a period of at least one year prior to
appointment. The determinations of the Committee shall be made in accordance
with their judgments as to the best interests of the Corporation and its
stockholders and in accordance with the purposes of the Plan. A majority of
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee if in writing signed by all of the Committee members. No member of the
Committee or the Board shall be liable for any action taken or determination
made in good faith with respect to this Plan or any option granted hereunder.
The Committee shall have full authority and discretion to (a)
determine, consistent with the provisions of this Plan, the employees to be
granted options, the times at which options shall be granted, the number of
shares subject to each option, the period during which each option becomes
exercisable (subject to Section 7 hereof), and the terms contained in each
option agreement, and (b) adopt rules and regulations and prescribe or approve
any forms or documents to carry out the purposes and provisions of this Plan.
Notwithstanding the foregoing, the number of shares subject to option which may
be granted to any employee, regardless of position or title, during any calendar
year under this Plan may not exceed 200,000, provided that such limitation shall
be subject to adjustment consistent with the provisions of Section 12 hereof
with respect to any change in the Common Stock of the Corporation which shall
occur on or after November 21, 1996. The Committee's interpretation and
construction of any provisions of this Plan or determination of any grant
hereunder shall be binding and conclusive, except as such may be otherwise
modified, amended or changed by the Board. The authority of the Board under this
Section shall not be exercised in any manner which could jeopardize the status
of the Committee as disinterested administrator of the Plan.
3. Eligibility. The class of employees eligible to participate in this
Plan shall consist of those headquarters employees holding the title of
Assistant Vice President or above, or the equivalent of that position in
function and responsibility in the case of subsidiaries of the Corporation, and
those employees in the Corporation's field operations holding the title of
Director and above. An employee who has been granted an option may be granted an
additional option or options under this Plan if the Committee shall so
determine. The granting of an option under this Plan shall not affect any
outstanding stock option previously granted to an optionee under this Plan. The
term "subsidiary" shall mean any domestic or foreign corporation of which the
Corporation owns, directly or indirectly, in excess of 50% of the total combined
voting power of all classes of stock of such corporation.
Notwithstanding any language of this Section to the contrary, no
individual shall be eligible to receive an option as an employee of the
Corporation or any of its subsidiaries for a period of one year after having
been eligible to receive options pursuant to Section 8 hereof.
Those eligible shall include individuals who are subject to the
personal income tax laws of foreign countries, including Canada, the United
Kingdom, and the German Federal Republic, and employed by the Corporation or any
of its subsidiaries, and the Committee shall have the discretion, but shall not
be required, to include as a part of the terms of each option agreement
provisions and conditions consistent with the Plan, intended to comply with the
applicable requirements of the internal revenue laws of such foreign countries.
4. Shares Subject to Plan. Subject to adjustment as provided in Section
12, the aggregate number of shares which shall be authorized to be issued
pursuant to options granted by the Committee under this Plan for any calendar
year shall not exceed that number of shares equal to one and three-quarter
percent (.0175) of the total issued and outstanding Common Stock of the
Corporation, par value $1.00 per share, as measured on the first day of any such
calendar year, which may be treasury shares reacquired by the Corporation or
authorized and unissued shares or a combination of both. If during any such
calendar year options for less than the total number of shares so authorized are
granted under the Plan, the balance of such shares shall be available for the
granting of options during any succeeding year. Any shares subject to an option
under this Plan which shall expire or be terminated for any reason shall be
available for the granting of options in that, or any succeeding year during the
term of this Plan.
5. Option Price. The option price per share under each option granted
by the Committee shall be not less than 100% of the fair market value per share
on the date an option is granted, but in no event less than the par value
thereof. The fair market value shall be the average between the highest and
lowest quoted selling price per share on the New York Stock Exchange Composite
Transactions Tape ("Composite Tape") on the date the option is granted (subject
to adjustment under Section 12 hereof). If there should be no sale of the shares
reported on such date, then the option price per share shall be the average
between the highest and lowest quoted selling price per share reported on the
Composite Tape on the next preceding day on which there shall have been a sale.
6. Exercise of Option.
(a) Each Option granted under the Plan shall be exercisable on
the dates and for the number of shares as shall be provided in a stock option
agreement between the Corporation and optionee evidencing the option granted by
the Committee and the terms thereof. Shares shall be issued to the optionee upon
payment in full either in cash or by an exchange of shares of Common Stock of
the Corporation previously owned by the optionee for at least six months prior
to the date of exercise, or a combination of both, in an amount or having a
combined value equal to the aggregate purchase price for the shares subject to
the option or portion thereof being exercised. The value of the previously owned
shares of Common Stock exchanged in full or partial payment for the shares
purchased upon the exercise of an option shall be equal to the aggregate fair
market value, as defined in Section 5, of such shares on the date of the
exercise of such options.
(b) The Corporation shall be entitled to withhold the amount
of any tax attributable to any amounts payable or shares deliverable under the
Plan after giving the person entitled to receive the payment or delivery (or the
person liable for the tax, if different) notice as far in advance as
practicable, and the Corporation may defer making payment or delivery of any
benefits under the Plan if any tax is payable until indemnified to its
satisfaction. The Committee may, in its discretion and subject to rules which it
may adopt, permit an optionee to pay all or a portion of all taxes arising in
connection with the exercise of an option by electing to (i) have the
Corporation withhold shares of Common Stock, or (ii) deliver other shares of
Common Stock previously owned by the optionee for at least six months having a
fair market value (as defined in Section 5) equal to the amount to be withheld
provided, however, that the amount to be withheld shall not exceed the
optionee's estimated total Federal, State and local tax obligations associated
with the transaction. The fair market value of fractional shares remaining after
payment of the withholding taxes shall be paid to the optionee in cash.
7. Term of Option. Options granted under the Plan shall become
exercisable at such intervals or dates and over such period of time ("Exercise
Period") and for such number of shares which may be purchased at any one time as
shall be determined by the Committee (collectively "Option Terms") to be set
forth in the stock option agreements between individual optionees and the
Corporation under the Plan ("Option Agreements"), but in no event shall the
Exercise Period commence prior to one year after the date of grant (except as
permitted in Sections 11(c) and 10(e) hereof) or extend more than 10 years after
the date of grant. The Committee may, consistent with Section 13 hereof,
authorize existing Option Agreements to be amended to provide for different
Option Terms, in whole or in part, including an amendment to permit
transferability in accordance with Section 9 hereof. Options which are not
exercised prior to the end of the Exercise Period shall expire, and the shares
subject to such options shall become available for the granting of other options
under the Plan during that or any succeeding year.
8. Grants to Outside Directors.
(a) On the 15th day of the month of November of each year
prior to the termination of this Plan, each member of the Board of Directors of
the Corporation (excluding Emeritus Directors) who is not then an employee of
the Corporation or any of its subsidiaries ("Outside Director") shall
automatically be issued an option pursuant to this Plan to purchase 4000 shares
of the Common Stock of the Corporation, provided, however, that such number of
shares shall be automatically proportionately adjusted upon the occurrence of
any event described in Section 12 hereof, in a manner consistent with any
adjustment affected pursuant to that Section. In the event that November 15
shall in any year fall on a day on which the New York Stock Exchange is not open
for trading, options shall instead be issued pursuant to this Section on the
next preceding trading day.
(b) Such options shall be granted at an option price equal to
the fair market value per share (as defined at Section 5) on the date of grant,
shall be exercisable at any time after one year following the date of grant and
prior to ten years following the date of grant, and shall be subject to the
restrictions on transferability provided in Section 9 hereof.
(c) If for any reason during the term of an unexercised and
unexpired option issued pursuant to this Section, the optionee shall cease to be
a voting member of the Board of Directors of the Corporation, the option may be
exercised at any time during its normal exercise period, provided however, that
any option not exercisable on the date of such cessation shall expire on such
date.
(d) Options issued pursuant to this Section shall be
subject to adjustment pursuant to Section 12 hereof.
(e) Notwithstanding any provisions of this Section to the
contrary, no Outside Director of the Corporation shall be eligible to receive
any option pursuant to the Plan for a period of one year after having been
eligible to receive options pursuant to the Plan as an employee of the
Corporation or any of its subsidiaries.
(f) The provisions of this Section 8 may be amended by the
Board from time to time, affecting the issuance date, number of shares under
option, and terms of options issued to Outside Directors hereunder.
(g) On December 1, 1997, each Outside Director of the
Corporation shall be issued an option pursuant to the Plan to purchase 2,000
shares of the Common Stock of the Corporation. This non-recurring option grant
shall be on the terms, and subject to the restrictions, set forth in subsections
(b), (c), (d) and (e) of this Section 8.
<PAGE>
9. Transferability of Options.
Options or LSAR's granted under this Plan shall be
transferable by the optionee by will or the laws of descent and distribution,
and shall also be transferable by the optionee to (i) the spouse, siblings,
parents and lineal descendants of the optionee ("Immediate Family Members"),
(ii) organizations described at Section 501(c)(3) of the Code ("Charities"),
(iii) a trust or trusts for the exclusive benefit of such Immediate Family
Members or Charities, or (iv) a partnership or partnerships in which such
Immediate Family Members are the only partners, provided that (A) there may be
no consideration for any such transfer, (B) the stock option agreement pursuant
to which options were granted under this Plan must expressly provide for
transferability in a manner consistent with this Section 9, (C) subsequent
transfers of transferred options shall be prohibited except those pursuant to
will or the laws of descent and distribution, and (D) any such transfer must
expressly provide that the optionee is designated as agent of the transferee for
purposes of notices from the Plan or the Committee with respect to the options,
and for purposes of any notices to the Plan or the Committee from the transferee
with respect to the options, including but not limited to notices of intent to
exercise. Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Sections 6 and 13 hereof the term "optionee" shall
be deemed to refer to the transferee. The events of termination of employment of
Section 10 hereof shall continue to be applied with respect to the original
optionee, following which the options shall be exercisable by the transferee
only to the extent, and for the periods specified at Sections 10(b), 10(c),
10(d) and 10(e). Absent a transfer in accordance with the provisions of this
Section 9, options or LSAR's granted under the Plan shall be exercisable during
the optionee's lifetime only by the optionee (or the legal representative of the
optionee under Section 10(c)).
10. Termination of Employment and Death of Optionee.
(a) If during the term of an unexercised option the optionee
terminates employment with the Corporation or any of its subsidiaries for any
reason (other than those specified at (b) through (e) of this Section) the
option shall expire and cease to be exercisable immediately upon such
termination.
(b) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by reason of the
death of such optionee, the option may be exercised within a two year period
following the date of death to the extent that such option is exercisable at the
date of death, but in no event later than the Exercise Period specified in the
Option Agreement by which such option was granted. The option shall be
exercisable during such period by the optionee's estate or by any person who
acquires the right to exercise the option by reason of the optionee's death.
(c) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by reason of the
"long term disability" of the optionee, as such term is defined for purposes of
the Long Term Disability Benefits Plan maintained by the Corporation, the option
may be exercised, to the extent that it was exercisable at termination, at any
time during the Exercise Period specified in the Option Agreement by which such
option was granted. The optionee's legal representative, if appointed, shall be
entitled to exercise the option.
(d) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by reason of
retirement at any time following the date the optionee is eligible to retire
early pursuant to Section 4 of the Beneficial Corporation Pension Plan dated
October 1, 1983, as amended ("Pension Plan") the option may be exercised at any
time during the three month period following his or her Early Retirement Date
(as defined in the Pension Plan), to the extent that such option is exercisable
on such Early Retirement Date, but in no event later than the Exercise Period
specified in the Option Agreement by which such option was granted.
(e) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by reason of
retirement at any time following the date the optionee is eligible to retire
early, as defined at 10(d) above, and after the date on which such optionee
attains the age of sixty two years, the option shall be exercisable at any time
during the Exercise Period specified in the Option Agreement by which such
option was granted. Notwithstanding the provisions of Section 7 hereof and the
terms of each Option Agreement, all options held at retirement, then unexercised
and unexpired, by any optionee whose employment is terminated as provided for in
this Section 10(e) shall become immediately exercisable upon the later to occur
of (i) the optionee's retirement date, or (ii) the expiration of a period of six
months following the date of grant of any affected option.
(f) The portion of any option subject to this Section 10 which
is not exercisable at the beginning of, or exercised within the periods
permitted by paragraphs (b) through (e) above shall lapse, and the shares
subject to such option shall become available for the granting of other options
under this Plan during that or any succeeding year.
11. Change of Control.
(a) Qualifying Event. The occurrence of a "Change in Control
of the Corporation", as that term is defined herein, shall constitute a
"Qualifying Event" for purposes of the Plan. A "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A (or the corresponding
provision of any future schedule of required proxy statement information) of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not the Corporation is then subject to such
reporting requirement; provided, that, without limitation, such a change in
control shall be deemed to have occurred if:
(i) the Corporation shall cease to be a publicly
owned corporation having at least 1000 stockholders; or
(ii) any "person" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing fifteen percent (15%) or
more of the combined voting power of the Corporation's then outstanding
securities; or
(iii) during any period of two (2) consecutive
years (not including any period prior to the adoption of this Plan) there
shall cease to be a majority of the Board comprised as follows: individuals
who at the beginning of such period constitute the Board and any new
director(s) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved.
(b) Limited Stock Appreciation Rights. Upon the occurrence of
a Qualifying Event, there shall automatically be issued in connection with all
options granted pursuant to the Plan, then unexercised and unexpired, to persons
at such time subject to restrictions on purchase and sale of the Common Stock of
the Corporation under Section 16(b) of the Exchange Act, Limited Stock
Appreciation Rights ("LSAR"), as hereinafter defined. The number of shares
subject to each LSAR shall be the same as that for the underlying option to
which such LSAR relates. For purposes of the Plan an LSAR shall represent the
privilege to receive from the Corporation (without payment to the Corporation
except for applicable withholding taxes) upon exercise of such LSAR a payment
solely in cash equal to the "Option Spread". The "Option Spread" shall be (i)
the difference between the highest fair market value per share (as defined in
Section 5) during the 90-day period beginning on the day of the Qualifying Event
and the per share option price of the related option, times (ii) the number of
shares subject to the LSAR. An LSAR shall be exercisable in whole or in part at
any time during the 30 day period following the expiration of six months after
the date of the Qualifying Event, upon notice to the Corporation in the manner
prescribed by the Committee. Notwithstanding Section 10(a) hereof, options or
LSAR's granted hereunder shall remain exercisable during such six month and 30
day periods, if within the Exercise Period. Upon the exercise of an LSAR, the
related option granted pursuant to the Plan shall cease to be exercisable to the
extent of the shares of Common Stock with respect to which such LSAR is
exercised. Upon the exercise or termination of a related option, the LSAR with
respect to such related option shall terminate to the extent of the shares of
Common Stock with respect to which the related option was exercised or
terminated.
(c) Acceleration of Vesting. Notwithstanding the provisions of
Section 7 hereof and the terms of each stock option agreement, upon the
occurrence of any Qualifying Event all options granted under the Plan, then
unexercised and unexpired, shall be immediately exercisable.
12. Adjustment Provisions. In the event of any change in the Common
Stock of the Corporation, $1.00 par value, by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, extraordinary dividend, or of any similar change
affecting such Common Stock, then in any such event the number and kind of
shares subject to options granted pursuant to the Plan and their purchase price
per share shall be appropriately adjusted consistent with such change in such
manner as the Committee of the Plan may deem equitable to prevent substantial
dilution or enlargement of the rights granted pursuant to any option agreement
issued hereunder. Any adjustments so made shall be final and binding upon all
parties.
13. Duration, Amendment and Termination. This Plan is intended to be
perpetual and shall have no stated termination date. The Board of Directors may
amend the Plan from time to time or terminate the Plan at any time. However, no
action or amendment authorized by this Section or Section 7 shall reduce the
amount of any existing benefits or change the terms and conditions thereof
without the optionee's consent.
To the extent then required by Rule 16(b)(3), as promulgated by the
Securities and Exchange Commission, approval of the stockholders of the
Corporation shall be required for any amendment to the Plan which shall (a)
materially increase the total number of shares which may be issued under the
Plan; (b) materially reduce the minimum purchase price of shares of Common Stock
which may be made subject to options under the Plan, or (c) materially modify
the requirements as to eligibility for options under the Plan.
By mutual agreement between the Corporation and an optionee hereunder
or under any other stock option plan of the Corporation, options or rights may
be granted to the optionee in substitution and exchange for, and in cancellation
of, any benefits previously granted to the optionee under this Plan or any other
stock option plan of the Corporation.
14. Compliance With Law. This Plan, all options issued hereunder, and
the obligation of the Corporation to sell and deliver shares of Common Stock
hereunder, shall be subject to all applicable Federal and State laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required.
15. No Rights as Stockholder. Individuals granted options pursuant to
the Plan and transferees shall have no rights as stockholders with respect to
any shares of Common Stock subject to such options prior to the date of issuance
to them of certificates for such shares. Other than pursuant to Section 12
hereof no adjustment shall be made for dividends or distributions or other
rights with respect to such shares for which the record date is prior to the
date on which they shall become the holder of record thereof.
16. Stockholder Approval. The Plan was adopted by the Board of
Directors on November 15, 1990, subject to stockholder approval. The Plan was
approved by the stockholders of the Corporation on May 22, 1991.
<PAGE>
EXHIBIT 12
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Continuing Operations Only)
Years Ended December 31
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in millions)
Income From Continuing
<S> <C> <C> <C> <C> <C>
Operations...... $ 253.7 $ 281.0 $ 150.5 $177.7 $186.0
Add Provision
for Income Taxes. 119.6 177.5 119.9 148.4 129.2
-------- -------- -------- ------- -------
Earnings Before
Income Taxes. 373.3 458.5 270.4 326.1 315.2
Fixed charges:
Interest and Debt
Expense.......... 855.0 812.8 816.2 673.6 633.2
Interest Factor
Portion of Rentals.26.5 23.3 22.3 16.3 15.8
-------- -------- -------- ------- -------
Total Fixed
Charges..... 881.5 836.1 838.5 689.9 649.0
-------- -------- -------- ------- -------
Earnings Before Income Taxes
and Fixed
Charges........ $1,254.8 $1,294.6 $1,108.9 $1,016.0 $964.2
======== ======== ======== ======== ======
Ratio of Earnings to
Fixed Charges.... 1.42 1.55 1.32 1.47 1.49
======== ======== ======== ======== ======
Preferred Dividend
Requirements..... $ 7.6 $ 8.5 $ 9.3 $ 9.5 $ 8.8
--------- --------- -------- -------- ------
Ratio of Earnings to Fixed Charges
and Preferred
Dividend
Requirements.. 1.41 1.53 1.31 1.45 1.47
======== ======== ======== ======== ========
</TABLE>
In computing the ratio of earnings to fixed charges, earnings consist
of net income to which has been added income taxes and fixed charges. Fixed
charges consist principally of interest on all indebtedness and that portion of
rentals considered to represent an appropriate interest factor. Preferred
dividend requirements are grossed up to their pretax equivalent.
<PAGE>
EXHIBIT 21
<PAGE>
LIST OF BENEFICIAL CORPORATION SUBSIDIARIES 01/01/98
COMPRISING THE FINANCE DIVISION
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Bencharge Credit Service Holding Company DE
301 North Walnut St., Wilmington, DE 19801
Bencharge Credit Service of America, Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services of Connecticut Inc. DE
926 Main St., East Hartford, CT 06108
Beneficial Credit Services of Mississippi Inc. DE
286 Highway 51, Ste. B, Ridgeland, MS 39157
Beneficial Credit Services of South Carolina Inc. DE
1660 Sam Ritterburg Blvd., Charleston, SC 29407
Beneficial Arizona Inc. DE
7315 North Oracle Road, Ste. 107, Tucson, AZ 85704
Beneficial California Inc. DE
1731 W. Colorado Blvd., Los Angeles, CA 90041
Beneficial Colorado Inc. DE
3200 South Wadsworth Blvd., Lakewood, CO 80227
Beneficial Connecticut Inc. DE
926 Main St., East Hartford, CT 06108
Beneficial Delaware Inc. DE
514 Jefferic Blvd., Unit 1, Dover, DE 19901
Beneficial Florida Inc. DE
2777 University Blvd., W., Ste. 65
Jacksonville, FL 32216
Beneficial Mortgage Co. of Florida DE
2777 University Blvd., W., Ste. 65
Jacksonville, FL 32216
Beneficial Georgia Inc. DE
700 North Main St., Ste. 10, Alpharetta, GA 30201
Beneficial Hawaii Inc. DE
James Campbell Bldg., 826 Ft. Street Mall,
Honolulu, HI 96813
Beneficial Idaho Inc. DE
1003 Vista Ave., Boise, ID 83709
-1-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Illinois Inc. DE
4012 West 79th St., Chicago, IL 60652
Beneficial Indiana Inc. DE
812 S. Scatterfield Rd., Anderson, IN 46012
Beneficial Iowa Inc. IA
301 North Walnut St., Wilmington, DE 19801
Beneficial Kansas Inc. KS
Capitol Hills Shops, 400 SW 29th St., Ste. L,
Topeka, KS 66611
Beneficial Kentucky Inc. DE
8512 Preston Hwy., Louisville, KY 40219
Beneficial Louisiana Inc. DE
11439 Florida Blvd., Baton Rouge, LA 70815
Beneficial Maine Inc. DE
1041 Breighton Avenue, Portland, ME 04102
Beneficial Maryland Inc. DE
79 Forest Dr., Annapolis, MD 21401
Beneficial Massachusetts Inc. DE
Gr. Fl., 236 Cabot St., Beverly, MA 01915
Beneficial Michigan Inc. DE
12900 Hall Road., Ste. 190, Sterling Hts., MI 48313
Beneficial Minnesota Inc. DE
5180 Central Ave., NE Columbia Heights, MN 55421
Beneficial Mississippi Inc. DE
286 Highway 51, Ste. B, Ridgeland, MS 39157
Beneficial Missouri, Inc. DE
2219 C Missouri Blvd., Jefferson City, MO 65109
Beneficial Montana Inc. DE
1520 3rd St., NW, Ste. A,
Great Falls, MT 59404
Beneficial Nebraska Inc. NE
5005 O Street, Lincoln, NE 68510
Beneficial Nevada Inc. DE
1055 South Wells, Ste. 115, Reno, NV 89502
Beneficial New Hampshire Inc. DE
45 S. Main St., Concord, NH 03301
Beneficial New Jersey Inc. DE
146 South Street, Morristown, NJ 07960
Beneficial New Mexico Inc. DE
7200 Montgomery Blvd, NE, Ste. B 3-4,
Albuquerque, NM 87109
-2-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial North Carolina Inc. DE
6300 - 170 Creedmoor Road
Raleigh, NC 27612
Beneficial Oklahoma Inc. DE
6935 South Lewis, Tulsa, OK 74136
Beneficial Oregon Inc. DE
3671 SW Hall St., Beaverton, OR 97005
Beneficial Rhode Island Inc. DE
457 Main St., East Greenwich, RI 02818
Beneficial South Carolina Inc. DE
1660 Sam Ritterburg Blvd., Charleston, SC 29407
Beneficial South Dakota Inc. DE
3640 S. Highway 79, Ste. D, Rapid City, SD 57701
Beneficial Tennessee Inc. TN
3802 B Nolensville Rd., Nashville, TN 37211
Beneficial Texas Inc. TX
6406 N. 1 H-35, Lincoln Village Shopping Center
Austin, TX 78752
Beneficial Utah Inc. DE
1741 West 7800 South, West Jordan, UT 84088
Beneficial Virginia Inc. DE
10809 Hull Street Road, Midlothian, VA 23112
Beneficial Washington Inc. DE
2111 N. Northgate Way, Seattle, WA 98133
Beneficial West Virginia, Inc. WV
100 Lee Street West, Charleston, WV 25302
Beneficial Wisconsin Inc. DE
11102 West National Ave., West Allis, WI 53227
Beneficial Wyoming Inc. WY
2320 Dell Range Blvd., Ste. 300
Cheyenne, WY 82009
Beneficial Commercial Holding Corporation DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Commercial Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Beneficial Finance Leasing Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
-3-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Leasing Group, Inc. DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Neil Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Silliman Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Beneficial Consumer Discount Company PA
3368 Paxton St., Scottsdale Plaza
Harrisburg, PA 17111
Beneficial Discount Co. of Virginia DE
10809 Hull Street Road, Midlothian, VA 23113
Beneficial Finance Co. of West Virginia DE
100 Lee Street West, Charleston, WV 25302
Beneficial Finance Services, Inc. KS
8771 W. 95th St., Overland Park, KS 66204
Beneficial Income Tax Service Holding Co., Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Tax Masters Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Industrial Loan Company of Kentucky DE
8512 Preston Hwy., Louisville, KY 40219
Beneficial Investment Co. DE
301 North Walnut St., Wilmington, DE 19801
B B Credit Corp. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services of New York, Inc. DE
622 Yonkers Ave., Yonkers, NY 10704 (Inactive)
Beneficial New York Inc. NY
622 Yonkers Ave., Yonkers, NY 10704
Beneficial Homeowner Service Corporation DE
622 Yonkers Ave., Yonkers, NY 10704
Beneficial Homeowners Inc. (Inactive) DE
301 North Walnut St., Wilmington, DE 19801
-4-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Loan & Thrift Co. MN
5180 Central Ave., NE.
Columbia Heights, MN 55421
Beneficial Mortgage Holding Company DE
301 North Walnut St., Wimington, DE 19801
Beneficial Excess Servicing Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Beneficial Home Mortgage Loan Corp. DE
457 Main St., East Greenwich, RI 02818
Beneficial Mortgage Co. of Arizona DE
7315 North Oracle Road, Ste. 107, Tucson, AZ 85704
Beneficial Mortgage Co. of Colorado DE
3200 South Wadsworth Blvd., Lakewood, CO 80227
Beneficial Mortgage Co. of Connecticut DE
926 Main St., East Hartford, CT 06108
Beneficial Mortgage Co. of Georgia DE
700 North Main Street, Ste. 10
Alpharetta, GA 30201
Beneficial Mortgage Co. of Idaho DE
1003 Vista Ave., Boise, ID 83709
Beneficial Mortgage Co. of Indiana DE
812 S. Scatterfield Rd., Anderson, IN 46012
Beneficial Mortgage Co. of Kansas, Inc. DE
Capitol Hills Shops, 400 SW 29th St., Ste. L,
Topeka, KS 66611
Beneficial Mortgage Co. of Louisiana DE
11439 Florida Blvd., Baton Rouge, LA 70815
Beneficial Mortgage Co. of Maryland DE
79 Forest Dr., Annapolis, MD 21401
Beneficial Mortgage Co. of Massachusetts DE
Gr. Fl., 236 Cabot St., Beverly, MA 01915
Beneficial Mortgage Co. of Mississippi DE
286 Highway 51, Ste. B, Ridgeland, MS 39157
Beneficial Mortgage Co. of Missouri, Inc. DE
2219 C Missouri Blvd., Jefferson City, MO 65109
Beneficial Mortgage Co. of Nevada DE
1055 South Wells, Ste. 115, Reno, NV 89502
-5-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Mortgage Co. of New Hampshire DE
45 S. Main St., Concord, NH 03301
Beneficial Mortgage Co. of North Carolina DE
6300 - 170 Creedmoor Road
Raleigh, NC 27612
Beneficial Mortgage Co. of Oklahoma DE
6935 South Lewis, Tulsa, OK 74136
Beneficial Mortgage Co. of Rhode Island DE
457 Main St., East Greenwich, RI 02818
Beneficial Mortgage Co. of South Carolina DE
1660 Sam Ritterburg Blvd., Charleston, SC 29407
Beneficial Mortgage Co. of Texas DE
6406 N. 1 H-35, Lincoln Village Shopping Center
Austin, TX 78752
Beneficial Mortgage Co. of Utah DE
1741 West 7800 South, West Jordan, UT 84088
Beneficial Mortgage Co. of Virginia DE
10809 Hull Street Road, Midlothian, VA 23112
Beneficial Savings Bank, FSB A
430 Knights Run Ave., Tampa, FL 33602 Federal
*same as above, Andrea J. Kaplan Savings Bank
Beneficial Retail Services Inc. DE
430 Knights Run Ave., Tampa, FL 33602
Beneficial Service Corporation DE
430 Knights Run Ave., Tampa, FL 33602
Benevest Group Inc. DE
301 N. Walnut Street, Wilmington, DE 19801
Benevest Services, Inc. WA
2111 N. Northgate Way, Seattle, WA 98133
Alabama Properties, Inc. DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in the District of Columbia
and State of Colorado
-6-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
BMC Holding Company DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Mortgage Corporation DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Mortgage Services, Inc. DE
301 North Walnut St., Wilmington, DE 19801
*Charles D. Brown, Esq., 200 Beneficial Center
Peapack, NJ 07977
A limited/special purpose Corporation to comply with rating
Agencies rules regarding Securitizations.
Beneficial Credit Corp. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Finance Limited UK
Beneficial House, Easthampstead Road,
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Beneficial Insurance Group Holding Company DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
BFC Agency, Inc. DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Acts as an insurance agency
BFC Insurance Agency of America WY
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Acts as an insurance agency
-7-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Bank Public Limited Company UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Operates in the banking field in the
United Kingdom
Beneficial Financial Services Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS *same as above, Anthony Lee
Performs services for Beneficial Bank Public Limited Company
Beneficial Financing Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial Bank Public
Limited Company
Endeavour Personal Financial Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Provides real estate secured loans
Beneficial Leasing Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial Bank Public
Limited Company
Beneficial Trust (Guernsey) Limited UK
*Rysaffe International Services Ltd.
La Tonnelle House, Les Banques, St. Sampson,
Guernsey, Channel Islands
Performs services for Beneficial Bank Public
Limited Company
-8-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Trust Investments Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
* same as above, Anthony Lee
Performs services for Beneficial Bank Public
Limited Company
Beneficial Trust (Jersey) Limited UK
*Rysaffe International Services Ltd.
La Tonnelle House, Les Banques, St. Sampson,
Guernsey, Channel Islands
Performs services for Beneficial Bank Public
Limited Company
Beneficial Trust Nominees Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial Bank Public
Limited Company
The Loan Corporation Limited UK
Abbey Gardens, 6 Abbey Street, Reading,
Berkshire RG1 3BA, England
*Anthony Lee, Beneficial House,
Easthampstead Road., Bracknell,
Berkshire, RG 12 1NS, England
Performs a Loan Broker Service for Sterling
Bank & Trust Limited
Security Trust Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial Bank Public
Limited Company
-9-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Sterling Credit Limited UK
Abbey Gardens, 6 Abbey Street,
Reading, Berkshire RG1 3BA, Eng.
*Anthony Lee, 6th Floor, Beneficial
House, Easthampstead Road, Bracknell,
Berkshire, RG12 1NS
Engages in making Second Mortgage
Consumer Loans.
Sterling Credit Management Limited UK
Abbey Gardens, 4 Abbey Street, Reading,
Berkshire RG1 3BA, England *Anthony Lee, Beneficial House,
Easthampstead Road, Bracknell, Berkshire, RG12 1NS Engages in
Managing and Collecting Loan Portfolios of Third Parties.
Beneficial Canada Holdings Inc. Canada
8500 Leslie St., Ste. 600,
Thornhill, Ont., Canada
*same as above, Jean A. Bedard
A holding company
Beneficial Canada Inc. Canada
8500 Leslie St., Ste. 600
Thornhill, Ont., Canada
*same as above, Jean A. Bedard
Engaged in the business of making
consumer loans to individuals, purchasing
installment sales contracts, evidencing time
sales of merchandise on services and related
activities in Canada
Beneficial Realty Ltd. Canada
8500 Leslie St., Ste. 600
Thornhill, Ont., Canada
*same as above, Jean A Bedard
Engaged in the business of second mortgage loans.
-10-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Direct, Inc. NJ
400 Beneficial Center
Peapack, NJ 07977 *same as above, Barbara L. Hill
Direct marketing of credit
life insurance and other related products.
BFC Ireland (Holdings) Limited Ireland
3 Burlington Road
Dublin 4, Ireland
*same as above, Matsack Trust Limited
a Holding Company
BFC Insurance (Life) Limited Ireland
22-24 Lower Mount Street
Newmount House, Dublin 2, Ireland
*Matsack Trust Limited,
3 Burlington Road, Dublin 4, Ireland
Will operate as a full line life,
accident and health insurance
company
BFC Insurance Limited Ireland
22-24 Lower Mount Street Newmount
House, Dublin 2, Ireland
Will operate as a full line life,
*Matsack Trust Limited,
3 Burlington Road, Dublin 4, Ireland
Will operate as a full line life,
accident and health insurance company
BFC Management Services Limited Ireland
3 Burlington Road, Dublin 4, Ireland
Will operate as a serving company
to service Life Insurance
written by a Third Party carrier
in Ireland for loan
operations/sales in Ireland *Matsack Trust Limited,
-11-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Bank AG Germany
Augustenstrasse 7
7000 Stuttgart 1, Germany
*Dr. Klaus A. Gerstenmaier, Lenzhalde 83,
7000, Stuttgart 1, Germany
Engaged in consumer loans in Germany
Extracard Corp. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Engage in any lawful acts or activities
for which corporations may be
organized under the General Corporation Law of Delaware.
BFC Insurance Agency of Nevada NV
301 N. Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson Acts as an insurance agency
Beneficial Insurance Group, Inc. DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
A management company
Service Administrators, Inc. (USA) CO
205 E. 10th St., Amarillo, TX 79101
*400 Beneficial Center, Peapack, NJ 07977
Leonard Fisher
Service General Insurance Company OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Beneficial Ohio Inc. DE
5025 Arlington Centre Blvd., Columbus, OH 43220
Service Management Corporation OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
B.I.G. Insurance Agency, Inc. OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
-12-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
The Central National Life Insurance Company of Omaha DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Full line life, accident and health insurance company
The Central National Life Insurance Company of Omaha DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Full line life, accident and health insurance company
First Central National Life Insurance Company NY
of New York
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Wesco Insurance Company DE
400 Beneficial Center, Peapack, NJ 07977
*Elizabeth A. Dawson, 301 N. Walnut St.
Wilmington, DE 19801
Selling non-filing insurance in Delaware
Southwest Texas General Agency, Inc. TX
205 East 10th St., Amarillo, TX 79101
*same as above, Leah Kelley
Beneficial Land Company, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in the Borough of Peapack &
Gladstone, NJ
Beneficial Management Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Millicent A. Picker, Esq.
Provides Management, Accounting Services and Advertising for Affiliates.
Beneficial Management Institute, Inc. NY
200 Beneficial Center, Peapack, NJ 07977
*same as above, Millicent A. Picker, Esq.
-13-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial Management Corporation of America DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Management companies providing supervision, audit,
legal, training and other
services for financial and other subsidiaries, at cost
Beneficial Franchise Company Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Engages in the Management and Ownership of
Trademarks and Patents.
Beneficial Mark Holding Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Beneficial Trademark Co. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
An Investment Company
Beneficial Management Headquarters, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone Borough, NJ
and Bedminster Township, NJ
Beneficial Facilities Corporation NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone
Borough, NJ
Beneficial National Bank National
1300 Market Street, Wilmington, DE 19801 Banking Assoc.
*same as above, Kevin T. Peck, Esq.
A commercial bank doing business in the State of Delaware
Beneficial Service Corporation of Delaware DE
1300 Market Street, Wilmington, DE 19801
To sell Insurance on behalf of its Parent
Corporation
-14-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Beneficial National Bank USA National
301 North Walnut St. Wilmington, DE 19801 Banking Assoc.
*same as above, Kevin T. Peck (DE)
A private label credit card operation
Beneficial Service Corporation of New Jersey DE
301 North Walnut St., Wilmington, DE 19801
To sell Insurance on behalf of its Parent Corporation.
Beneficial Real Estate Company, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone Borough, NJ
Beneficial Systems Development Corporation DE
101 East Kennedy Blvd., Ste. 700, Tampa, FL 33602
Will engage in the business of applications,
development, computer
programming, consulting and other related
services in Tampa, Florida
Beneficial Telemarketing Services Inc. DE
301 North Walnut St., Wilmington, DE 19801
Will provide telemarketing services
Beneficial Technology Corporation DE
500 Beneficial Center, Peapack, NJ 07977
*same as above, Peter R. Callas
Performs data processing services for finance and
other subsidiaries
Bon Secour Properties Inc. AL
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone Borough, NJ
Capital Financial Services Inc. NV
5025 Arlington Centre Blvd, Columbus, OH 43220
-15-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Corporate Security Engineering Services, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Engaged in the business of designing security
and life safety systems for commercial use
Garrison Platt Properties Inc. FL
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Tampa, FL
Harbour Island Inc. FL
424 Knights Run Avenue
Tampa, FL 33602
*Matthew J. Broas, Esq., 200 Beneficial Center,
Peapack, NJ 07977
Oversees the development of a piece of
real estate in Florida and all activities
related thereto
Harbour Island Property Management Inc. FL
Harbour Island Security Co., Inc. FL
H I Venture One, Inc. FL
H I Venture Three, Inc. FL
H I Venture Four, Inc. FL
Tampa Island Transit Company, Inc. FL
All the above, 424 Knights Run Avenue
Tampa, FL 33602
*Matthew J. Broas, Esq., 200 Beneficial Center,
Peapack, NJ 07977
Personal Mortgage Holding Company DE
301 North Walnut St., Wilmington, DE 19801
Personal Mortgage Corporation DE
100 Business Center Dr., Hwy. 22,
Brewster, NY 10509
Southern Trust Company 301 North Walnut St., DE
Wilmington, DE 19801 *same as
above, Elizabeth A. Dawson Acts as transfer
agent for certain subsidiaries
of Beneficial Corporation
-16-
<PAGE>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Southwest Beneficial Finance, Inc. IL
301 North Walnut St., Wilmington, DE 19801
Wesco Properties, Inc. DE
301 North Walnut St.,
Wilmington, DE 19801
*same as above, Carolyn Micolucci
Holds real estate
Beneficial Real Estate Joint Ventures, Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
* Minutes of company kept at this address
** Remaining shares are Directors' qualifying shares
*** Remaining shares are owned by Beneficial Corporation
NOTE: Except where otherwise stated, minutes of the companies are kept by
Janice L. Lewis, 301 North Walnut St., Wilmington, Delaware 19801.
-17-
<PAGE>
01/01/98
State of
INACTIVE CORPORATIONS Incorporation
Beneficial Credit Services Northeast Inc. DE
Beneficial Credit Services of Alabama Inc. DE
Beneficial Data Systems Limited UK
Beneficial Finance Co. DE
Beneficial Finance Co. of Alaska DE
Beneficial Finance Co. of Canada Canada
Beneficial Finance Co. of Columbia DC
Beneficial Financial Center, Inc. DE
Beneficial Marketing Corporation OH
Beneficial North Dakota Inc. DE
Beneficial PayNet Systems, Inc. DE
Beneficial Premium Services Limited UK
Beneficial Securities, Inc. DE
Beneficial Vermont Inc. DE
Benevest Escrow Company DE
Benevest Service Company DE
Capital Credit Services Inc. DE
Guaranty and Indemnity Insurance Company DE
Personal Finance Company, Inc. NY
Sterling Mortgages Limited UK
<PAGE>
EXHIBIT 23
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 333-30543 and No. 333-33649 of Beneficial Corporation on
Form S-3 and Registration Statements No. 333-37295 and No. 333-02737
of Beneficial Corporation on Form S-8 of our report dated January 28, 1998,
appearing in the Annual Report on Form 10-K of Beneficial Corporation for the
year ended December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 30, 1998
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROBERT J. CALLANDER, a Director
of Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March,
1998.
/s/ ROBERT J. CALLANDER
ROBERT J. CALLANDER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, FINN M.W. CASPERSEN, a
Director of Beneficial Corporation, One Christina Centre, 301 North Walnut
Street, Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute
and appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY,
officers of the Company, or any of them, with full power to act
without the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 pursuant
to the Securities Exchange Act of 1934, as amended, and any amendment
thereto, to be filed by Beneficial Corporation, a Delaware corporation, with
the Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March,
1998.
/s/ FINN M. W. CASPERSEN
FINN M. W. CASPERSEN
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROBERT C. CLARK, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March,
1998.
/s/ ROBERT C. CLARK
ROBERT C. CLARK
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, LEONARD S. COLEMAN, JR., a
Director of Beneficial Corporation, One Christina Centre, 301 North Walnut
Street, Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute
and appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY,
officers of the Company, or any of them, with full power to act without the
others, my true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual Report on Form
10-K for the fiscal year ended December 31, 1997 pursuant to the Securities
Exchange Act of 1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March,
1998.
/s/ LEONARD S. COLEMAN, JR.
LEONARD S. COLEMAN, JR.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, DAVID J. FARRIS, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of March,
1998.
/s/ DAVID J. FARRIS
DAVID J. FARRIS
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, JAMES H. GILLIAM, JR., a
Director of Beneficial Corporation, One Christina Centre, 301 North Walnut
Street, Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute
and appoint ANDREW C. HALVORSEN and JONATHAN MACEY, officers of the Company, or
either of them, with full power to act without the other, my true and lawful
attorney-in-fact or agent for me and in my name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 pursuant to the Securities Exchange Act of 1934, as amended,
and any amendment thereto, to be filed by Beneficial Corporation, a Delaware
corporation, with the Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of March,
1998.
/s/ JAMES H. GILLIAM, JR.
JAMES H. GILLIAM, JR.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ANDREW C. HALVORSEN, a Director
of Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers of the Company, or
either of them, with full power to act without the other, my true and lawful
attorney-in-fact or agent for me and in my name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 pursuant to the Securities Exchange Act of 1934, as amended,
and any amendment thereto, to be filed by Beneficial Corporation, a Delaware
corporation, with the Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of March,
1998.
/s/ ANDREW C. HALVORSEN
ANDREW C. HALVORSEN
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROLAND A. HERNANDEZ, a Director
of Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March,
1998.
/s/ ROLAND A. HERNANDEZ
ROLAND A. HERNANDEZ
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, J. ROBERT HILLIER, a Director
of Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of March,
1998.
/s/ J. ROBERT HILLIER
J. ROBERT HILLIER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, GERALD L. HOLM, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March,
1998.
/s/ GERALD L. HOLM
GERALD L. HOLM
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, THOMAS H. KEAN, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March,
1998.
/s/ THOMAS H. KEAN
THOMAS H. KEAN
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, STEVEN MULLER, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and. JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March,
1998.
/s/ STEVEN MULLER
STEVEN MULLER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, SUSAN JULIA ROSS, a Director of
Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of March,
1998.
/s/ SUSAN JULIA ROSS
SUSAN JULIA ROSS
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, CHARLES H. WATTS, II a Director
of Beneficial Corporation, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801 (the "Company"), do hereby make, constitute and
appoint ANDREW C. HALVORSEN, JAMES H. GILLIAM, JR. and JONATHAN MACEY, officers
of the Company, or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by Beneficial
Corporation, a Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of March,
1998.
/s/ CHARLES H. WATTS, II
CHARLES H. WATTS, II
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF INCOME (BOTH DATED 12/31/97) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 254
<SECURITIES> 0 <F1>
<RECEIVABLES> 15,030
<ALLOWANCES> 560
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 558 <F3>
<DEPRECIATION> 329 <F3>
<TOTAL-ASSETS> 17,645
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 8,887 <F4>
0
115
<COMMON> 53
<OTHER-SE> 1,604 <F5>
<TOTAL-LIABILITY-AND-EQUITY> 17,645
<SALES> 0
<TOTAL-REVENUES> 2,956 <F6>
<CGS> 0
<TOTAL-COSTS> 855 <F7>
<OTHER-EXPENSES> 1,183 <F8>
<LOSS-PROVISION> 544
<INTEREST-EXPENSE> 0 <F9>
<INCOME-PRETAX> 374
<INCOME-TAX> 120
<INCOME-CONTINUING> 254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254
<EPS-PRIMARY> 4.68
<EPS-DILUTED> 4.54
<FN>
<F1> CURRENT MARKETABLE EQUITY SECURITIES ARE NOT SEPARATELY STATED.
<F2> DO NOT PREPARE CLASSIFIED BALANCE SHEET.
<F3> PP&E PER BALANCE SHEET (229.3) IS SHOWN NET OF DEPRECIATION.
<F4> LONG-TERM DEBT PER BALANCE SHEET.
<F5> INCLUDES ADDITIONAL CAPITAL (250.7), NET UNREALIZED GAIN ON INVESTMENT
(5.2), FOREIGN CURRENCY TRANSLATION ADJ (-48.2), & RETAINED EARNINGS (1396.5)
PER BALANCE SHEET = 1604.2.
<F6> INCLUDES FINANCE CHARGES AND FEES (2317.1), INSURANCE PREMIUMS (177.8),
AND OTHER REVENUE (460.8) PER INCOME STATEMENT = 2955.7.
<F7> INTEREST EXPENSE PER INCOME STATEMENT.
<F8> INCLUDES SALARIES & BENEFITS (434.9), INSURANCE BENEFITS (71.1) AND
OTHER (677.3) PER INCOME STATEMENT = 1183.3.
<F9> COMPANY'S PRIMARY COST OF GENERATING REVENUE IS INTEREST EXPENSE WHICH
IS INCLUDED IN TOTAL COSTS (ABOVE).
</FN>
</TABLE>
