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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
________ ________
Commission File Number 1-2256
EXXON MOBIL CORPORATION
_____________________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
______________________________ ______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(972) 444-1000
_______________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 30, 2001
_______________________________ _______________________________
Common stock, without par value 6,871,078,958
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and six months ended June 30, 2001 and 2000
Condensed Consolidated Balance Sheet 4
As of June 30, 2001 and December 31, 2000
Condensed Consolidated Statement of Cash Flows 5
Six months ended June 30, 2001 and 2000
Notes to Condensed Consolidated Financial Statements 6-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security Holders 25-26
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
Signature 28
Index to Exhibits 29
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
__________________ _________________
2001 2000 2001 2000
________ ________ ________ ________
REVENUE
Sales and other operating revenue,
including excise taxes $ 55,101 $ 54,936 $111,177 $108,209
Earnings from equity interests and
other revenue 1,083 1,020 2,307 1,828
________ ________ ________ ________
Total revenue 56,184 55,956 113,484 110,037
________ ________ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 25,731 26,340 50,609 51,304
Operating expenses 4,626 4,456 9,615 8,741
Selling, general and administrative
expenses 3,215 2,830 6,275 5,707
Depreciation and depletion 1,871 1,939 3,847 4,067
Exploration expenses, including dry holes 266 166 546 376
Merger related expenses 167 202 288 732
Interest expense 70 126 147 300
Excise taxes 5,226 5,457 10,520 10,950
Other taxes and duties 8,057 7,624 16,250 15,706
Income applicable to minority and preferred
interests 83 110 295 182
________ ________ ________ ________
Total costs and other deductions 49,312 49,250 98,392 98,065
________ ________ ________ ________
INCOME BEFORE INCOME TAXES 6,872 6,706 15,092 11,972
Income taxes 2,587 2,706 5,847 4,947
________ ________ ________ ________
INCOME BEFORE EXTRAORDINARY ITEM 4,285 4,000 9,245 7,025
Extraordinary gain, net of income tax 175 530 215 985
________ ________ ________ ________
NET INCOME $ 4,460 $ 4,530 $ 9,460 $ 8,010
======== ======== ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)*
Before extraordinary gain $ 0.64 $ 0.58 $ 1.35 $ 1.02
Extraordinary gain, net of income tax 0.02 0.08 0.03 0.14
________ ________ ________ ________
Net income $ 0.66 $ 0.66 $ 1.38 $ 1.16
======== ======== ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)*
Before extraordinary gain $ 0.63 $ 0.57 $ 1.33 $ 1.00
Extraordinary gain, net of income tax 0.02 0.08 0.03 0.14
________ ________ ________ ________
Net income $ 0.65 $ 0.65 $ 1.36 $ 1.14
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE* $ 0.23 $ 0.22 $ 0.45 $ 0.44
2001 amounts include additional dividend of $0.01 per common share
(post-split basis) declared on May 30, 2001.
* Prior year amounts restated to reflect two-for-one stock split effective
June 20, 2001.
-3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
June 30, Dec. 31,
2001 2000
________ ________
ASSETS
Current assets
Cash and cash equivalents $ 9,298 $ 7,080
Notes and accounts receivable - net 21,409 22,996
Inventories
Crude oil, products and merchandise 7,293 7,244
Materials and supplies 1,102 1,060
Prepaid taxes and expenses 2,220 2,019
________ ________
Total current assets 41,322 40,399
Property, plant and equipment - net 88,356 89,829
Investments and other assets 17,982 18,772
________ ________
TOTAL ASSETS $147,660 $149,000
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 3,890 $ 6,161
Accounts payable and accrued liabilities 25,307 26,755
Income taxes payable 6,417 5,275
________ ________
Total current liabilities 35,614 38,191
Long-term debt 7,289 7,280
Deferred income tax liability 16,194 16,442
Other long-term liabilities 15,589 16,330
________ ________
TOTAL LIABILITIES 74,686 78,243
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (203) (235)
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares 3,745 3,661
Earnings reinvested 93,006 86,652
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (6,381) (4,862)
Minimum pension liability adjustment (310) (310)
Unrealized gains/(losses) on stock investments 56 (17)
Common stock held in treasury:
1,148 million shares at June 30, 2001 (16,939)
1,089 million shares at December 31, 2000 (14,132)
________ ________
TOTAL SHAREHOLDERS' EQUITY 72,974 70,757
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $147,660 $149,000
======== ========
The number of shares of common stock issued and outstanding at June 30, 2001
and December 31, 2000 (restated to reflect two-for-one stock split effective
June 20, 2001) were 6,871,078,958 and 6,930,006,228, respectively.
-4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Six Months Ended
June 30,
___________________
2001 2000
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,460 $ 8,010
Depreciation and depletion 3,847 4,067
Changes in operational working capital, excluding
cash and debt 1,256 2,224
All other items - net (319) (2,847)
________ ________
Net cash provided by operating activities 14,244 11,454
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (4,370) (3,801)
Sales of subsidiaries, investments, and property,
plant and equipment 745 3,209
Other investing activities - net 311 699
________ ________
Net cash provided by/(used in) investing activities (3,314) 107
________ ________
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 10,930 11,561
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 341 143
Reductions in long-term debt (357) (280)
Additions/(reductions) in short-term debt - net (2,369) (4,178)
Cash dividends to ExxonMobil shareholders (3,037) (3,063)
Cash dividends to minority interests (94) (91)
Changes in minority interests and sales/(purchases)
of affiliate stock (274) (112)
Net ExxonMobil shares sold/(acquired) (2,776) 195
________ ________
Net cash provided by/(used in) financing activities (8,566) (7,386)
________ ________
Effects of exchange rate changes on cash (146) (50)
________ ________
Increase/(decrease) in cash and cash equivalents 2,218 4,125
Cash and cash equivalents at beginning of period 7,080 1,688
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,298 $ 5,813
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 4,182 $ 2,582
Cash interest paid $ 244 $ 476
-5-
EXXON MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis Of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be read
in the context of the consolidated financial statements and notes thereto
filed with the Securities and Exchange Commission in the corporation's
2000 Annual Report on Form 10-K. In the opinion of the corporation, the
information furnished herein reflects all known accruals and adjustments
necessary for a fair statement of the results for the periods reported
herein. All such adjustments are of a normal recurring nature. The
corporation's exploration and production activities are accounted for
under the "successful efforts" method.
2. Accounting Change
As of January 1, 2001, ExxonMobil adopted Financial Accounting Standards
Board Statement No. 133 (FAS 133), "Accounting for Derivative Instruments
and Hedging Activities" as amended by Statements No. 137 and 138. This
statement requires that all derivatives be recognized as either assets or
liabilities in the financial statements and be measured at fair value.
Since the corporation makes limited use of derivatives, the effect of
adoption of FAS 133 on the corporation's operations or financial condition
was negligible.
3. Recently Issued Statements of Financial Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 (FAS 141), "Business
Combinations", and No. 142 (FAS 142), "Goodwill and Other Intangible
Assets". Under FAS 141, the pooling of interests method of accounting is
no longer permitted and the purchase method must be used for business
combinations initiated after June 30, 2001. Under FAS 142, which will be
effective for the corporation beginning January 1, 2002, goodwill and
certain intangibles will no longer be amortized but will be subject to
annual impairment tests. The effect of adoption of the new standards on
the corporation's financial statements will be negligible.
4. Capital
On May 30, 2001, the company's Board of Directors approved a two-for-one
stock split to common stock shareholders of record on June 20, 2001. The
authorized common stock was increased from four billion five hundred
million (4,500,000,000) shares without par value to nine billion
(9,000,000,000) shares without par value and the issued shares were split
on a two-for-one basis on June 20, 2001.
-6-
The number of shares of common stock issued and outstanding as of
March 31, 2001 and as of December 31, 2000 and 1999, restated to reflect
the two-for-one stock split, were 6,899,752,948, 6,930,006,228 and
6,954,846,646, respectively. Net income per common share -- assuming
dilution, restated to reflect the two-for-one stock split, for the
quarters ended March 31, 2001 and 2000 were $0.71 and $0.49, respectively,
and for the years ended December 31, 2000, 1999 and 1998, were $2.52,
$1.12, and $1.14, respectively.
5. Merger of Exxon Corporation and Mobil Corporation
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation
merged with Mobil Corporation so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its
name to Exxon Mobil Corporation. The Merger was accounted for as a pooling
of interests.
In the second quarter of 2001, in association with the Merger,
$167 million of before tax costs ($95 million after tax) were recorded as
merger related expenses. In the second quarter of 2000, merger related
expenses were $202 million before tax ($150 million after tax). For the
six months ended June 30, 2001 merger related expenses totaled
$288 million before tax ($185 million after tax). For the six months ended
June 30, 2000, merger related expenses totaled $732 million ($475 million
after tax).
The severance reserve balance at the end of the second quarter of 2001 is
expected to be expended in 2001 and 2002. The following table summarizes
the activity in the severance reserve for the six months ended June 30,
2001:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
317 67 170 214
6. Extraordinary Gain
Second quarter 2001 results included a net after tax gain of $175 million
(including an income tax credit of $6 million), or $0.02 per common share,
from asset management activities in the chemicals segment. Second quarter
2000 included a net after tax gain of $530 million (net of $75 million of
income taxes), or $0.08 per common share, from asset divestments that were
required as a condition of the regulatory approval of the Merger.
For the six months ended June 30, 2001, the net after tax gain from asset
management activities and required asset divestitures totaled $215 million
(including an income tax credit of $21 million), or $0.03 per common
share. For the six months ended June 30, 2000, the net after tax gain from
required asset divestitures totaled $985 million (net of $624 million of
income taxes), or $0.14 per common share. These net gains from asset
management activities in the chemicals segment and required asset
divestitures have been reported as extraordinary items in accordance with
accounting requirements for business combinations accounted for as a
pooling of interests.
-7-
7. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against Exxon Mobil Corporation and certain of its subsidiaries
relating to the accidental release of crude oil from the tanker Exxon
Valdez in 1989. Essentially all of these lawsuits have now been resolved
or are subject to appeal.
On September 24, 1996, the United States District Court for the District
of Alaska entered a judgment in the amount of $5.058 billion in the Exxon
Valdez civil trial that began in May 1994. The District Court awarded
approximately $19.6 million in compensatory damages to fisher plaintiffs,
$38 million in prejudgment interest on the compensatory damages and
$5 billion in punitive damages to a class composed of all persons and
entities who asserted claims for punitive damages from the corporation as
a result of the Exxon Valdez grounding. The District Court also ordered
that these awards shall bear interest from and after entry of the
judgment. The District Court stayed execution on the judgment pending
appeal based on a $6.75 billion letter of credit posted by the
corporation. ExxonMobil has appealed the judgment. The United States Court
of Appeals for the Ninth Circuit heard oral arguments on the appeal on
May 3, 1999. The corporation continues to believe that the punitive
damages in this case are unwarranted and that the judgment should be set
aside or substantially reduced by the appellate courts.
On January 29, 1997, a settlement agreement was concluded resolving all
remaining matters between the corporation and various insurers arising
from the Valdez accident. Under terms of this settlement, ExxonMobil
received $480 million. Final income statement recognition of this
settlement continues to be deferred in view of uncertainty regarding the
ultimate cost to the corporation of the Valdez accident.
The ultimate cost to ExxonMobil from the lawsuits arising from the Exxon
Valdez grounding is not possible to predict and may not be resolved for a
number of years.
Under the October 8, 1991, civil agreement and consent decrees with the
U.S. and Alaska governments, the corporation will make a final payment of
$70 million in 2001. This payment, along with prior payments, will be
charged against the provision that was previously established to cover the
costs of the settlement.
German and Dutch affiliated companies are the concessionaires of a natural
gas field subject to a treaty between the governments of Germany and the
Netherlands under which the gas reserves in an undefined border or common
area are to be shared equally. Entitlement to the reserves is determined
by calculating the amount of gas which can be recovered from this area.
Based on the final reserve determination, the German affiliate has
received more gas than its entitlement. Arbitration proceedings, as
provided in the agreements, were conducted to resolve issues concerning
the compensation for the overlifted gas.
By final award dated July 2, 1999, preceded by an interim award in 1996,
an arbitral tribunal established the full amount of the compensation for
the excess gas. This amount has now been paid and a petition to set the
award aside has now been dismissed, rendering the award final in all
respects. Other substantive matters remain outstanding, including recovery
of royalties paid on such excess gas and the taxes payable on the final
compensation amount. The net financial impact on the corporation is not
possible to predict at this time. However, the ultimate outcome is not
expected to have a materially adverse effect upon the corporation's
operations or financial condition.
-8-
On December 19, 2000, a jury in Montgomery County, Alabama, returned a
verdict against the corporation in a contract dispute over royalties in
the amount of $87.69 million in compensatory damages and $3.42 billion in
punitive damages in the case of Exxon Corporation v. State of Alabama,
et al. The verdict was upheld by the trial court on May 4, 2001.
ExxonMobil has appealed the verdict and believes that the verdict is
unwarranted and that the judgement should be set aside or substantially
reduced. The ultimate outcome is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
On May 22, 2001, a state court jury in New Orleans, Louisiana, returned a
verdict against the corporation and three other entities in a case
brought by a landowner claiming damage to his property. The property had
been leased by the landowner to a company that performed pipe cleaning
and storage services for customers, including the corporation. The jury
awarded the plaintiff $56 million in compensatory damages (90 percent to
be paid by the corporation) and $1 billion in punitive damages (all to be
paid by the corporation). The damage related to the presence of naturally
occurring radioactive material (NORM) on the site resulting from pipe
cleaning operations. The award has been affirmed by the trial court, and
the corporation is in the process of taking an appeal to the Louisiana
Fourth Circuit Court of Appeals. The ultimate outcome is not expected to
have a materially adverse effect upon the corporation's operations or
financial condition.
The U.S. Tax Court has decided the issue with respect to the pricing of
crude oil purchased from Saudi Arabia for the years 1979-1981 in favor of
the corporation. This decision is subject to appeal. Certain other issues
for the years 1979-1993 remain pending before the Tax Court. The ultimate
resolution of these issues is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
Claims for substantial amounts have been made against ExxonMobil and
certain of its consolidated subsidiaries in other pending lawsuits, the
outcome of which is not expected to have a materially adverse effect upon
the corporation's operations or financial condition.
The corporation and certain of its consolidated subsidiaries are directly
and indirectly contingently liable for amounts similar to those at the
prior year-end relating to guarantees for notes, loans and performance
under contracts, including guarantees of non-U.S. excise taxes and customs
duties of other companies, entered into as a normal business practice,
under reciprocal arrangements.
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all
of which are expected to be fulfilled with no adverse consequences
material to the corporation's operations or financial condition.
The operations and earnings of the corporation and its affiliates
throughout the world have been, and may in the future be, affected from
time to time in varying degree by political developments and laws and
regulations, such as forced divestiture of assets; restrictions on
production, imports and exports; price controls; tax increases and
retroactive tax claims; expropriation of property; cancellation of
contract rights and environmental regulations. Both the likelihood of such
occurrences and their overall effect upon the corporation vary greatly
from country to country and are not predictable.
-9-
8. Nonowner Changes in Shareholders' Equity
The total nonowner changes in shareholders' equity for the three months
ended June 30, 2001 and 2000 were $4,026 million and $3,746 million,
respectively. The total nonowner changes in shareholders' equity for the
six months ended June 30, 2001 and 2000 were $8,014 million and
$6,265 million, respectively. Total nonowner changes in shareholders'
equity include net income and the change in the cumulative foreign
exchange translation adjustment, the minimum pension liability adjustment
and the unrealized gains and losses on stock investments components of
shareholders' equity.
9. Earnings Per Share*
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2001 2000 2001 2000
_______ _______ _______ _______
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $ 4,285 $ 4,000 $ 9,245 $ 7,025
Weighted average number of common shares
outstanding (million of shares) 6,883 6,962 6,898 6,962
Net income per common share (dollars)
Before extraordinary gain $ 0.64 $ 0.58 $ 1.35 $ 1.02
Extraordinary gain, net of income tax 0.02 0.08 0.03 0.14
_______ _______ _______ _______
Net income $ 0.66 $ 0.66 $ 1.38 $ 1.16
======= ======= ======= =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $ 4,285 $ 4,000 $ 9,245 $ 7,025
Adjustment for assumed dilution 1 (3) (2) (10)
_______ _______ _______ _______
Income available to common shares $ 4,286 $ 3,997 $ 9,243 $ 7,015
======= ======= ======= =======
Weighted average number of common shares
outstanding (millions of shares) 6,883 6,962 6,898 6,962
Plus: Issued on assumed exercise of
stock options 80 87 76 85
_______ _______ _______ _______
Weighted average number of common shares
outstanding 6,963 7,049 6,974 7,047
======= ======= ======= =======
Net income per common share
- assuming dilution (dollars)
Before extraordinary gain $ 0.63 $ 0.57 $ 1.33 $ 1.00
Extraordinary gain, net of income tax 0.02 0.08 0.03 0.14
_______ _______ _______ ________
Net income $ 0.65 $ 0.65 $ 1.36 $ 1.14
======= ======= ======= =======
* Prior year amounts restated to reflect two-for-one stock split effective
June 20, 2001.
-10-
10. Disclosures about Segments and Related Information
Three Months Ended Six Months Ended
June 30, June 30,
__________________ __________________
2001 2000 2001 2000
________ ________ ________ ________
(millions of dollars)
EARNINGS AFTER INCOME TAX
Upstream
United States $ 1,111 $ 1,086 $ 2,739 $ 1,966
Non-U.S. 1,739 1,679 3,889 3,553
Downstream
United States 844 594 1,253 776
Non-U.S. 423 404 1,013 591
Chemicals
United States 149 238 194 419
Non-U.S. 168 124 323 263
All Other 26 405 49 442
________ ________ ________ ________
Corporate Total $ 4,460 $ 4,530 $ 9,460 $ 8,010
======== ======== ======== ========
Extraordinary gains included above:
Chemicals
United States $ 100 $ 0 $ 100 $ 0
Non-U.S. 75 0 75 0
All Other 0 530 40 985
________ ________ ________ ________
Corporate Total $ 175 $ 530 $ 215 $ 985
======== ======== ======== ========
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 1,415 $ 1,195 $ 3,701 $ 2,191
Non-U.S. 3,404 3,312 7,901 7,115
Downstream
United States 14,375 14,100 27,104 27,117
Non-U.S. 31,514 31,696 63,442 62,788
Chemicals
United States 1,841 2,113 3,806 4,082
Non-U.S. 2,354 2,302 4,799 4,472
All Other 198 218 424 444
________ ________ ________ ________
Corporate Total $ 55,101 $ 54,936 $111,177 $108,209
======== ======== ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 1,827 $ 1,467 $ 3,797 $ 2,948
Non-U.S. 3,350 3,700 6,777 6,918
Downstream
United States 1,092 1,099 2,384 1,972
Non-U.S. 4,813 2,459 8,845 4,877
Chemicals
United States 646 697 1,344 1,368
Non-U.S. 439 458 1,025 904
All Other 43 37 94 67
-11-
11. Condensed Consolidating Financial Information Related to Guaranteed
Securities Issued by Subsidiaries
Exxon Mobil Corporation has fully and unconditionally guaranteed the 6.0%
notes due 2005 and the 6.125% notes due 2008 of Exxon Capital Corporation
and the deferred interest debentures due 2012 and the debt securities due
2001-2011 of SeaRiver Maritime Financial Holdings, Inc. Exxon Capital
Corporation and SeaRiver Maritime Financial Holdings, Inc. are 100 percent
owned subsidiaries of Exxon Mobil Corporation.
The following condensed consolidating financial information is provided
for Exxon Mobil Corporation, as guarantor, and for Exxon Capital
Corporation and SeaRiver Maritime Financial Holdings, Inc., as issuers, as
an alternative to providing separate financial statements for the issuers.
The accounts of Exxon Mobil Corporation, Exxon Capital Corporation and
SeaRiver Maritime Financial Holdings, Inc., are presented utilizing the
equity method of accounting for investments in subsidiaries.
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ ____________ ____________
(millions of dollars)
Condensed consolidated statement of income for three months ended June 30, 2001
_______________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 9,477 $ - $ - $ 45,624 $ - $ 55,101
Earnings from equity
interests and other
revenue 3,687 - 11 960 (3,575) 1,083
Intercompany revenue 1,234 254 17 27,537 (29,042) -
________ ________ ________ ________ ________ ________
Total revenue 14,398 254 28 74,121 (32,617) 56,184
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 6,062 - - 45,691 (26,022) 25,731
Operating expenses 1,499 - 1 4,361 (1,235) 4,626
Selling, general and
administrative expenses 547 1 - 2,667 - 3,215
Depreciation and
depletion 388 1 - 1,482 - 1,871
Exploration expenses,
including dry holes 39 - - 227 - 266
Merger related expenses 36 - - 131 - 167
Interest expense 323 238 28 1,266 (1,785) 70
Excise taxes 650 - - 4,576 - 5,226
Other taxes and duties 3 - - 8,054 - 8,057
Income applicable to
minority and preferred
interests - - - 83 - 83
________ ________ ________ ________ ________ ________
Total costs and
other deductions 9,547 240 29 68,538 (29,042) 49,312
________ ________ ________ ________ ________ ________
Income before income taxes 4,851 14 (1) 5,583 (3,575) 6,872
Income taxes 566 6 (4) 2,019 - 2,587
________ ________ ________ ________ ________ ________
Income before
extraordinary item 4,285 8 3 3,564 (3,575) 4,285
Extraordinary gain, net
of income tax 175 - - (25) 25 175
________ ________ ________ ________ ________ ________
Net income $ 4,460 $ 8 $ 3 $ 3,539 $ (3,550) $ 4,460
======== ======== ======== ======== ======== ========
-12-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ ____________ ____________
(millions of dollars)
Condensed consolidated statement of income for three months ended June 30, 2000
_______________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 8,984 $ - $ - $ 45,952 $ - $ 54,936
Earnings from equity
interests and other
revenue 3,335 - 7 914 (3,236) 1,020
Intercompany revenue 681 228 21 20,460 (21,390) -
________ ________ ________ ________ ________ ________
Total revenue 13,000 228 28 67,326 (24,626) 55,956
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 5,314 - - 39,031 (18,005) 26,340
Operating expenses 1,469 - - 5,053 (2,066) 4,456
Selling, general and
administrative expenses 362 1 (1) 2,537 (69) 2,830
Depreciation and
depletion 353 1 - 1,585 - 1,939
Exploration expenses,
including dry holes 7 - - 159 - 166
Merger related expenses 117 - - 85 - 202
Interest expense 377 208 29 762 (1,250) 126
Excise taxes 677 - - 4,780 - 5,457
Other taxes and duties 2 - - 7,622 - 7,624
Income applicable to
minority and preferred
interests - - - 110 - 110
________ ________ ________ ________ ________ ________
Total costs and
other deductions 8,678 210 28 61,724 (21,390) 49,250
________ ________ ________ ________ ________ ________
Income before income taxes 4,322 18 - 5,602 (3,236) 6,706
Income taxes 322 5 (2) 2,381 - 2,706
________ ________ ________ ________ ________ ________
Income before
extraordinary item 4,000 13 2 3,221 (3,236) 4,000
Extraordinary gain, net
of income tax 530 - - 291 (291) 530
________ ________ ________ ________ ________ ________
Net income $ 4,530 $ 13 $ 2 $ 3,512 $ (3,527) $ 4,530
======== ======== ======== ======== ======== ========
Condensed consolidated statement of income for six months ended June 30, 2001
_____________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 18,733 $ - $ - $ 92,444 $ - $111,177
Earnings from equity
interests and other
revenue 8,039 - 27 2,023 (7,782) 2,307
Intercompany revenue 2,362 548 38 54,883 (57,831) -
________ ________ ________ ________ ________ ________
Total revenue 29,134 548 65 149,350 (65,613) 113,484
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 11,550 - - 91,093 (52,034) 50,609
Operating expenses 3,178 1 1 8,601 (2,166) 9,615
Selling, general and
administrative expenses 1,056 1 - 5,218 - 6,275
Depreciation and depletion 764 2 1 3,080 - 3,847
Exploration expenses,
including dry holes 83 - - 463 - 546
Merger related expenses 71 - - 217 - 288
Interest expense 703 513 59 2,503 (3,631) 147
Excise taxes 1,258 - - 9,262 - 10,520
Other taxes and duties 7 - - 16,243 - 16,250
Income applicable to
minority and preferred
interests - - - 295 - 295
________ ________ ________ ________ ________ ________
Total costs and
other deductions 18,670 517 61 136,975 (57,831) 98,392
________ ________ ________ ________ ________ ________
Income before income taxes 10,464 31 4 12,375 (7,782) 15,092
Income taxes 1,219 12 (8) 4,624 - 5,847
________ ________ ________ ________ ________ ________
Income before
extraordinary item 9,245 19 12 7,751 (7,782) 9,245
Extraordinary gain, net
of income tax 215 - - - - 215
________ ________ ________ ________ ________ ________
Net income $ 9,460 $ 19 $ 12 $ 7,751 $ (7,782) $ 9,460
======== ======== ======== ======== ======== ========
-13-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ ____________ ____________
(millions of dollars)
Condensed consolidated statement of income for six months ended June 30, 2000
_____________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 17,092 $ - $ - $ 91,117 $ - $108,209
Earnings from equity
interests and other
revenue 6,091 - 13 1,619 (5,895) 1,828
Intercompany revenue 1,139 407 38 39,886 (41,470) -
________ ________ ________ ________ ________ ________
Total revenue 24,322 407 51 132,622 (47,365) 110,037
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 9,903 - - 78,218 (36,817) 51,304
Operating expenses 2,765 - - 8,330 (2,354) 8,741
Selling, general and
administrative expenses 800 1 (3) 4,978 (69) 5,707
Depreciation and
depletion 689 2 1 3,375 - 4,067
Exploration expenses,
including dry holes 41 - - 335 - 376
Merger related expenses 314 - - 418 - 732
Interest expense 688 370 57 1,415 (2,230) 300
Excise taxes 1,405 - - 9,545 - 10,950
Other taxes and duties 5 - - 15,701 - 15,706
Income applicable to
minority and preferred
interests - - - 182 - 182
________ ________ ________ ________ ________ ________
Total costs and
other deductions 16,610 373 55 122,497 (41,470) 98,065
________ ________ ________ ________ ________ ________
Income before income taxes 7,712 34 (4) 10,125 (5,895) 11,972
Income taxes 687 9 (6) 4,257 - 4,947
________ ________ ________ ________ ________ ________
Income before
extraordinary item 7,025 25 2 5,868 (5,895) 7,025
Extraordinary gain, net
of income tax 985 - - 721 (721) 985
________ ________ ________ ________ ________ ________
Net income $ 8,010 $ 25 $ 2 $ 6,589 $ (6,616) $ 8,010
======== ======== ======== ======== ======== ========
-14-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ ____________ ____________
(millions of dollars)
Condensed consolidated balance sheet as of June 30, 2001
________________________________________________________
Cash and cash equivalents $ 3,294 $ - $ - $ 6,004 $ - $ 9,298
Notes and accounts
receivable - net 3,904 - - 17,505 - 21,409
Inventories 1,259 - - 7,136 - 8,395
Other current assets 168 - 9 2,043 - 2,220
________ ________ ________ ________ _________ ________
Total current
assets 8,625 - 9 32,688 - 41,322
Property, plant and
equipment - net 18,695 111 8 69,542 - 88,356
Investments and other
assets 85,976 - 584 317,348 (385,926) 17,982
Intercompany receivables 5,995 20,683 1,363 194,879 (222,920) -
________ ________ ________ ________ _________ ________
Total assets $119,291 $ 20,794 $ 1,964 $614,457 $(608,846) $147,660
======== ======== ======== ======== ========= ========
Notes and loans payables $ - $ 23 $ 7 $ 3,860 $ - $ 3,890
Accounts payable and
accrued liabilities 3,396 11 1 21,899 - 25,307
Income taxes payable 1,502 21 - 4,894 - 6,417
________ ________ ________ ________ _________ ________
Total current
liabilities 4,898 55 8 30,653 - 35,614
Long-term debt 1,234 266 972 4,817 - 7,289
Deferred income tax
liabilities 3,344 33 292 12,525 - 16,194
Other long-term liabilities 4,398 - - 11,191 - 15,589
Intercompany payables 32,443 19,559 383 170,535 (222,920) -
________ ________ ________ ________ _________ ________
Total liabilities 46,317 19,913 1,655 229,721 (222,920) 74,686
Earnings reinvested 93,006 75 (85) 44,160 (44,150) 93,006
Other shareholders'
equity (20,032) 806 394 340,576 (341,776) (20,032)
________ ________ ________ ________ _________ ________
Total shareholders'
equity 72,974 881 309 384,736 (385,926) 72,974
________ ________ ________ ________ _________ ________
Total liabilities
and shareholders'
equity $119,291 $ 20,794 $ 1,964 $614,457 $(608,846) $147,660
======== ======== ======== ======== ========= ========
Condensed consolidated balance sheet as of December 31, 2000
____________________________________________________________
Cash and cash equivalents $ 4,235 $ - $ - $ 2,845 $ - $ 7,080
Notes and accounts
receivable - net 4,427 - - 18,569 - 22,996
Inventories 1,102 - - 7,202 - 8,304
Other current assets 262 - 14 1,743 - 2,019
________ ________ ________ ________ _________ ________
Total current
assets 10,026 - 14 30,359 - 40,399
Property, plant and
equipment - net 18,559 113 9 71,148 - 89,829
Investments and other
assets 80,097 2 558 308,584 (370,469) 18,772
Intercompany receivables 9,339 19,124 1,355 212,790 (242,608) -
________ ________ ________ ________ _________ ________
Total assets $118,021 $ 19,239 $ 1,936 $622,881 $(613,077) $149,000
======== ======== ======== ======== ========= ========
Notes and loans payables $ 60 $ 74 $ 7 $ 6,020 $ - $ 6,161
Accounts payable and
accrued liabilities 3,918 8 2 22,827 - 26,755
Income taxes payable 902 9 - 4,364 - 5,275
________ ________ ________ ________ _________ ________
Total current
liabilities 4,880 91 9 33,211 - 38,191
Long-term debt 1,209 281 925 4,865 - 7,280
Deferred income tax
liabilities 3,334 31 292 12,785 - 16,442
Other long-term liabilities 4,428 9 - 11,893 - 16,330
Intercompany payables 33,413 17,965 412 190,818 (242,608) -
________ ________ ________ ________ _________ ________
Total liabilities 47,264 18,377 1,638 253,572 (242,608) 78,243
Earnings reinvested 86,652 56 (96) 36,946 (36,906) 86,652
Other shareholders'
equity (15,895) 806 394 332,363 (333,563) (15,895)
________ ________ ________ ________ _________ ________
Total shareholders'
equity 70,757 862 298 369,309 (370,469) 70,757
________ ________ ________ ________ _________ ________
Total liabilities
and shareholders'
equity $118,021 $ 19,239 $ 1,936 $622,881 $(613,077) $149,000
======== ======== ======== ======== ========= ========
-15-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ ____________ ____________
(millions of dollars)
Condensed consolidated statement of cash flows for six months ended June 30, 2001
_________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 3,214 $ 31 $ 37 $ 11,446 $ (484) $ 14,244
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,040) - - (3,330) - (4,370)
Sales of long-term assets 514 - - 231 - 745
Net intercompany
investing 2,268 (1,559) (8) (680) (21) -
All other investing, net (23) - - 334 - 311
________ ________ ________ ________ ________ ________
Net cash provided by/
(used in) investing
activities 1,719 (1,559) (8) (3,445) (21) (3,314)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 341 - 341
Reductions in long-term
debt (1) (15) - (341) - (357)
Additions/(reductions)
in short-term debt
- net (60) (51) - (2,258) - (2,369)
Cash dividends (3,037) - - (484) 484 (3,037)
Net ExxonMobil shares
sold/(acquired) (2,776) - - - - (2,776)
Net intercompany
financing activity - 1,594 (29) (1,586) 21 -
All other financing, net - - - (368) - (368)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (5,874) 1,528 (29) (4,696) 505 (8,566)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - (146) - (146)
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (941) $ - $ - $ 3,159 $ - $ 2,218
======== ======== ======== ======== ======== ========
Condensed consolidated statement of cash flows for six months ended June 30, 2000
_________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 4,692 $ 33 $ 48 $ 6,902 $ (221) $ 11,454
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (756) - - (3,045) - (3,801)
Sales of long-term assets 1,161 - - 2,048 - 3,209
Net intercompany
investing 179 (4,116) (46) 3,951 32 -
All other investing, net 93 - - 606 - 699
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) investing
activities 677 (4,116) (46) 3,560 32 107
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 143 - 143
Reductions in long-term
debt - - - (280) - (280)
Additions/(reductions)
in short-term debt
- net (978) (6) - (3,194) - (4,178)
Cash dividends (3,063) - - (221) 221 (3,063)
Net ExxonMobil shares
sold/(acquired) 195 - - - - 195
Net intercompany
financing activity - 4,089 (2) (4,055) (32) -
All other financing, net - - - (203) - (203)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (3,846) 4,083 (2) (7,810) 189 (7,386)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - (50) - (50)
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ 1,523 $ - $ - $ 2,602 $ - $ 4,125
======== ======== ======== ======== ======== ========
-16-
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
______________ ________________
2001 2000 2001 2000
_____ ____ ____ ____
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Upstream
United States $ 1,111 $ 1,086 $ 2,739 $ 1,966
Non-U.S. 1,739 1,679 3,889 3,553
Downstream
United States 844 594 1,253 776
Non-U.S. 423 404 1,013 591
Chemicals
United States 149 238 194 419
Non-U.S. 168 124 323 263
Other operations 128 127 269 246
Corporate and financing (7) (102) (75) (314)
Merger expenses (95) (150) (185) (475)
Gain from required asset divestitures 0 530 40 985
_______ _______ _______ _______
NET INCOME $ 4,460 $ 4,530 $ 9,460 $ 8,010
======= ======= ======= =======
Net income per common share* $ 0.66 $ 0.66 $ 1.38 $ 1.16
Net income per common share
- assuming dilution* $ 0.65 $ 0.65 $ 1.36 $ 1.14
Merger effects and special items
________________________________
Chemicals
United States $ 100 $ 0 $ 100 $ 0
Non-U.S. 75 0 75 0
Merger expenses (95) (150) (185) (475)
Gain from required asset divestitures 0 530 40 985
_______ _______ _______ _______
TOTAL $ 80 $ 380 $ 30 $ 510
======= ======= ======= =======
Earnings excluding merger effects and special items
___________________________________________________
Upstream
United States $ 1,111 $ 1,086 $ 2,739 $ 1,966
Non-U.S. 1,739 1,679 3,889 3,553
Downstream
United States 844 594 1,253 776
Non-U.S. 423 404 1,013 591
Chemicals
United States 49 238 94 419
Non-U.S. 93 124 248 263
Other operations 128 127 269 246
Corporate and financing (7) (102) (75) (314)
_______ _______ _______ _______
TOTAL $ 4,380 $ 4,150 $ 9,430 $ 7,500
======= ======= ======= =======
Earnings per common share* $ 0.65 $ 0.61 $ 1.38 $ 1.09
Earnings per common share
- assuming dilution* $ 0.64 $ 0.60 $ 1.36 $ 1.07
* Prior year amounts restated to reflect two-for-one stock split effective
June 20, 2001.
-17-
SECOND QUARTER 2001 COMPARED WITH SECOND QUARTER 2000
Exxon Mobil Corporation reported record second quarter results. Excluding
merger effects and special items, estimated second quarter 2001 earnings of
$4,380 million ($0.64 per share) increased $230 million (6 percent) from the
second quarter of 2000. Including merger effects and special items, estimated
second quarter net income of $4,460 million ($0.65 per share) was $70 million
lower, primarily reflecting the absence of last year's gains on asset
divestments required as a condition of the merger. These per share amounts
reflect the two-for-one stock split effective June 20, 2001. Included in this
year's second quarter net income were merger expenses and special items netting
to a favorable $80 million, while last year's second quarter included net
favorable merger effects of $380 million.
Revenue for the second quarter of 2001 totaled $56,184 million compared with
$55,956 million in 2000. Capital and exploration expenditures of $2,834 million
in the second quarter of 2001 were up $410 million, or 17 percent, compared
with $2,424 million last year and were 13 percent higher than in the first
quarter.
The improvement in earnings reflected higher U.S. natural gas realizations and
refining margins, both of which were very strong early in the second quarter
but declined significantly as the quarter progressed. The decline in these key
earnings drivers along with crude oil prices has continued into the third
quarter. Upstream volumes were higher excluding the effect of suspending
natural gas production operations in the Aceh province in Indonesia due to
security concerns. Capital expenditures were higher in line with full-year
spending plans and company-wide operating cost efficiencies continued to
increase.
Upstream earnings were $2,850 million, an increase of $85 million from last
year, and represent a second quarter record. The higher earnings were driven by
higher average natural gas realizations, particularly in the U.S. This was
partly offset by lower average crude oil realizations, especially among heavier
crude grades, and higher exploration expenses in future growth areas. Liquids
production increased 1 percent with growth in West Africa, Kazakhstan and
Canada. Natural gas volumes increased by about 4 percent absent the impact of
the Aceh shutdown.
Downstream earnings of $1,267 million were also a second quarter record. These
results were $269 million, or 27 percent higher than the same period a year
ago, reflecting stronger refining and marketing margins, particularly in the
U.S. Although average U.S. refining margins were well above last year's levels,
there was significant margin erosion towards the end of the quarter. Refining
margins remained weak in Asia-Pacific. Sales volumes were flat when adjusted
for the impact of U.S. businesses divested as a regulatory requirement of the
merger.
Chemicals earnings of $317 million included $175 million of net gains on asset
management activities. Absent this special item, chemicals earnings of
$142 million declined $220 million due to a significant deterioration in
margins, particularly in the U.S., as higher natural gas prices drove up
feedstock costs while product realizations declined. U.S. volumes decreased
6 percent reflecting weak economic conditions in the manufacturing sector.
Outside the U.S., higher volumes were offset by lower margins and higher
expenses associated with new capacity additions. Earnings from other operations
were essentially unchanged from last year as higher volumes and coal
realizations were offset by lower copper prices.
-18-
Second quarter net income included merger expenses of $95 million ($167 million
before tax) and $175 million of special gains related to asset management
activities in the chemicals segment.
In the second quarter, ExxonMobil continued its active investment program,
spending $2,834 million on capital and exploration projects, compared with
$2,424 million last year, reflecting higher spending in both the upstream and
downstream.
During the quarter, the Corporation announced a two-for-one stock split and an
additional two cents per share dividend (one cent per share on a post-split
basis), both with a record date of June 20, 2001.
OTHER COMMENTS ON SECOND QUARTER COMPARISON
Upstream earnings benefited from higher natural gas realizations, up 25 percent
from last year. The higher realizations were driven by higher U.S. gas prices,
although these steadily declined during the quarter. Lower crude oil
realizations and higher exploration expenses in growth areas were a partial
offset.
Liquids production of 2,533 kbd (thousands of barrels per day) increased from
2,514 kbd in the second quarter of 2000. This increase reflected higher
production in Equatorial Guinea, Nigeria, Kazakhstan and Canadian heavy oil
operations, partly offset by natural field declines in mature areas. Worldwide
gas production was up about 4 percent, primarily reflecting higher production
in Europe, Australia, Canada and Qatar, before including the effect of
suspending operations at the Arun facility in the Aceh province in Indonesia
due to security concerns. On a year to year basis, including the effects of
Arun, second quarter natural gas production was 9,131 mcfd (millions of cubic
feet per day) in 2001, compared with 9,247 mcfd last year.
Earnings from U.S. upstream operations were $1,111 million, an increase of
$25 million from the prior year. Upstream earnings outside the U.S. were
$1,739 million, an increase of $60 million.
Downstream results improved by 27 percent from the second quarter of 2000
primarily reflecting stronger refining margins in the U.S. Asia-Pacific margins
remained depressed. Refining margins in all regions declined throughout the
quarter, particularly in the U.S., while improving marketing margins provided a
partial offset. Petroleum product sales of 7,933 kbd decreased from 8,035 kbd
in the second quarter of 2000. Absent the volumes from operations divested as a
regulatory requirement of the merger, sales were flat.
U.S. downstream earnings were $844 million, up $250 million. Non-U.S.
downstream earnings of $423 million were $19 million higher than last year.
Chemicals earnings, excluding a $175 million net gain on asset management
activities, were $142 million, down $220 million from the same quarter a year
ago as higher feedstock costs and energy costs, particularly in the U.S., put
significant pressure on commodity margins. Prime product sales volumes of
6,418 kt (thousands of metric tons) were 3 percent below last year's level,
reflecting a difficult U.S. market, partly offset by higher sales outside of
the U.S. which were helped by recent capacity additions.
-19-
Earnings from other operations, including coal, minerals and power, totaled
$128 million, compared with $127 million in the second quarter of 2000. Higher
volumes from continuing operations and higher coal realizations were offset by
lower copper prices.
Corporate and financing expenses of $7 million compared with $102 million last
year, reflecting lower net interest costs due to lower debt levels and higher
cash balances, and favorable foreign exchange effects.
During the period, the company's operating segments continued to benefit from
reductions in the tax rates of several countries and favorable resolution of
tax-related issues.
Second quarter net income included $95 million of after tax merger expenses and
special gains of $175 million from asset management activities in chemicals.
During the second quarter of 2001, Exxon Mobil Corporation purchased
34.8 million shares of its common stock for the treasury at a gross cost of
$1,516 million. These purchases were to offset shares issued in conjunction
with company benefit plans and programs and to reduce the number of shares
outstanding. Shares outstanding were reduced from 6,900 million at the end of
the first quarter of 2001 to 6,871 million at the end of the second quarter.
Purchases may be made in both the open market and through negotiated
transactions, and may be discontinued at any time. The number of common shares
reflect the two-for-one stock split which had a record date of June 20, 2001.
FIRST SIX MONTHS 2001 COMPARED WITH FIRST SIX MONTHS 2000
Excluding merger effects and special items, record first half 2001 earnings of
$9,430 million ($1.36 per share) increased $1,930 million, or 26 percent from
the first half of last year. Including merger effects and special items, first
half net income of $9,460 million ($1.36 per share) increased $1,450 million.
Included in this year's first half net income was a net favorable $30 million
in merger effects and special items, while last year's first half included net
favorable merger effects of $510 million.
Upstream earnings increased primarily due to higher natural gas realizations,
particularly in the U.S., which reached historical highs at the beginning of
2001 but have eased over the first six months, ending the period below prior
year levels. The impact of higher average gas realizations was slightly offset
by lower crude oil realizations and higher exploration expenses in future
growth areas. Liquids production of 2,574 kbd increased 16 kbd over the first
half of 2000, reflecting higher production in West Africa, Kazakhstan and
Canada, partly offset by natural field declines in mature areas and the
decision early in the year to reduce gas plant processing to maximize natural
gas sales. Absent the effect of suspending operations in the Aceh province of
Indonesia due to security concerns, worldwide gas production was up about
3 percent, with increases in Europe, Australia, Canada and Qatar. Including the
impact of lower Indonesia volumes, first half 2001 worldwide natural gas
production of 10,612 mcfd compared with 10,696 mcfd in 2000.
Earnings from U.S. upstream operations for the first half of 2001 were
$2,739 million, an increase of $773 million. Earnings outside the U.S. were
$3,889 million, $336 million higher than last year.
-20-
Downstream earnings improved by 66 percent versus the first half of 2000,
reflecting higher refining margins in the U.S., higher marketing margins,
particularly outside the U.S., and improved refinery operations. Petroleum
product sales of 7,959 kbd compared with 7,916 kbd in the first half of 2000.
Excluding the effect of the required divestments, volumes were up 2 percent.
U.S. downstream earnings were $1,253 million, up $477 million. Earnings outside
the U.S. of $1,013 million were $422 million higher than last year.
First half chemicals earnings were $517 million, including $175 million of net
gains on asset management activities. Absent this special item, chemicals
earnings were $342 million, $340 million lower than last year. Most of the
reduction occurred in the U.S. as higher feedstock and energy costs put
significant pressure on commodity margins. Prime product sales volumes of
12,951 kt were slightly below last year's level. Lower sales in the U.S.,
reflecting reduced industry demand, were largely offset by higher sales outside
the U.S.
Earnings from other operations totaled $269 million, an increase of $23 million
reflecting higher volumes from continuing operations and higher coal
realizations, partly offset by lower copper prices. Corporate and financing
expenses decreased $239 million to $75 million, reflecting lower net interest
costs due to lower debt levels and higher cash balances, along with favorable
foreign exchange and tax effects.
MERGER OF EXXON CORPORATION AND MOBIL CORPORATION
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation merged
with Mobil Corporation so that Mobil became a wholly-owned subsidiary of Exxon
(the "Merger"). At the same time, Exxon changed its name to Exxon Mobil
Corporation. The Merger was accounted for as a pooling of interests.
In the second quarter of 2001, in association with the Merger, $167 million of
before tax costs ($95 million after tax) were recorded as merger related
expenses. In the second quarter of 2000, merger related expenses were
$202 million before tax ($150 million after tax). For the six months ended
June 30, 2001 merger related expenses totaled $288 million before tax
($185 million after tax). For the six months ended June 30, 2000, merger
related expenses totaled $732 million ($475 million after tax).
The severance reserve balance at the end of the second quarter of 2001 is
expected to be expended in 2001 and 2002. The following table summarizes the
activity in the severance reserve for the six months ended June 30, 2001:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
317 67 170 214
Merger related expenses are expected to grow to approximately $2.5 billion
before tax on a cumulative basis by 2002. Merger synergy initiatives, including
cost savings, efficiency gains, and revenue enhancements, are on track.
-21-
Certain property -- primarily refining, marketing, pipeline and natural gas
distribution assets -- were divested as a condition of the regulatory approval
of the Merger by the U.S. Federal Trade Commission and the European Commission.
For the six months ended June 30, 2001, the net after tax gain from required
asset divestitures, all in the first quarter, totaled $40 million (including an
income tax credit of $15 million), or $0.01 per common share. Second quarter
2000 included a net after tax gain of $530 million (net of $75 million of
income taxes), or $0.08 per common share, from required asset divestments. For
the six months ended June 30, 2000, the net after tax gain from required asset
divestitures totaled $985 million (net of $624 million of income taxes), or
$0.14 per common share. These merger related net gains from required asset
divestitures have been reported as extraordinary items in accordance with
accounting requirements for business combinations accounted for as a pooling of
interests.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $10,930 million in the
first six months of 2001 versus $11,561 million in the same period last year.
Operating activities provided net cash of $14,244 million, an increase of
$2,790 million from the prior year, influenced by higher net income. Investing
activities used net cash of $3,314 million, compared to cash provided of
$107 million in the prior year, reflecting higher additions to property, plant,
and equipment and the absence of proceeds from the asset divestments that were
required as a condition of regulatory approval of the merger.
Net cash used in financing activities was $8,566 million in the first half of
2001 versus $7,386 million in the same period last year. The increase was
driven by purchases of shares of ExxonMobil common stock, partially offset by
lower debt reductions in the current year period versus last year.
During the first half of 2001, Exxon Mobil Corporation purchased 69.7 million
shares of its common stock for the treasury at a gross cost of $2,958 million.
These purchases were to offset shares issued in conjunction with company
benefit plans and programs and to reduce the number of shares outstanding.
Purchases may be made in both the open market and through negotiated
transactions, and may be discontinued at any time.
Revenue for the first half of 2001 totaled $113,484 million compared to
$110,037 million in the first half of 2000.
Capital and exploration expenditures were $5,350 million in the first half 2001
compared to $4,648 million in last year's first half. Given the breadth of
ExxonMobil's portfolio of attractive growth opportunities, capital and
exploration investments are expected to increase by 15 to 20 percent in 2001
versus 2000 and another 10 percent in 2002.
Total debt of $11.2 billion at June 30, 2001 decreased $2.3 billion from
year-end 2000. The corporation's debt to total capital ratio was 12.8 percent
at the end of the first half of 2001, compared to 15.4 percent at year-end
2000.
Although the corporation issues long-term debt from time to time and maintains
a revolving commercial paper program, internally generated funds cover the
majority of its financial requirements.
-22-
Litigation and other contingencies are discussed in note 7 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future operating
results or future financial condition.
The corporation, as part of its ongoing asset management program, continues to
evaluate its mix of assets for potential upgrade. Because of the ongoing nature
of this program, dispositions will continue to be made from time to time,
within the constraints of pooling of interests accounting, which will result in
either gains or losses.
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future events
or conditions are forward-looking statements. Actual future results, including
merger related expenses; synergy benefits from the merger (including cost
savings, efficiency gains, and revenue enhancements); financing sources; the
resolution of contingencies; the effect of changes in prices, interest rates
and other market conditions; and environmental and capital expenditures could
differ materially depending on a number of factors. These factors include
management's ability to implement merger plans successfully and on schedule;
the outcome of commercial negotiations; changes in the supply of and demand for
crude oil, natural gas and petroleum and petrochemical products; and other
factors discussed above and discussed under the caption "Factors Affecting
Future Results" in Item 1 of ExxonMobil's 2000 Form 10-K.
-23-
EXXON MOBIL CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the six months ended June 30, 2001
does not differ materially from that discussed under Item 7A of the
registrant's Annual Report on Form 10-K for 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 21, 2001, the Puerto Rican Environmental Quality Board
("EQB")in Case No. OA-99-TE-102 issued an order alleging that Esso
Standard Oil Company has failed to perform its obligations for
investigation and remediation of alleged hydrocarbon contamination
associated with underground storage tanks at the La Vega Esso Station,
Barranquitas, Puerto Rico, in violation of the Puerto Rico
Environmental Public Policy Act, Act No. 9 of June 18, 1970, as
amended, 12 L.P.R.A. Sections 1121 et seq., and Underground Storage
Tank Control Regulation and Water Quality Standards Regulation
promulgated pursuant thereto. The EQB seeks a penalty of $75,960,000.
On July 10, 2001, Mobil Oil Corporation was served by the State of New
York in a case captioned State of New York v. Mobil Oil Corporation,
__________________________________________
et al. The case is pending in the New York State Supreme Court, 3rd
_____
District, Albany County, New York, Cause No. L-00054-01. The State
alleges violations of Article 12 of the New York Navigation Law in
connection with an underground storage tank clean-up in the City of
Liberty, New York. In addition to seeking approximately $1.1 million
in compensatory damages, the State is seeking statutory penalties of
up to $25,000 for each offense for each day of violation.
Refer to the relevant portions of Note 7 on pages 8 and 9 of this
Quarterly Report on Form 10-Q for further information on legal
proceedings.
-24-
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 30, 2001, the following
proposals were voted upon. Votes are presented on a pre-split basis
since the voting was before the June 20, 2001 effective date of the
two-for-one stock split. Percentages are based on the total of the
shares voted for and against.
Concerning Election of Directors
Votes Votes
Nominees for Directors Cast For Withheld
______________________ ________ ________
Michael J. Boskin 2,809,088,501 28,452,094
Rene Dahan 2,810,220,563 27,320,032
William T. Esrey 2,809,687,874 27,852,721
Donald V. Fites 2,807,295,334 30,245,261
Charles A. Heimbold, Jr. 2,808,130,956 29,409,639
James R. Houghton 2,809,407,888 28,132,707
William R. Howell 2,808,140,103 29,400,492
Helene L. Kaplan 2,751,863,231 85,677,364
Reatha Clark King 2,809,122,376 28,418,219
Philip E. Lippincott 2,809,170,486 28,370,109
Harry J. Longwell 2,809,550,007 27,990,588
Marilyn Carlson Nelson 2,809,489,818 28,050,777
Lee R. Raymond 2,808,419,961 29,120,634
Eugene A. Renna 2,809,526,746 28,013,849
Walter V. Shipley 2,808,975,981 28,564,614
Concerning Ratification of Independent Auditors
Votes Cast For: 2,761,310,680 98.0%
Votes Cast Against: 57,087,321 2.0%
Abstentions: 19,142,592
Broker Non-Votes: 2
Concerning Government Service
Votes Cast For: 101,107,058 4.4%
Votes Cast Against: 2,182,609,772 95.6%
Abstentions: 63,359,197
Broker Non-Votes: 490,464,568
Concerning Two Director Nominees
Votes Cast For: 96,562,700 4.2%
Votes Cast Against: 2,195,209,686 95.8%
Abstentions: 55,303,641
Broker Non-Votes: 490,464,568
-25-
Concerning Policy on Board Diversity
Votes Cast For: 214,825,773 9.6%
Votes Cast Against: 2,019,283,526 90.4%
Abstentions: 112,966,728
Broker Non-Votes: 490,464,568
Concerning Amendment of EEO Policy
Votes Cast For: 290,271,760 13.0%
Votes Cast Against: 1,950,194,247 87.0%
Abstentions: 106,610,020
Broker Non-Votes: 490,464,568
Concerning Executive Pay and Downsizing
Votes Cast For: 213,366,313 9.3%
Votes Cast Against: 2,069,583,496 90.7%
Abstentions: 64,126,218
Broker Non-Votes: 490,464,568
Concerning Executive Compensation Factors
Votes Cast For: 215,915,010 9.5%
Votes Cast Against: 2,050,034,422 90.5%
Abstentions: 81,126,595
Broker Non-Votes: 490,464,568
Concerning Additional Report on ANWR Drilling
Votes Cast For: 215,394,152 9.6%
Votes Cast Against: 2,035,008,315 90.4%
Abstentions: 96,673,560
Broker Non-Votes: 490,464,568
Concerning Renewable Energy Sources
Votes Cast For: 199,035,075 8.9%
Votes Cast Against: 2,037,646,752 91.1%
Abstentions: 110,394,200
Broker Non-Votes: 490,464,568
See also pages 3 through 9 and pages 26 through 42 of the registrant's
definitive proxy statement dated April 18, 2001.
-26-
Item 5. Other Information
This selected financial data from Item 6 of the registrant's Annual Report on
Form 10-K for 2000 has been restated to reflect the two-for-one stock split
effective June 20, 2001. Restated data elements are marked with an asterisk (*).
Years Ended December 31,
________________________________________________
2000 1999 1998 1997 1996
____ ____ ____ ____ ____
(millions of dollars, except per share amounts)
Sales and other operating
revenue, including excise
taxes $228,439 $182,529 $165,627 $197,732 $210,038
Net income
Before extraordinary item
and cumulative effect of
accounting change $ 15,990 $ 7,910 $ 8,144 $ 11,732 $ 10,474
Extraordinary gain from
required asset
divestitures, net of
income tax $ 1,730 $ - $ - $ - $ -
Cumulative effect of
accounting change $ - $ - $ (70) $ - $ -
________ ________ ________ ________ ________
Net income $ 17,720 $ 7,910 $ 8,074 $ 11,732 $ 10,474
Net income - per common share*
Before extraordinary item
and cumulative effect of
accounting change $ 2.30 $ 1.14 $ 1.16 $ 1.66 $ 1.48
Extraordinary gain, net
of income tax $ 0.25 $ - $ - $ - $ -
Cumulative effect of
accounting change $ - $ - $ (0.01) $ - $ -
________ ________ ________ ________ ________
Net income $ 2.55 $ 1.14 $ 1.15 $ 1.66 $ 1.48
Net income per common share
- assuming dilution*
Before extraordinary item
and cumulative effect of
accounting change $ 2.27 $ 1.12 $ 1.15 $ 1.64 $ 1.46
Extraordinary gain, net
of income tax $ 0.25 $ - $ - $ - $ -
Cumulative effect of
accounting change $ - $ - $ (0.01) $ - $ -
________ ________ ________ ________ ________
Net income $ 2.52 $ 1.12 $ 1.14 $ 1.64 $ 1.46
Cash dividends per common
share* $ 0.88 $ 0.84 $ 0.83 $ 0.81 $ 0.77
Total assets $149,000 $144,521 $139,335 $143,751 $146,939
Long-term debt $ 7,280 $ 8,402 $ 8,532 $ 10,868 $ 11,986
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 3(i) - Restated Certificate of Incorporation, as restated
November 30, 1999, and as further amended effective
June 20, 2001.
b) Reports on Form 8-K
On April 2, 2001 the registrant filed a regulation FD disclosure in a
Current Report on Form 8-K listing informational reports provided by
the company and announcing a presentation to the investment community
and media and the ExxonMobil annual meeting of shareholders.
-27-
EXXON MOBIL CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXXON MOBIL CORPORATION
Date: August 13, 2001 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
-28-
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
INDEX TO EXHIBITS
3(i). Restated Certificate of Incorporation, as restated November 30, 1999,
and as further amended effective June 20, 2001.
-29-
EXHIBIT 3(i)
RESTATED
CERTIFICATE OF INCORPORATION
of
EXXON MOBIL CORPORATION
(As Amended Effective June 20, 2001)
Exxon Mobil Corporation, a corporation organized and existing under
the laws of the State of New Jersey, restates and integrates its Certificate of
Incorporation, as heretofore restated and amended, to read in full as herein
set forth:
FIRST. The name of the corporation is:
EXXON MOBIL CORPORATION
SECOND. The address of the corporation's registered office is
830 Bear Tavern Road, West Trenton, New Jersey 08628-1020. The name of the
Corporation's registered agent at such address, upon whom process against the
corporation may be served, is Corporation Service Company.
THIRD. The purposes for which the corporation is organized are
to engage in any or all activities within the purposes for which corporations
now or at any time hereafter may be organized under the New Jersey Business
Corporation Act and under all amendments and supplements thereto, or any
revision thereof or any statute enacted to take the place thereof, including
but not limited to the following:
(1) To do all kinds of mining, manufacturing and trading
business; transporting goods and merchandise by land or water in any manner; to
buy, sell, lease and improve lands; to build houses, structures, vessels, cars,
wharves, docks and piers; to lay and operate pipelines; to erect and operate
telegraph and telephone lines and lines for conducting electricity; to enter
into and carry out contracts of every kind pertaining to its business; to
acquire, use, sell and grant licenses under patent rights; to purchase or
otherwise acquire, hold, sell, assign and transfer shares of capital stock and
bonds or other evidences of indebtedness of corporations, and to exercise all
the privileges of ownership including voting upon the securities so held; to
carry on its business and have offices and agencies therefor in all parts of
the world; and to hold, purchase, mortgage and convey real estate and personal
property within or without the State of New Jersey;
(2) To engage in any activities encompassed within this Article
Third directly or through a subsidiary or subsidiaries and to take any and all
acts deemed appropriate to promote the interests of such subsidiary or
subsidiaries, including, without limiting the foregoing, the following: making
contracts and incurring liabilities for the benefit of such subsidiary or
subsidiaries; transferring or causing to be transferred to any such subsidiary
or subsidiaries assets of this corporation; guaranteeing dividends on any
shares of the capital stock of any such subsidiary; guaranteeing the principal
and interest or either of the bonds, debentures, notes or other evidences of
indebtedness issued or obligations incurred by any such subsidiary or
subsidiaries; securing said bonds, debentures, notes or other evidences of
indebtedness so guaranteed by mortgage of or security interest in the property
of this corporation; and contracting that said bonds, debentures, notes or
other evidences of indebtedness so guaranteed, whether secured or not, may be
convertible into shares of this corporation upon such terms and conditions as
may be approved by the board of directors;
(3) To guarantee the bonds, debentures, notes or other evidences
of indebtedness issued, or obligations incurred, by any corporation,
partnership, limited partnership, joint venture or other association in which
this corporation at the time such guarantee is made has a substantial interest
or where such guarantee is otherwise in furtherance of the interests of this
corporation; and
(4) To exercise as a purpose or purposes each power granted to
corporations by the New Jersey Business Corporation Act or by any amendment or
supplement thereto or by any statute enacted to take the place thereof, insofar
as such powers authorize or may hereafter authorize corporations to engage in
activities.
FOURTH. The aggregate number of shares which the corporation
shall have authority to issue is nine billion two hundred million
(9,200,000,000) shares, divided into two hundred million (200,000,000) shares
of preferred stock without par value and nine billion (9,000,000,000) shares
of common stock without par value.
(1) The board of directors of the corporation is authorized at
any time or from time to time (i) to divide the shares of preferred stock into
classes and into series within any class or classes of preferred stock; (ii) to
determine for any such class or series its designation, relative rights,
preferences and limitations; (iii) to determine the number of shares in any
such class or series (including a determination that such class or series shall
consist of a single share); (iv) to increase the number of shares of any such
class or series previously determined by it and to decrease such previously
determined number of shares to a number not less than that of the shares of
such class or series then outstanding; (v) to change the designation or number
of shares, or the relative rights, preferences and limitations of the shares,
of any theretofore established class or series no shares of which have been
issued; and (vi) to cause to be executed and filed without further approval of
the shareholders such amendment or amendments to the Restated Certificate of
Incorporation as may be required in order to accomplish any of the foregoing.
In particular, but without limiting the generality of the foregoing, the board
of directors is authorized to determine with respect to the shares of any class
or series of preferred stock:
(a) whether the holders thereof shall be entitled to
cumulative, non-cumulative or partially cumulative dividends or to no dividends
and, with respect to shares entitled to dividends, the dividend rate or rates
(which may be fixed or variable and may be made dependent upon facts
ascertainable outside of the Restated Certificate of Incorporation) and any
other terms and conditions relating to such dividends;
(b) whether the holders thereof shall be entitled to
receive dividends payable on a parity with or subordinate or in preference to
the dividends payable on any other class or series of shares of the
corporation;
2
(c) whether, and if so to what extent and upon what terms
and conditions, the holders thereof shall be entitled to preferential rights
upon the liquidation of, or upon any distribution of the assets of, the
corporation;
(d) whether, and if so upon what terms and conditions,
such shares shall be convertible into other securities;
(e) whether, and if so upon what terms and conditions,
such shares shall be redeemable;
(f) the terms and amount of any sinking fund provided for
the purchase or redemption of such shares; and
(g) the voting rights, if any, to be enjoyed by such
shares and the terms and conditions for the exercise thereof.
(2) Each holder of shares of common stock shall be entitled to
one vote for each share of common stock held of record by such holder on all
matters on which holders of shares of common stock are entitled to vote.
(3) No holder of any shares of common or preferred stock of the
corporation 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 unissued or treasury shares, or any
option rights, or securities having conversion or option rights, of the
corporation now or hereafter authorized.
(4) The relative voting, dividend, liquidation and other rights,
preferences and limitations of the shares of the class of preferred stock
designated "Class A Preferred Stock" and the class of preferred stock
designated "Class B Preferred Stock" are as set forth in this Article FOURTH
and in Exhibit A to this Restated Certificate of Incorporation.
FIFTH. The following is a list of the names and residences of
the original shareholders, and of the number of shares held by each:
H.M. Flagler of New York City, One share.
Paul Babcock, Jr. of Jersey City, One share.
James McGee of Plainfield, New Jersey, One share.
Thos. C. Bushnell of Morristown, New Jersey, One share.
John D. Rockefeller of Cleveland, Ohio, }
Wm. Rockefeller of New York City, }
J.A. Bostwick of New York City, }
John D. Archbold of New York City, }
O.H. Payne of Cleveland, Ohio, }
Wm. G. Warden of Philadelphia, Pa., }
Benj. Brewster of New York City, }
Chas. Pratt of Brooklyn, N.Y., }
and H.M. Flagler of New York City. }
3
Trustees of Standard Oil Trust, twenty-nine thousand nine hundred
and ninety-six shares (29,996), of which twenty-one thousand seven
hundred and twenty-four shares (21,724) were issued for property
purchased and necessary for the business of this corporation.
SIXTH. The number of directors of the corporation as of
November 30, 1999 is 19 and their names and business office addresses are:
4
Dr. Michael J. Boskin Mr. Phillip E. Lippincott
Hoover Institution P.O. Box 2159
Stanford University Park City, Utah 84060
Stanford, California 94305-6010
Mr. Harry J. Longwell
Mr. Rene Dahan 5959 Las Colinas Boulevard
5959 Las Colinas Boulevard Irving, Texas 75039-2298
Irving, Texas 75039-2298
Mrs. Marilyn Carlson Nelson
Mr. William T. Esrey Carlson Companies, Inc.
Sprint Corporation 1405 Xenium Lane North
2330 Shawnee Mission Pkwy. Plymouth, Minnesota 55441
Westwood, Kansas 66205
Mr. J. Richard Munro
Mr. Donald V. Fites Time Warner Cable
100 N. E. Adams Street 290 Harbor Drive
Peoria, IL 61629-9210 Stamford, CT 06902
Mr. Jess Hay Mr. Lucio A. Noto
Chase Tower 5959 Las Colinas Boulevard
2200 Ross Avenue Irving, TX 75039-2298
Dallas, Texas 75201-2764
Mr. Lee R. Raymond
Mr. Charles A. Heimbold, Jr. 5959 Las Colinas Boulevard
Bristol-Myers Squibb Company Irving, Texas 75039-2298
345 Park Avenue
New York, NY 10154-0037 Mr. Eugene A. Renna
5959 Las Colinas Boulevard
Mr. James R. Houghton Irving, Texas 75039-2298
80 East Market Street
Corning, New York 14830 Mr. Walter V. Shipley
The Chase Manhattan Corporation
Mr. William R. Howell 270 Park Avenue
6501 Legacy Drive New York, New York 10017-2070
Plano, Texas 75024-3698
Mr. Robert E. Wilhelm
Mrs. Helene L. Kaplan 5959 Las Colinas Boulevard
Skadden, Arps, Slate, Meagher & Flom Irving, Texas 75039-2298
919 Third Avenue
New York, NY 10022-3897
Dr. Reatha Clark King
General Mills Foundation
One General Mills Boulevard
Minneapolis, Minnesota 55426
5
SEVENTH. The number of directors at any time may be increased or
diminished by vote of the board of directors, and in case of any such increase
the board of directors shall have power to elect each such additional director
to hold office until the next succeeding annual meeting of shareholders and
until his successor shall have been elected and qualified.
The board of directors, by the affirmative vote of a majority of
the directors in office, may remove a director or directors for cause where, in
the judgment of such majority, the continuation of the director or directors in
office would be harmful to the corporation and may suspend the director or
directors for a reasonable period pending final determination that cause exists
for such removal.
The board of directors from time to time shall determine whether
and to what extent, and at what times and places, and under what conditions and
regulations, the accounts and books of the corporation, or any of them, shall
be open to the inspection of the shareholders; and no shareholder shall have
any right of inspecting any account or book or document of the corporation,
except as conferred by statute or authorized by the board of directors, or by a
resolution of the shareholders.
EIGHTH. The following action may be taken by the affirmative
vote of a majority of the votes cast by the holders of shares of the
corporation entitled to vote thereon:
(1) The adoption by the shareholders of a proposed amendment of
the certificate of incorporation of the corporation;
(2) The adoption by the shareholders of a proposed plan of
merger or consolidation involving the corporation;
(3) The approval by the shareholders of a sale, lease, exchange,
or other disposition of all, or substantially all, the assets of the
corporation otherwise than in the usual and regular course of business as
conducted by the corporation; and
(4) Dissolution.
NINTH. Except as otherwise provided by statute or by this
certificate of incorporation or the by-laws of the corporation as in each case
the same may be amended from time to time, all corporate powers may be
exercised by the board of directors. Without limiting the foregoing, the board
of directors shall have power, without shareholder action:
(1) To authorize the corporation to purchase, acquire, hold,
lease, mortgage, pledge, sell and convey such property, real, personal and
mixed, without as well as within the State of New Jersey, as the board of
directors may from time to time determine, and in payment for any property to
issue, or cause to be issued, shares of the corporation, or bonds, debentures,
notes or other obligations or evidence of indebtedness thereof secured by
pledge, security interest or mortgage, or unsecured; and
(2) To authorize the borrowing of money, the issuance of bonds,
debentures, notes and other obligations or evidences of indebtedness of the
corporation, secured or unsecured, and the inclusion of provisions as to
redeemability and convertibility into shares of
6
stock of the corporation or otherwise, and, as security for money borrowed or
bonds, debentures, notes and other obligations or evidences of indebtedness
issued by the corporation, the mortgaging or pledging of any property, real,
personal, or mixed, then owned or thereafter acquired by the corporation.
TENTH. To the full extent from time to time permitted by law, no
director or officer of the corporation shall be personally liable to the
corporation or its shareholders for damages for breach of any duty owed to the
corporation or its shareholders. Neither the amendment or repeal of this
Article, nor the adoption of any provision of this certificate of incorporation
inconsistent with this Article, shall eliminate or reduce the protection
afforded by this Article to a director or officer of the corporation with
respect to any matter which occurred, or any cause of action, suit or claim
which but for this Article would have accrued or arisen, prior to such
amendment, repeal or adoption.
7
EXHIBIT A
PART I
Class A Preferred Stock
Section 1. Designation and Amount; Special Purpose Restricted
_________ __________________________________________________
Transfer Issue.
_______________
(A) The shares of this class of preferred stock shall be
designated as "Class A Preferred Stock" (referred to herein as the "Class A
Preferred Stock") and the aggregate number of shares constituting such class
which the Corporation shall have the authority to issue is 16,500,000. The
shares of this class shall have a stated value of $61.50 per share (the "Stated
Value").
(B) Shares of Class A Preferred Stock shall be issued only to a
trustee acting on behalf of the Plan (as defined in Section 9(F)(vii)). In the
event of any transfer of shares of Class A Preferred Stock to any person other
than the Corporation or the trustee of the Plan, the shares of Class A
Preferred Stock so transferred, upon such transfer and without any further
action by the Corporation or the holder, shall be automatically converted into
shares of the Corporation's Common Stock without par value (the "Common Stock")
pursuant to Section 5 hereof and no such transferee shall have any of the
voting powers, preferences and relative, participating, optional or special
rights ascribed to shares of Class A Preferred Stock hereunder but, rather,
only the powers and rights pertaining to the Common Stock into which such
shares of Class A Preferred Stock shall be so converted. In the event of such a
conversion, the transferee of the shares of Class A Preferred Stock shall be
treated for all purposes as the record holder of the shares of Common Stock
into which such shares of Class A Preferred Stock have been automatically
converted as of the date of such transfer; provided, however, that the pledge
________ _______
of Class A Preferred Stock as collateral under any credit agreement for the
financing or refinancing of the initial purchase of the Class A Preferred Stock
by the Plan shall not constitute a transfer for purposes of this Section 1.
Certificates representing shares of Class A Preferred Stock shall be legended
to reflect such restrictions on transfer. Notwithstanding the foregoing
provisions of this Section 1 (B), shares of Class A Preferred Stock (i) upon
allocation to the account of a participant in the Plan, shall be converted into
shares of Common Stock pursuant to Section 5 hereof and the shares of Common
Stock issued upon such conversion may be transferred by the holder thereof as
permitted by law and (ii) shall be redeemable by the Corporation upon the terms
and conditions provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
_________ ____________________________
(A) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Class A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
available under applicable law and the Certificate of Incorporation, cumulative
cash dividends ("Preferred Dividends") in an amount per share equal to $4.68
per annum and no more, payable (x) monthly in arrears, one-twelfth on the 20th
day of each month, commencing on July 20, 1989 and ending on June 20, 1990, and
thereafter (y) quarterly in arrears, one-quarter on the 20th day of each March,
June, September and December in each year (each such monthly and quarterly date
a "Dividend Payment Date"), to holders of record at the start of business on
such Dividend Payment Date. In the event that any Dividend Payment Date shall
occur on any day other than a "Business Day" (as defined in Section 9(F)(i)),
8
the dividend payment due on such Dividend Payment Date shall be paid on the
Business Day immediately succeeding such Dividend Payment Date. Preferred
Dividends shall begin to accrue on outstanding shares of Class A Preferred
Stock from the date of issuance of such shares of Class A Preferred Stock.
Preferred Dividends shall accrue on a daily basis whether or not the
Corporation shall have earnings or surplus at the time. Preferred Dividends
accrued after the date of issuance for any period less than a full monthly or
quarterly period, as the case may be, between Dividend Payment Dates shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
such a proportional dividend shall accrue for the period from the date of
issuance until the end of the dividend payment period in which such issuance
occurs. Accumulated but unpaid Preferred Dividends shall accumulate as of the
Dividend Payment Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any Class A Preferred Stock shall be outstanding,
no dividend shall be declared or paid or set apart for payment on any other
class of stock ranking on a parity with the Class A Preferred Stock as to
dividends ("Parity Stock"), unless there shall also be or have been declared
and paid or set apart for payment on the Class A Preferred Stock dividends
ratably in proportion to the respective amounts of dividends (a) accumulated
and unpaid through all dividend payment periods for the Class A Preferred Stock
ending on or before the dividend payment date of such Parity Stock and (b)
accumulated and unpaid on such Parity Stock through the dividend payment period
on such Parity Stock next preceding such dividend payment date. So long as any
Class A Preferred Stock shall be outstanding, in the event that full cumulative
dividends on the Class A Preferred Stock have not been declared and paid or set
apart for payment for all prior dividend payment periods, the Corporation shall
not declare or pay or set apart for payment any dividends or make any other
distributions on, or make any payment on account of the purchase, redemption or
other retirement of, any other class of stock or series thereof of the
Corporation ranking as to dividends junior to the Class A Preferred Stock
("Junior Stock") until full cumulative and unpaid dividends on the Class A
Preferred Stock shall have been paid or declared and set apart for payment;
provided, however, that the foregoing shall not apply to (i) any dividend
________ _______
payable solely in any shares of any Junior Stock, or (ii) the acquisition of
shares of any Junior Stock either (x) pursuant to any employee or director
incentive or benefit plan or arrangement (including any employment, severance
or consulting agreement) of the Corporation or any subsidiary of the
Corporation heretofore or hereafter adopted or (y) in exchange solely for
shares of any other Junior Stock.
Section 3. Voting Rights. The holders of shares of Class A
_________ _____________
Preferred Stock shall have the following voting rights:
(A) The holders of Class A Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together as one class with the holders of Common Stock and
any other class or series of preferred stock so voting as one class. Each share
of the Class A Preferred Stock shall entitle the holder thereof to a number of
votes equal to the number of shares of Common Stock into which such share of
Class A Preferred Stock could be converted pursuant to the first sentence of
Section 5(A) hereof on the record date for determining the shareholders
entitled to vote, rounded to the nearest one-tenth of a vote; it being
understood that whenever the "Conversion Ratio" (as defined in Section 5
hereof) is adjusted pursuant to Section 9 hereof, the voting rights of the
Class A Preferred Stock shall also be similarly adjusted.
9
(B) Except as otherwise required by law, holders of Class 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 any other class or series of preferred stock) for the taking of
any corporate action.
Section 4. Liquidation, Dissolution or Winding-Up.
_________ ______________________________________
(A) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the holders of Class A Preferred Stock shall
be entitled to receive out of assets of the Corporation which remain after
satisfaction in full of all valid claims of creditors of the Corporation and
which are available for payment to shareholders, and subject to the rights of
the holders of any class of stock of the Corporation ranking senior to or on a
parity with the Class A Preferred Stock in respect of distributions upon
liquidation, dissolution or winding-up of the Corporation, before any amount
shall be paid or distributed among the holders of Common Stock or any other
class of stock ranking junior to the Class A Preferred Stock in respect of
distributions upon liquidation, dissolution or winding-up of the Corporation,
liquidating distributions in an aggregate amount of $61.50 per share of Class A
Preferred Stock plus an amount equal to all accrued and unpaid dividends
thereon to the date fixed for distribution, and no more. If upon any
liquidation, dissolution or winding-up of the Corporation, the amounts payable
with respect to the Class A Preferred Stock and any other class of stock
ranking as to any such distribution on a parity with the Class A Preferred
Stock are not paid in full, the holders of the Class A Preferred Stock and such
other class of stock shall share ratably in any distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount to which they are entitled as
provided by the foregoing provisions of this Section 4(A), the holders of
shares of Class A Preferred Stock shall not be entitled to any further right or
claim to any of the remaining assets of the Corporation.
(B) Neither the merger, consolidation or combination of the
Corporation with or into any other corporation, nor the sale, lease, transfer
or other exchange of all or any portion of the assets of the Corporation (or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation), shall be deemed to be a dissolution, liquidation
or winding-up of the affairs of the Corporation for purposes of this Section 4,
but the holders of Class A Preferred Stock shall nevertheless be entitled in
the event of any such transaction to the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, stating the payment date or dates
when, and the place or places where, the amounts distributable to holders of
Class A Preferred Stock and any other class or series of preferred stock in
such circumstances shall be payable, and stating that, except in the case of
Class A Preferred Stock represented by uncertificated shares, such payment will
be made only after the surrender (or submission for notation of any partial
payment) of such holder's certificates representing shares of Class A Preferred
Stock, shall be given by first class mail, postage prepaid, mailed not less
than twenty (20) days prior to any payment date stated therein, to the holders
of Class A Preferred Stock, at the address shown on the books of the
Corporation or any transfer agent for the Class A Preferred Stock.
10
Section 5. Conversion into Common Stock.
_________ ____________________________
(A) A holder of shares of Class A Preferred Stock shall be
entitled at any time, but not later than the close of business on the
Redemption Date (as hereinafter defined) of such shares pursuant to Section 6,
7 or 8 hereof, to cause any or all of such shares to be converted into a number
of shares of Common Stock for each share of Class A Preferred Stock which
initially shall be one and which shall be adjusted as hereinafter provided
(and, as so adjusted, is hereinafter sometimes referred to as the "Conversion
Ratio"). In addition to the foregoing and subject to Section 5(B) hereof, a
holder of shares of Class A Preferred Stock upon allocation of such shares to
the account of a participant in the Plan shall be required to convert each such
share of Class A Preferred Stock into the greater of (i) that number of shares
of Common Stock which shall be the quotient obtained by dividing the Stated
Value of each share of Class A Preferred Stock by the greater of (x)
$15 divided by the Conversion Ratio or (y) the average of the high and low
sales prices for a share of Common Stock on the trading day next preceding the
Conversion Date (as hereinafter defined) on which one or more sales of shares
of Common Stock occur, all as reported on the Composite Tape (as hereinafter
defined), or (ii) that number of shares of Common Stock equal to the Conversion
Ratio. The Corporation's determination in good faith in respect of the number
of shares to be issued upon any and all conversions pursuant to the preceding
sentence shall be conclusive.
(B) Any holder of shares of Class A Preferred Stock desiring or
required to convert such shares into shares of Common Stock shall surrender the
certificate or certificates representing the shares of Class A Preferred Stock
being converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto) in case of a
request for registration in a name other than that of such holder, at the
offices of the Corporation or the transfer agent for the Common Stock
accompanied by written notice of conversion. Such notice of conversion shall
specify (i) the number of shares of Class A Preferred Stock to be converted,
and the name or names in which such holder wishes the certificate or
certificates for Common Stock and for any shares of Class A Preferred Stock not
to be so converted to be issued (or the name or names in which ownership of
such shares is to be registered in the event that they are to be
uncertificated), (ii) the address or addresses to which such holder wishes
delivery to be made of such new certificates to be issued upon such conversion,
and (iii) whether the conversion is being effected pursuant to the second
sentence of Section 5(A) hereof.
(C) A conversion of shares of Class A Preferred Stock into
shares of Common Stock pursuant to Section 5(A) shall be effective immediately
before the close of business on the day of the later of (i) the surrender to
the Corporation of the certificate or certificates for the shares of Class A
Preferred Stock to be converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto) in
case of a request for registration in a name other than that of such holder and
(ii) the giving of the notice of conversion as provided herein (the "Conversion
Date"). On and after such Conversion Date, the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock.
(D) Promptly after the Conversion Date for shares of Class A
Preferred Stock to be converted, the Corporation or the transfer agent for the
Common Stock shall issue and send by hand delivery (with receipt to be
acknowledged) or by first class mail, postage prepaid, to the holder of such
shares or to such holder's designee, at the address designated by such holder,
a
11
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled upon conversion. In the event that there shall
have been surrendered a certificate or certificates representing shares of
Class A Preferred Stock only part of which are to be converted, the Corporation
or the transfer agent for the Common Stock shall issue and deliver to such
holder or such holder's designee a new certificate or certificates representing
the number of shares of Class A Preferred Stock which shall not have been
converted.
(E) The Corporation shall not be obligated to deliver to holders
of Class A Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Class A Preferred Stock, but in
lieu thereof may make a cash payment in respect thereof in any manner permitted
by law. The determination in good faith by the Corporation of the amount of any
such cash payments shall be conclusive.
(F) The Corporation shall at all times reserve and keep
available out of its authorized and unissued and/or treasury Common Stock
solely for issuance upon the conversion of shares of Class A Preferred Stock as
herein provided, free from any preemptive rights, the maximum number of shares
of Common Stock as shall from time to time be issuable upon the conversion of
all shares of Class A Preferred Stock then outstanding.
Section 6. Redemption at the Option of the Corporation.
_________ ___________________________________________
(A) The Class A Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation at any time at the Stated Value, plus
an amount equal to all accrued and unpaid dividends thereon to the date fixed
for redemption (the close of business on such date being referred to as the
"Redemption Date"); provided that such redemption may be made on or after
________
December 20, 1990 and prior to July 20, 1995 only if (i) the Corporation shall
have requested that the trustee of the Plan repay the indebtedness incurred by
such trustee to purchase the shares of Class A Preferred Stock and (ii) either
(x) Section 404(k) of the Code (as hereinafter defined) is repealed or amended
or the Internal Revenue Service or the Treasury Department promulgates a
Revenue Ruling or Regulation or a federal Court of Appeals issues a decision
involving the Corporation, at any time on or after December 20, 1990 and prior
to July 20, 1995 with the effect that less than 100% of the dividends payable
on the shares of any capital stock of the Corporation including, without
limitation, Class A Preferred Stock or Common Stock held in the Plan is
deductible by the Corporation, when paid to participants in the Plan or their
beneficiaries or used to repay indebtedness as described in Section 404(k) of
the Code, from its gross income for purposes of determining its liability for
the federal income tax imposed by Section 11 of the Code or (y) the Code is
amended at any time on or after December 20, 1990 and prior to July 20, 1995
(other than to change the rate of any existing tax imposed by the Code) or the
Internal Revenue Service or the Treasury Department promulgates a Revenue
Ruling or Regulation or a federal Court of Appeals issues a decision involving
the Corporation, with the effect that the Corporation's liability for the
alternative minimum tax imposed by Section 55 of the Code, the general federal
income tax imposed by Section 11 of the Code or any other tax hereafter imposed
by the Code is increased solely by reason of its claiming a deduction in
respect of dividends paid on the shares of any capital stock of the Corporation
including, without limitation, Class A Preferred Stock or Common Stock held in
the Plan in a manner consistent with Section 404(k) of the Code. Payment of the
redemption price shall be made by the Corporation in cash or shares of Common
Stock or a combination thereof, as permitted by paragraph (C) of this Section
6. From and after the Redemption Date, dividends on shares of Class A
Preferred Stock called for redemption will cease to accrue, such shares will no
longer be
12
deemed to be outstanding and all rights in respect of such shares of the
Corporation shall cease, except the right to receive the redemption price. No
interest shall accrue at the redemption price after the Redemption Date. If
less than all of the outstanding shares of Class A Preferred Stock are to be
redeemed, the Corporation shall either redeem a portion of the shares of each
holder determined pro rata based on the number of shares held by each holder or
shall select the shares to be redeemed by lot or as may be otherwise determined
by the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of redemption
pursuant to paragraph (A) of this Section 6 will be sent to the holders of
Class A Preferred Stock at the address shown on the books of the Corporation or
any transfer agent for the Class A Preferred Stock by first class mail, postage
prepaid, mailed not less than thirty (30) days nor more than sixty (60) days
prior to the Redemption Date. Such Class A Preferred Stock shall continue to be
entitled to the conversion rights provided in Section 5 hereof through such
Redemption Date. Each such notice shall state: (i) the Redemption Date; (ii)
the total number of shares of the Class A Preferred Stock to be redeemed and,
if fewer than all the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such holder; (iii) the redemption price and
the intended form of payment; (iv) the place or places where certificates for
such shares are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such Redemption
Date; and (vi) a summary of the conversion rights of the shares to be redeemed,
the period within which conversion rights may be exercised, and the Conversion
Ratio in effect at the time. Upon surrender of the certificate for any shares
so called for redemption and not previously converted (or upon giving the
notice of redemption in the case of uncertificated shares), but not earlier
than the Redemption Date, the Corporation shall pay to the holder of such
shares or its designee the redemption price set forth pursuant to this
Section 6.
(C) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of Class A Preferred Stock
pursuant to Section 6 or 7 hereof in cash or in shares of Common Stock or in a
combination of such shares and cash, any such shares of Common Stock to be
valued for such purpose at their Fair Market Value (as defined in Section
9(F)(iii)) on the Redemption Date. Any shares of Common Stock so issued or
delivered (or issued or delivered pursuant to Section 7) shall be deemed to
have been issued or delivered to the holder of the Class A Preferred Stock as
of the Redemption Date and such holder shall be deemed to have become the
record holder thereof as of the Redemption Date.
Section 7. Other Redemption Rights.
_________ _______________________
Shares of Class A Preferred Stock shall be redeemed by the
Corporation for cash or, if the Corporation so elects, in shares of Common
Stock, or a combination of such shares and cash (any such shares of Common
Stock to be valued for such purpose in accordance with Section 6(C)), at a
redemption price equal to the Stated Value plus accrued and unpaid dividends
thereon to the date fixed for redemption, at the option of the holder, at any
time and from time to time upon notice to the Corporation given not less than
five (5) Business Days prior to the Redemption Date fixed by the holder in such
notice (i) in the event that the Plan is determined by the Internal Revenue
Service not to be qualified within the meaning of Sections 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended from time to time
(the "Code") or (ii) in the event that the Plan is terminated in accordance
with its terms.
13
Section 8. Consolidation, Combination, Merger, Etc.
_________ _______________________________________
(A) In the event that the Corporation shall consummate any
consolidation, combination, merger or substantially similar transaction,
pursuant to which the outstanding shares of Common Stock are by operation of
law exchanged solely for or changed, reclassified or converted solely into
stock of any successor or resulting corporation (including the Corporation)
that constitutes "qualifying employer securities" with respect to a holder of
Class A Preferred Stock within the meaning of Section 409(1) of the Code and
Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provisions of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, the shares of Class A Preferred
Stock of such holder shall in connection therewith be exchanged for or
converted into preferred stock of such successor or resulting corporation,
having in respect of such corporation insofar as possible the same powers,
preferences and relative, participating, optional or other special rights
(including the redemption rights provided by Sections 6, 7 and 8 hereof), and
the qualifications, limitations or restrictions thereon, that the Class A
Preferred Stock had immediately prior to such transaction, except that after
such transaction each share of the Class A Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section 5
hereof, into the number and kind of qualifying employer securities so
receivable by a holder of the number of shares of Common Stock into which such
shares of Class A Preferred Stock could have been converted pursuant to the
first sentence of Section 5(A) hereof immediately prior to such transaction;
provided, however, that if by virtue of the structure of such transaction, a
________ _______
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, such
holder of shares of Class A Preferred Stock shall be entitled to make an
equivalent election as to the nature and kind of consideration it shall
receive, and if such election cannot practicably be made by the holders of the
Class A Preferred Stock, then the shares of Class A Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be convertible into or exchangeable for the aggregate amount of
qualifying employer securities (payable in like kind and proportion) receivable
by a holder of the number of shares of Common Stock into which such shares of
Class A Preferred Stock could have been converted immediately prior to such
transaction if such holder of Common Stock failed to exercise any rights of
election to receive any kind or amount of qualifying employer securities
receivable upon such transaction (provided that, if the kind or amount of
________
qualifying employer securities receivable upon such transaction is not the same
for each non-electing share, then the kind and amount of qualifying employer
securities receivable upon such transaction for each such non-electing share
shall be the kind and amount so receivable per share by a plurality of the
non-electing shares). The conversion rights of the class of preferred stock of
such successor or resulting corporation for which the Class A Preferred Stock
is exchanged or into which it is converted, shall successively be subject to
adjustments pursuant to Section 9 hereof after any such transactions as nearly
equivalent as practicable to the adjustments provided for by such Section prior
to such transaction. The Corporation shall not consummate any such merger,
consolidation or similar transaction unless the successor or resulting
corporation shall have agreed to recognize and honor the rights of the holders
of Class A Preferred Stock set forth in this Section 8(A).
(B) In the event that the Corporation shall consummate any
consolidation, combination, merger or substantially similar transaction,
pursuant to which the outstanding shares of Common Stock are by operation of
law exchanged for or changed, reclassified or converted into other stock or
securities or cash or any other property, or any combination thereof,
14
other than solely qualifying employer securities (as referred to in Section
8(A)) and cash payments, if applicable, in lieu of fractional shares,
outstanding shares of Class A Preferred Stock shall, without any action on the
part of the Corporation or any holder thereof (but subject to Section 8(C)), be
deemed to have been converted pursuant to the first sentence of Section 5(A)
hereof immediately prior to the consummation of such merger, consolidation,
combination or similar business combination transaction into the number of
shares of Common Stock into which such shares of Class A Preferred Stock could
have been converted pursuant to the first sentence of Section 5(A) hereof at
such time so that each share of Class A Preferred Stock shall, by virtue of
such transaction and on the same terms as apply to the holders of Common Stock,
be converted into or exchanged for the aggregate amount of stock, securities,
cash or other property (payable in like kind and proportion) receivable by a
holder of the number of shares of Common Stock into which such share of Class A
Preferred Stock could have been converted pursuant to the first sentence of
Section 5(A) hereof immediately prior to such transaction; provided, however,
________ _______
that if by virtue of the structure of such transaction, a holder of Common
Stock is required to make an election with respect to the nature and kind of
consideration to be received in such transaction, the holder of Class A
Preferred Stock shall be entitled to make an equivalent election as to the kind
of consideration it shall receive, and if such election cannot practicably be
made by the holders of the Class A Preferred Stock, then the shares of Class A
Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property (payable in like
kind and proportion) receivable by a holder of the number of shares of Common
Stock into which such shares of Class A Preferred Stock could have been
converted immediately prior to such transaction if such holder of Common Stock
failed to exercise any rights of election as to the kind or amount of stock,
securities, cash or other property receivable upon such transaction (provided
________
that, if the kind or amount of stock, securities, cash or other property
____
receivable upon such transaction is not the same for each non-electing share,
then the kind and amount of stock, securities, cash or other property
receivable upon such transaction for each such non-electing share shall be the
kind and amount so receivable per share by a plurality of the non-electing
shares).
(C) In the event the Corporation shall enter into any agreement
providing for any consolidation, combination, merger or substantially similar
transaction described in Section 8(B), then the Corporation shall as soon as
practicable thereafter (and in any event at least twenty (20) Business Days
before consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of Class A Preferred Stock and each
holder shall have the right to elect, by written notice to the Corporation, to
receive, upon consummation of such transaction (if and when such transaction is
consummated), from the Corporation or the successor of the Corporation, in
redemption and retirement of such Class A Preferred Stock, a cash payment equal
to the amount payable in respect of shares of Class A Preferred Stock upon
redemption pursuant to Section 6(A) hereof as if the date of the consummation
of such transaction was the Redemption Date. No such notice of redemption shall
be effective unless given to the Corporation prior to the close of business on
the second Business Day prior to consummation of such transaction, unless the
Corporation or the successor of the Corporation shall waive such prior notice,
but any notice of redemption so given prior to such time may be withdrawn by
notice of withdrawal given to the Corporation prior to the close of business on
the second Business Day prior to consummation of such transaction.
15
Section 9. Anti-dilution Adjustments.
_________ _________________________
(A) In the event the Corporation shall, at any time or from time
to time while any of the shares of the Class A Preferred Stock are outstanding,
(i) pay a dividend or make a distribution in respect of the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
or (iii) combine the outstanding shares of Common Stock into a smaller number
of shares, in each case whether by reclassification of shares, recapitalization
of the Corporation (including a recapitalization effected by a merger or
consolidation to which Section 8 hereof does not apply) or otherwise, the
Conversion Ratio in effect immediately prior to such action shall be adjusted
by multiplying such Conversion Ratio 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
outstanding immediately before such event. An adjustment made pursuant to this
Section 9(A) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of shareholders
entitled to receive such dividend or distribution (on a retroactive basis) and
in the case of a subdivision or combination shall become effective immediately
as of the effective date thereof.
(B) In the event the Corporation shall, at any time or from time
to time while any shares of Class A Preferred Stock are outstanding, issue
rights, options or warrants to all holders of its outstanding Common Stock,
without any charge to such holders, entitling them (for a period expiring
within forty-five (45) days after the record date mentioned below) to subscribe
for or purchase shares of Common Stock at a price per share which is more than
2% lower at the record date mentioned below than the then Current Market Price
per share of Common Stock, the Conversion Ratio in effect immediately prior to
such action shall, subject to paragraphs (D) and (E) of this Section 9, be
adjusted by multiplying such Conversion Ratio by a fraction (i) the numerator
of which shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights, options or warrants plus the number of additional
shares of Common Stock issued upon exercise thereof, and (ii) the denominator
of which shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights, options or warrants plus the number of shares which
the aggregate offering price of the total number of shares of Common Stock so
issued would purchase at the then Current Market Price per share of Common
Stock. Such adjustment shall be made whenever such rights, options or warrants
have expired, and shall become effective retroactively immediately after the
record date for the determination of shareholders entitled to receive such
rights, options or warrants on the basis of the number of rights, options or
warrants actually exercised.
(C) In the event the Corporation shall, at any time or from time
to time while any of the shares of Class A Preferred Stock are outstanding,
make an Extraordinary Distribution (as defined in Section 9(F)(ii)) in respect
of the Common Stock, whether by dividend, distribution, reclassification of
shares or recapitalization of the Corporation (other than a recapitalization or
reclassification effected by a merger, combination or consolidation to which
Section 8 hereof applies), the Conversion Ratio in effect immediately prior to
such Extraordinary Distribution shall, subject to paragraphs (D) and (E) of
this Section 9, be adjusted by multiplying such Conversion Ratio by a fraction,
the numerator of which shall be the product of (i) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution and
(ii) the Fair Market Value of a share of Common Stock on the Valuation Date (as
defined in Section 9(F)(vi)) with respect to an Extraordinary Distribution, and
the
16
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution and
(y) the Fair Market Value of a share of Common Stock on the Valuation Date with
respect to an Extraordinary Distribution, minus (ii) the Fair Market Value of
_____
the Extraordinary Distribution on the Valuation Date. The Corporation shall
send each holder of Class A Preferred Stock notice of its intent to make any
Extraordinary Distribution at the same time as, or as soon as practicable
after, such intent is first communicated (including by announcement of a record
date in accordance with the rules of the principal stock exchange on which the
Common Stock is listed or admitted to trading) to holders of Common Stock. Such
notice shall indicate the intended record date and the amount and nature of
such dividend or distribution, and the Conversion Ratio in effect at such time.
(D) Notwithstanding any other provisions of this Section 9, the
Corporation shall not be required to make any adjustment of the Conversion
Ratio unless such adjustment would require an increase or decrease of at least
one percent (1%) in the Conversion Ratio. Any lesser adjustment shall be
carried forward and shall be made no later than the time of, and together with,
the next subsequent adjustment which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease of at
least one percent (1%) in the Conversion Ratio.
(E) The Corporation shall be entitled to make such additional
adjustments in the Conversion Ratio, in addition to those required by the
foregoing provisions of this Section 9, as shall be necessary in order that any
dividend or distribution in shares of capital stock of the Corporation,
subdivision, reclassification or combination of shares of stock of the
Corporation or any recapitalization of the Corporation shall not be taxable to
holders of the Common Stock.
(F) For purposes of this Exhibit A, the following definitions
shall apply:
(i) "Business Day" shall mean each day that is not a
Saturday, Sunday or a day which state or federally chartered banking
institutions in New York are required or authorized to be closed.
(ii) "Extraordinary Distribution" shall mean any dividend
or other distribution (effected while any of the shares of Class A Preferred
Stock are outstanding) of (x) cash to the extent that such dividend or
distribution when added to the amount of all cash dividends and distributions
paid during the preceding period of twelve (12) calendar months exceeds fifteen
percent (15%) of the aggregate Fair Market Value of all shares of Common Stock
outstanding on the declaration date for such Extraordinary Distribution and/or
(y) any shares of capital stock of the Corporation (other than shares of Common
Stock), other securities of the Corporation, evidences of indebtedness of the
Corporation or any other person or any other property (including shares of any
subsidiary of the Corporation), or any combination thereof, but excluding
rights, options or warrants to which Section 9(B) refers (without regard to the
subscription or purchase price provided for therein).
(iii) "Fair Market Value" shall mean, as to shares of
Common Stock or any other class of publicly traded capital stock or securities
of the Corporation or any other issuer which are publicly traded, the average
of the Current Market Prices of such shares or securities for each day of the
Adjustment Period. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair
17
value thereof as determined by an independent investment banking or appraisal
firm experienced in the valuation of such securities or property, which firm
shall be selected in good faith by the Board of Directors of the Corporation or
a committee thereof, or, if no such investment banking or appraisal firm is in
the good faith judgment of the Board of Directors or such committee available
to make such determination, as determined in good faith by the Board of
Directors of the Corporation or such committee.
(iv) "Current Market Price" of publicly traded shares of
Common Stock or any other class of capital stock or other security of the
Corporation or any other issuer shall mean (I) the last reported sales price,
regular way, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case as reported
on the Composite Tape for New York Stock Exchange transactions (the "Composite
Tape") or, (II) if such security is not listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), on the principal national securities
exchange on which such security is listed or admitted to trading or, (III) if
not listed or admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ National Market System") or, (IV) if such
security is not quoted on the NASDAQ National Market System, the average of the
closing bid and asked prices on each such day in the over-the-counter market as
reported by NASDAQ or, (V) if bid and asked prices for such security on each
such day shall not have been reported through NASDAQ, the average of the bid
and asked prices for such day as furnished by any NYSE member firm regularly
making a market in such security selected for such purposes by the Board of
Directors of the Corporation or a committee thereof, in each case, on each
trading day during the Adjustment Period; provided, however, in determining the
________ _______
Current Market Price, the value (as reasonably determined by the Board of
Directors of the Corporation or a committee thereof) of any "due-bill" or
similar instrument which is then associated with a share of Common Stock or any
other class of capital stock or other security, shall be deducted.
(v) "Adjustment Period" shall mean the period of five (5)
consecutive trading days preceding, and including, the date as of which the
Fair Market Value of a security is to be determined.
(vi) "Valuation Date" with respect to an Extraordinary
Distribution shall mean the date that is five (5) Business Days prior to the
record date for such Extraordinary Distribution.
(vii) "Plan" shall mean collectively the Corporation's
Thrift and ESOP plans and its Thrift and ESOP Trust.
(G) Whenever an adjustment to the Conversion Ratio and the
related voting rights of the Class A Preferred Stock is required pursuant
hereto, the Corporation shall forthwith deliver to the transfer agent(s) for
the Common Stock and the Class A Preferred Stock and file with the Secretary of
the Corporation, a statement signed by an officer of the Corporation stating
the adjusted Conversion Ratio determined as provided herein, and the voting
rights (as appropriately adjusted), of the Class A Preferred Stock. Such
statement shall set forth in reasonable detail such facts as shall be necessary
to show the reason and the manner of computing such adjustment including any
determination of Fair Market Value involved in such
18
computation. Promptly after each adjustment to the Conversion Ratio and the
related voting rights of the Class A Preferred Stock, the Corporation shall
mail a notice thereof and of the then prevailing Conversion Ratio to each
holder of Class A Preferred Stock.
Section 10. Ranking; Cancellation of Shares.
__________ _______________________________
(A) The Class A Preferred Stock shall rank senior to the Common
Stock as to the payment of dividends and senior to the Common Stock as to the
distribution of assets on liquidation, dissolution and winding-up of the
Corporation, and, unless otherwise provided in the Certificate of
Incorporation, as the same may be amended, the Class A Preferred Stock shall
rank on a parity with all other classes or series of the Corporation's
preferred stock, as to payment of dividends and the distribution of assets on
liquidation, dissolution or winding-up.
(B) Any shares of Class A Preferred Stock acquired by the
Corporation by reason of the conversion or redemption of such shares as
provided hereby, or otherwise so acquired, shall be cancelled as shares of
Class A Preferred Stock and restored to the status of authorized but unissued
shares of preferred stock of the Corporation, undesignated as to classes or
series, and may thereafter be reissued as part of a new class or series of such
preferred stock as permitted by law.
Section 11. Miscellaneous.
__________ _____________
(A) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
receipt thereof or three (3) Business Days after the mailing thereof if sent by
registered mail (unless first class mail shall be specifically permitted for
such notice under the terms of this Exhibit A) with postage prepaid, addressed:
(i) if to the Corporation, to its office at 5959 Las Colinas Boulevard, Irving,
TX 75039 (Attention: Treasurer) or to the transfer agent (if any) for the Class
A Preferred Stock or (ii) if to any holder of the Class A Preferred Stock or
the Common Stock, as the case may be, to such holder at the address of such
holder as listed in the stock record books of the Corporation (which may
include the records of any transfer agent for the Class A Preferred Stock or
the Common Stock, as the case may be) or (iii) to such other address as the
Corporation shall have designated by notice similarly given.
(B) In the event that, at any time as a result of an adjustment
made pursuant to Section 8 or 9, the holder of any share of the Class A
Preferred Stock upon thereafter surrendering such shares for conversion shall
become entitled to receive any shares or other securities of the Corporation
other than shares of Common Stock, the Conversion Ratio in respect of such
other shares or securities so receivable upon conversion of shares of Class A
Preferred Stock shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in
Sections 8 or 9, and the provisions of each of the other Sections hereof with
respect to the Common Stock shall apply on like or similar terms to any such
other shares or securities. Any determination in good faith by the Corporation
as to any adjustment of the Conversion Ratio pursuant to this Section 11 (B)
shall be conclusive.
(C) The Corporation shall pay any and all issuance, stock
transfer and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Class A Preferred Stock or Common Stock or
other securities issued upon conversion of Class A
19
Preferred Stock pursuant hereto or certificates representing such shares or
securities. The Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the issuance or
delivery of shares of Common Stock or other securities in a name other then
that in which the shares of Class A Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount of any such tax for issuance, transfer or documentary
stamp taxes or has established, to the satisfaction of the Corporation, that
such tax has been paid or is not payable.
(D) In the event that a holder of shares of Class A Preferred
Stock shall not by written notice designate the name in which (i) shares of
Common Stock or (ii) any other securities in accordance with this Exhibit A, to
be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Class A Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Corporation shall be entitled to register
such shares, and make such payment, in the name of the holder of such Class A
Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Corporation.
(E) Unless otherwise provided in the Certificate of
Incorporation, as the same may be amended, all payments of (x) dividends upon
the shares of any class of stock and upon any other class of stock ranking on a
parity with such first class of stock with respect to such dividends shall be
made pro rata, so that amounts paid per share on such first class of stock and
such other class of stock shall in all cases bear to each other the same ratio
that the required dividends then payable per share on the shares of such first
class of stock and such other class of stock bear to each other and (y)
distributions on voluntary or involuntary dissolution, liquidation or
winding-up or otherwise made upon the shares of any class of stock and upon any
other class of stock ranking on a parity with such first class of stock with
respect to such distributions shall be made pro rata, so that amounts paid per
share on such first class of stock and such other class of stock shall in all
cases bear to each other the same ratio that the required distributions then
payable per share on the shares of such first class of stock and such other
class of stock bear to each other.
(F) The Corporation may appoint, and from time to time discharge
and change, a transfer agent for the Class A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first class mail, postage prepaid, to each holder of record of Class
A Preferred Stock. So long as there is a transfer agent for a class of stock, a
holder thereof shall give any notices to the Corporation required hereunder to
the transfer agent at the address of the transfer agent last given by the
Corporation.
(G) If the Corporation and the holder so agree, any shares of
Class A Preferred Stock or any shares of Common Stock into which the shares of
Class A Preferred Stock shall be converted, may be uncertificated shares,
provided that the names of the holders of all uncertificated shares and the
________
number of such shares held by each holder shall be registered at the offices of
the Corporation or the transfer agent for such shares. In the event that any
shares shall
20
be uncertificated, all references herein to the surrender or issuance of stock
certificates shall have no application to such uncertificated shares.
21
PART II
Class B Preferred Stock
1. Designation and Issuance
(A) The shares of such class shall be designated CLASS B
PREFERRED STOCK (hereinafter referred to as "Class B Preferred Stock") and the
number of shares constituting such class shall be 165,800. Such number of
shares may be increased or decreased by resolution of the Board of Directors,
but no such decrease shall reduce the number of shares of Class B Preferred
Stock to a number less than that of the shares then outstanding plus the number
of shares issuable upon exercise of any rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation. All shares of
Class B Preferred Stock redeemed or purchased by the Corporation shall be
retired and shall be restored to the status of authorized but unissued shares
of preferred stock without designation.
(B) Shares of Class B Preferred Stock shall be issued only to a
trustee or trustees acting on behalf of an employee stock ownership trust or
plan or other employee benefit plan ("Plan") of Mobil Corporation or Mobil Oil
Corporation (collectively, "Mobil Oil"). In the event of any sale, transfer or
other disposition (hereinafter a "transfer") of shares of Class B Preferred
Stock to any person other than (x) any trustee or trustees of the Plan and (y)
any pledgee of such shares acquiring such shares as security for any loan or
loans made to the Plan or to any trustee or trustees acting on behalf of the
Plan, the shares of Class B Preferred Stock so transferred, upon such transfer
and without any further action by the Corporation or the holder shall be
automatically converted into shares of the Common Stock (as defined in Section
10) at the Conversion Price (as hereinafter defined) and on the terms otherwise
provided for the conversion of shares of Class B Preferred Stock into shares of
Common Stock pursuant to Section 5 hereof and no such transferee shall have any
of the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of Class B Preferred Stock hereunder but,
rather, only the powers and rights pertaining to the Common Stock into which
such shares of Class B Preferred Stock shall be so converted, provided,
however, that in the event of a foreclosure or other realization upon shares of
Class B Preferred Stock pledged as security for any loan or loans made to the
Plan or to the trustee or the trustees acting on behalf of the Plan, the
pledged shares so foreclosed or otherwise realized upon shall (subject to the
holder's right of redemption set forth in Section 7(B) hereof) be automatically
converted into shares of Common Stock at the Conversion Price and on the terms
otherwise provided for conversions of shares of Class B Preferred Stock into
shares of Common Stock pursuant to Section 5 hereof. In the event of such a
conversion, such transferee shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class B Preferred Stock
shall have been converted as of the date of such conversion. Certificates
representing shares of Class B Preferred Stock shall be legended to reflect
such restrictions on transfer. Notwithstanding the foregoing provisions of this
Section 1, shares of Class B Preferred Stock (i) may be converted into shares
of Common Stock as provided by Section 5 hereof and the shares of Common Stock
issued upon such conversion may be transferred by the holder thereof as
permitted by law and (ii) shall be redeemable by the Corporation upon the terms
and conditions provided by Sections 6, 7 and 8 hereof.
22
2. Dividends and Distributions.
(A)(1) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Class B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Regular Preferred Dividends") in an amount
per share initially equal to $300 per share per annum, subject to adjustment
from time to time as hereinafter provided, and no more, except as provided in
Section 2(A)(2) (such amount, as adjusted from time to time, being hereinafter
referred to as the "Regular Preferred Dividend Rate"), payable semiannually in
arrears, one-half on the last day of February, and one-half on the last day of
August of each year (each a "Dividend Payment Date") to holders of record at
the start of business on such Dividend Payment Date. The first dividend payable
on each share of Class B Preferred Stock shall accrue from the date of original
issuance thereof, except that the first dividend payable on shares of Class B
Preferred Stock issued on conversion of Mobil Corporation Series B ESOP
Convertible Preferred Stock ("Mobil Series B Stock") shall accrue and be
cumulative from the last dividend payment date of the Mobil Series B Stock and
shall include any arrearage on the Mobil Series B Stock. Regular Preferred
Dividends shall accrue on a daily basis, based on the Regular Preferred
Dividend Rate in effect on such date, whether or not the Corporation shall have
earnings or surplus at the time, computed on the basis of a 360-day year of
30-day months in case of any period less than a full semiannual period. Accrued
but unpaid Regular Preferred Dividends, shall cumulate as of the Dividend
Payment Date on which they first become payable, but no interest shall accrue
on accumulated but unpaid Regular Preferred Dividends.
(2) In the event that for any period of six (6) months preceding
any Dividend Payment Date (each such period, a "Dividend Period") the aggregate
fair value (as determined by the Board of Directors) of all dividends and other
distributions declared per share of Common Stock during such Dividend Period
multiplied by the number of shares of Common Stock into which a share of Class
B Preferred Stock was convertible on the appropriate dividend payment date for
the Common Stock shall exceed the amount of the Regular Preferred Dividends
accrued on a share of Class B Preferred Stock during such Dividend Period, the
holders of shares of the Class B Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds legally available
therefor, cash dividends (the "Supplemental Preferred Dividends") in an amount
per share (with appropriate adjustments to reflect any stock split or
combination of shares or other adjustment provided for in Section 9) equal to
the amount of such excess up to but not exceeding (x) the product of twelve and
one-half per cent (12.5%) times the average of the Fair Market Values of the
number of shares of Common Stock into which a share of Class B Preferred Stock
was convertible on the day next preceding the ex-dividend date for each such
dividend and the distribution date for each such distribution on the Common
Stock of the Corporation minus (y) such amount of accrued Regular Preferred
Dividends. The calculation of each Supplemental Preferred Dividend shall be
subject to adjustment corresponding to the adjustments provided in Section 9
hereof. Supplemental Preferred Dividends shall accrue and cumulate as of the
close of each relevant Dividend Period and shall be payable on the Dividend
Payment Date next following the close of any such Dividend Period, but no
interest shall accrue on accumulated but unpaid Supplemental Preferred
Dividends and no Supplemental Preferred Dividends shall accrue in respect of
any period of less than six months.
(B)(1) No full dividends shall be declared or paid or set apart for
payment on any shares ranking, as to dividends, on a parity with or junior to
the Class B Preferred Stock, for any
23
period unless full cumulative dividends (which for all purposes of this
resolution shall include Regular Preferred Dividends and Supplemental Preferred
Dividends) have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Class B Preferred Stock for all Dividend Payment Dates occurring on or prior to
the date of payment of such full dividends. When dividends are not paid in
full, as aforesaid, upon the shares of Class B Preferred Stock and any other
shares ranking, as to dividends, on a parity with Class B Preferred Stock, all
dividends declared upon shares of Class B Preferred Stock shall be declared
pro rata so that the amount of dividends declared per share on Class B
Preferred Stock and such other parity shares shall in all cases bear to each
other the same ratio that accumulated dividends per share on the shares of
Class B Preferred Stock and such other parity shares bear to each other. Except
as otherwise provided herein, holders of shares of Class B Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
shares, in excess of full cumulative dividends, as herein provided, on Class B
Preferred Stock.
(2) So long as any shares of Class B Preferred Stock are
outstanding, no dividend (other than dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Common Stock or other shares ranking junior to Class B Preferred Stock as to
dividends and upon liquidation and other than as provided in Section 2(B)(1))
shall be declared or paid or set aside for payment or other distribution
declared or made upon the Common Stock or upon any other shares ranking junior
to or on a parity with Class B Preferred Stock as to dividends or upon
liquidation, nor shall any Common Stock or any other shares of the Company
ranking junior to or on a parity with Class B Preferred Stock as to dividends
or upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by the Corporation (except by conversion
into or exchange for shares of the Corporation ranking junior to Class B
Preferred Stock as to dividends and upon liquidation) unless, in each case, the
full cumulative dividends on all outstanding shares of Class B Preferred Stock
shall have been paid.
(3) Any dividend payment made on shares of Class B Preferred
Stock shall first be credited against the earliest accumulated but unpaid
dividend due with respect to shares of Class B Preferred Stock.
3. Liquidation Preference
(A) In the event of any liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of any series or classes of stock
of the Corporation ranking junior to Class B Preferred Stock upon liquidation,
dissolution or winding-up, the holders of Class B Preferred Stock shall be
entitled to receive the Liquidation Price (as hereinafter defined) per share in
effect at the time of liquidation, dissolution or winding-up plus an amount
equal to all dividends accrued (whether or not accumulated) and unpaid thereon
to the date of final distribution to such holders, but such holders shall not
be entitled to any further payments. The Liquidation Price per share which
holders of Class B Preferred Stock shall receive upon liquidation, dissolution
or winding-up shall be $3,887.50, subject to adjustment as hereinafter
provided. If, upon any liquidation, dissolution or winding-up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Class B Preferred Stock shall be insufficient to pay in
full the preferential
24
amount aforesaid and liquidating payments on any other shares ranking as to
liquidation, dissolution or winding-up, on a parity with Class B Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among
the holders of Class B Preferred Stock and any such other shares ratably in
accordance with the respective amounts which would be payable on such shares of
Class B Preferred Stock and any such other shares if all amounts payable
thereon were paid in full. For the purposes of this Section 3, a consolidation
or merger of the Corporation with one or more corporations shall not be deemed
to be a liquidation, dissolution or winding-up, voluntary and involuntary.
(B) Subject to the rights of the holders of shares of any series
or class or classes of stock ranking on a parity with or prior to Class B
Preferred Stock upon liquidation, dissolution or winding-up, upon any
liquidation, dissolution or winding-up of the Corporation, after payment shall
have been made in full to the holders of Class B Preferred Stock as provided in
this Section 3, but not prior thereto, any other series or class or classes of
stock ranking junior to Class B Preferred Stock upon liquidation, dissolution
or winding-up shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be
paid or distributed, and the holders of Class B Preferred Stock shall not be
entitled to share therein.
4. Ranking and Voting of Shares.
(A) Any shares of the Corporation shall be deemed to rank:
(1) prior to Class B Preferred Stock as to dividends or as to
distribution of assets upon liquidation, dissolution or winding-up, if the
holders of such class shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding-up, as the case
may be, in preference or priority to the holders of Class B Preferred Stock,
(2) on a parity with Class B Preferred Stock as to dividends or
as to distribution of assets upon liquidation, dissolution or winding-up,
whether or not the dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those of Class B
Preferred Stock, if the holders of such class of stock and Class B Preferred
Stock shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding-up, as the case may be, in proportion
to their respective dividend or liquidation amounts, as the case may be,
without preference or priority one over the other, and
(3) junior to Class B Preferred Stock as to dividends or as to
the distribution of assets upon liquidation, dissolution or winding-up, if such
shares shall be Common Stock or if the holders of Class B Preferred Stock shall
be entitled to receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding-up, as the case may be, in preference or
priority to the holders of such shares. Unless otherwise provided in the
Restated Certificate of Incorporation of the Corporation, as the same may be
amended, including an amendment relating to any subsequent class or series of
preferred stock, the Class B Preferred Stock shall rank junior to all classes
or series of the Corporation's preferred stock as to dividends and the
distribution of assets upon liquidation, dissolution or winding-up.
(B) The holders of shares of Class B Preferred Stock shall have
the following voting rights:
25
(1) The holders of Class B Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the shareholders of the Corporation,
voting together with the holders of Common Stock as one class. The holder of
each share of Class B Preferred Stock shall be entitled to a number of votes
equal to the number of shares of Common Stock into which such Class B Preferred
Stock could be converted on the record date for determining the shareholders
entitled to vote; it being understood that whenever the "Conversion Price" (as
defined in Section 5 hereof) is adjusted as provided in Section 9 hereof, the
number of votes of the Class B Preferred Stock shall also be correspondingly
adjusted.
(2) Except as otherwise required by law or set forth herein,
holders of Class B 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 as set forth herein) for the taking of any
corporate action, including the issuance of any preferred stock now or
hereafter authorized, provided, however, that the vote of at least 66-2/3% of
the outstanding shares of Class B Preferred Stock, voting separately as a
class, shall be necessary to approve any alteration, amendment or repeal of any
provision of the Restated Certificate of Incorporation or any alteration,
amendment or repeal of any provision of the resolutions relating to the
designation, preferences and rights of Class B Preferred Stock (including any
such alteration, amendment or repeal effected by any merger or consolidation in
which the Corporation is the surviving or resulting corporation), if such
amendment, alteration or repeal would alter or change the powers, preferences,
or special rights of the Class B Preferred Stock so as to affect them
adversely.
5. Conversion into Common Stock.
(A) A holder of shares of Class B Preferred Stock shall be
entitled, at any time prior to the close of business on the date fixed for
redemption of such shares pursuant to Sections 6, 7 or 8 hereof, to cause any
or all of such shares to be converted into shares of Common Stock. The number
of shares of Common Stock into which each share of the Class B Preferred Stock
may be converted shall be determined by dividing the Liquidation Price in
effect at the time of conversion by the Conversion Price (as hereinafter
defined) in effect at the time of conversion. The Conversion Price per share at
which shares of Common Stock shall be initially issuable upon conversion of any
shares of Class B Preferred Stock shall be $29.447411 subject to adjustment as
hereinafter provided; that is, a conversion rate initially equivalent to
132.015 shares of Common Stock for each share of Class B Preferred Stock, which
is subject to adjustment as hereinafter provided.
(B) Any holder of shares of Class B Preferred Stock desiring to
convert such shares into shares of Common Stock shall surrender, if
certificated, the certificate or certificates representing the shares of Class
B Preferred Stock being converted, duly assigned or endorsed for transfer to
the Corporation (or accompanied by duly executed stock powers relating
thereto), or if uncertificated, a duly executed stock power relating thereto,
at the principal executive office of the Corporation or the offices of the
transfer agent for the Class B Preferred Stock or such office or offices in the
continental United States of an agent for conversion as may from time to time
be designated by notice to the holders of the Class B Preferred Stock by the
Corporation or the transfer agent for the Class B Preferred Stock, accompanied
by written notice of conversion. Such notice of conversion shall specify (i)
the number of shares of Class B Preferred Stock to be converted and the name or
names in which such holder wishes the Common Stock and any shares of Class B
Preferred Stock not to be so converted to be issued, and (ii) the address to
26
which such holder wishes delivery to be made of a confirmation of such
conversion, if uncertificated, or any new certificate which may be issued upon
such conversion if certificated.
(C) Upon surrender, if certificated, of a certificate
representing a share or shares of Class B Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the
Corporation shall issue and send by hand delivery (with receipt to be
acknowledged) or by first class mail, postage prepaid, to the holder thereof or
to such holder's designee, at the address designated by such holder, if
certificated, a certificate or certificates for, or if uncertificated,
confirmation of, the number of shares of Common Stock to which such holder
shall be entitled upon conversion. In the event that there shall have been
surrendered shares of Class B Preferred Stock, only part of which are to be
converted, the Corporation shall issue and deliver to such holder or such
holder's designee, if certificated, a new certificate or certificates
representing the number of shares of Class B Preferred Stock which shall not
have been converted, or if uncertificated, confirmation of the number of shares
of Class B Preferred Stock which shall not have been converted.
(D) The issuance by the Corporation of shares of Common Stock
upon a conversion of shares of Class B Preferred Stock into shares of Common
Stock made at the option of the holder thereof shall be effective as of the
earlier of (i) the delivery to such holder or such holder's designee of the
certificates representing the shares of Common Stock issued upon conversion
thereof if certificated or confirmation if uncertificated or (ii) the
commencement of business on the second business day after the surrender of the
certificate or certificates, if certificated, or a duly executed stock power,
if uncertificated, for the shares of Class B Preferred Stock to be converted.
On and after the effective date of conversion, the person or persons entitled
to receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to
holders of Common Stock of record on any date prior to such effective date. The
Corporation shall not be obligated to pay any dividends which shall have been
declared and shall be payable to holders of shares of Class B Preferred Stock
on a Dividend Payment Date if such Dividend Payment Date for such dividend
shall be on or subsequent to the effective date of conversion of such shares.
(E) The Corporation shall not be obligated to deliver to holders
of Class B Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Class B Preferred Stock, but in
lieu thereof may make a cash payment in respect thereof in any manner permitted
by law.
(F) The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock or treasury Common
Stock, solely for issuance upon the conversion of shares of Class B Preferred
Stock as herein provided, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the shares of Class B
Preferred Stock then outstanding.
6. Redemption at the Option of the Corporation.
(A) The Class B Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation, out of funds legally available
therefor, at any time after November 22, 1999 at 100% of the Liquidation Price
per share in effect on the date fixed for redemption, plus an amount equal to
all accrued (whether or not accumulated) and unpaid dividends thereon
27
to the date fixed for redemption. The Class B Preferred Stock shall be
redeemable, in whole or in part, out of funds legally available therefor, on or
before November 22, 1999 only if permitted by Section 6 (C) or (D) at a price
per share equal to, (i) if pursuant to Section 6(C), the redemption price set
forth therein, or (ii) if pursuant to Section 6(D), 100.775% of the Liquidation
Price in effect on the date fixed for redemption, plus, in each case, an amount
equal to all accrued (whether or not accumulated) and unpaid dividends thereon
to the date fixed for redemption. Payment of the redemption price shall be made
by the Corporation in cash or shares of Common Stock, or a combination thereof,
as permitted by Section 6(E). From and after the date fixed for redemption,
dividends on shares of Class B Preferred Stock called for redemption will cease
to accrue, such shares will no longer be deemed to be outstanding and all
rights in respect of such shares of the Corporation shall cease, except for the
right to receive the redemption price. If less than all of the outstanding
shares of Class B Preferred Stock are to be redeemed, the Corporation shall
either redeem a portion of the shares of each holder determined pro rata based
on the number of shares held by each holder or shall select the shares to be
redeemed by lot, as may be determined by the Board of Directors of the
Corporation.
(B) Unless otherwise required by law, notice of redemption will
be sent to the holders of Class B Preferred Stock at the address shown on the
books of the Corporation or any transfer agent for Class B Preferred Stock by
first class mail, postage prepaid, mailed not less than twenty (20) days nor
more than sixty (60) days prior to the redemption date. Each notice shall
state: (i) the redemption date; (ii) the total number of shares of the Class B
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates, if certificated, for such shares are to be surrendered for
payment of the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date; (vi) the conversion
rights of the shares to be redeemed, the period within which such conversion
rights may be exercised, and the Conversion Price and number of shares of
Common Stock issuable upon conversion of a share of Class B Preferred Stock at
the time. Upon surrender of the certificates, if certificated, for any shares
so called for redemption, or upon the date fixed for redemption if
uncertificated such shares if not previously converted shall be redeemed by the
Corporation on the date fixed for redemption and at the redemption price set
forth in this Section 6.
(C) In the event (i) of a change in the federal tax law or
regulations of the United States of America or of an interpretation or
application of such law or regulations or of a determination by a court of
competent jurisdiction, which in any case has the effect of precluding the
Corporation from claiming (other than for purposes of calculating any
alternative minimum tax) any of the tax deductions for dividends paid on the
Class B Preferred Stock when such dividends are used as provided under Section
404(k)(2) of the Internal Revenue Code of 1986, as amended (the "Code") as in
effect on the date shares of Class B Preferred Stock are initially issued, or
(ii) that the Corporation certifies to the holders of the Class B Preferred
Stock that the Corporation has determined in good faith that the Plan either is
not qualified within the meaning of Section 401(a) of the Code or is not an
"employee stock ownership plan" within the meaning of 4975(e)(7) of the Code,
the Corporation may, in its sole discretion and notwithstanding anything to the
contrary in Section 6(A), at any time within one year of the occurrence of such
event, elect either to (a) redeem any or all of such Class B Preferred Stock
for cash or, if the Corporation so elects, in shares of Common Stock, or a
combination of such shares of Common Stock and cash, as permitted by Section
6(B), at a redemption price equal to the higher of (x) the
28
Liquidation Price per share on the date fixed for redemption or (y) the Fair
Market Value (as defined in Section 9(G)(2)) of the number of shares of Common
Stock into which each share of Class B Preferred Stock is convertible at the
time the notice of such redemption is given, plus in either case an amount
equal to accrued (whether or not accumulated) and unpaid dividends thereon to
the date fixed for redemption, or (b) exchange any or all of such shares of
Class B Preferred Stock for securities of comparable value (as determined by an
independent appraiser) that constitute "qualifying employer securities" with
respect to a holder of Class B Preferred Stock within the meaning of
Section 409(1) of the Code and Section 407(d)(5) of the Employment Retirement
Income Security Act of 1974, as amended ("ERISA") or any successor provisions
of law.
(D) Notwithstanding anything to the contrary in Section 6(A), in
the event that the Employees Savings Plan of Mobil Oil is terminated or the
Employee Stock Ownership Plan incorporated therein is terminated or eliminated
from such Plan, the Corporation may, in its sole discretion, call for
redemption of any or all of the then outstanding Class B Preferred Stock at a
redemption price calculated on the basis of the redemption prices provided in
Section 6(A), increased by 50% of the amount thereof in excess of 100% of the
Liquidation Price in effect on the date fixed for redemption.
(E) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of Class B Preferred Stock
in cash or in shares of Common Stock, or in a combination of such shares and
cash, any such shares of Common Stock to be valued for such purpose at their
Fair Market Value (as defined in Section 9(G)(2)); provided, however, that in
calculating their Fair Market Value the Adjustment Period shall be deemed to be
the five (5) consecutive trading days preceding the date of redemption.
7. Redemption at the Option of the Holder.
(A) Unless otherwise provided by law, shares of Class B
Preferred Stock shall be redeemed by the Corporation out of funds legally
available therefor for cash or, if the Corporation so elects, in shares of
Common Stock, or a combination of such shares and cash, any such shares of
Common Stock to be valued for such purpose as provided by Section 6(E), at a
redemption price equal to the higher of (x) the Liquidation Price per share in
effect on the date fixed for redemption or (y) the Fair Market Value of the
number of shares of Common Stock into which each share of Class B Preferred
Stock is convertible at the time the notice of such redemption is given plus in
either case an amount equal to accrued (whether or not accumulated) and unpaid
dividends thereon to the date fixed for redemption, at the option of the
holder, at any time and from time to time upon notice to the Corporation given
not less than five (5) business days prior to the date fixed by the holder in
such notice of redemption, when and to the extent necessary for such holder to
provide for distributions required to be made under, or to satisfy an
investment election provided to participants in accordance with, the Employee
Stock Ownership Plan incorporated in the Employees Savings Plan of Mobil Oil,
or any successor plan or when the holder elects to redeem shares of Class B
Preferred Stock in respect of any Regular or Supplemental Preferred Dividend (a
"Dividend Redemption"). In the case of any Dividend Redemption, such holder
shall give the notice specified above within five (5) business days after the
related Dividend Payment Date and such redemption shall be effective as to such
number of shares of Class B Preferred Stock as shall equal (x) the aggregate
amount of such Regular or Supplemental Preferred Dividend with respect to
shares of Class B Preferred Stock allocated or credited to the accounts of
participants in the Employee Stock Ownership Plan incorporated in
29
the Employees Savings Plan of Mobil Oil, or any successor plan divided by (y)
the redemption price specified above.
(B) Shares of Class B Preferred Stock shall be redeemed by the
Corporation out of funds legally available therefor for cash or, if the
Corporation so elects, in shares of Common Stock, or a combination of such
shares of Common Stock and cash, any such shares of Common Stock to be valued
for such purpose as provided by Section 6(E), at a redemption price equal to
the Liquidation Price plus an amount equal to accrued and unpaid dividends
thereon to the date fixed for redemption, at the option of the holder, at any
time and from time to time upon notice to the Corporation given not less than
five (5) business days prior to the date fixed by the holder in such notice for
such redemption, upon certification by such holder to the Corporation of the
following events: (i) when and to the extent necessary for such holder to make
any payments of principal, interest or premium due and payable (whether as
scheduled, upon acceleration or otherwise) upon any obligations of the trust
established under the Employee Stock Ownership Plan incorporated in the
Employees Savings Plan of Mobil Oil in connection with the acquisition of Class
B Preferred Stock or any indebtedness, expenses or costs incurred by the holder
for the benefit of the Plan; or (ii) when and if it shall be established to the
satisfaction of the holder that the Plan has not initially been determined by
the Internal Revenue Service to be qualified as a stock bonus plan and an
employee stock ownership plan within the meaning of Sections 401(a) or
4975(e)(7) of the Code, respectively.
8. Consolidation, Merger, etc.
(A) In the event that the Corporation shall consummate any
consolidation or merger or similar transaction, however named, pursuant to
which the outstanding shares of Common Stock are by operation of law exchanged
solely for or changed, reclassified or converted solely into shares of any
successor or resulting company (including the Corporation) that constitute
"qualifying employer securities" that are common stock with respect to a holder
of Class B Preferred Stock within the meanings of Section 409(1) of the Code
and Section 407(d)(5) of ERISA, or any successor provision of law, and, if
applicable, for a cash payment in lieu of fractional shares, if any, then, in
such event, the terms of such consolidation or merger or similar transaction
shall provide that the shares of Class B Preferred Stock of such holder shall
be converted into or exchanged for and shall become preferred shares of such
successor or resulting company, having in respect of such company insofar as
possible the same powers, preferences and relative, participating, optional or
other special rights (including the redemption rights provided by Sections 6,
7, and 8 hereof), and the qualifications, limitations or restrictions thereon,
that the Class B Preferred Stock had immediately prior to such transaction;
provided, however, that after such transaction each share of stock into which
the Class B Preferred Stock is so converted or for which it is exchanged shall
be convertible, pursuant to the terms and conditions provided by Section 5
hereof, into the number and kind of qualifying employer securities receivable
by a holder of the number of shares of Common Stock into which such shares of
Class B Preferred Stock could have been converted pursuant to Section 5 hereof
immediately prior to such transaction and provided, further, that if by virtue
of the structure of such transaction, a holder of Common Stock is required to
make an election with respect to the nature and kind of consideration to be
received in such transaction, which election cannot practicably be made by the
holders of the Class B Preferred Stock, then such election shall be deemed to
be solely for "qualifying employer securities" (together, if applicable, with a
cash payment in lieu of fractional shares) with the effect provided above on
the basis of the number
30
and kind of qualifying employer securities receivable by a holder of the number
of shares of Common Stock into which the shares of Class B Preferred Stock
could have been converted pursuant to Section 5 hereof immediately prior to
such transaction (it being understood that if the kind or amount of qualifying
employer securities receivable in respect of each share of Common Stock upon
such transaction is not the same for each such share, then the kind and amount
of qualifying employer securities deemed to be receivable in respect of each
share of Common Stock for purposes of this proviso shall be the kind and amount
so receivable per share of Common Stock by a plurality of such shares). The
rights of the Class B Preferred Stock as preferred shares of such successor
resulting company shall successively be subject to adjustments pursuant to
Section 9 hereof after any such transaction as nearly equivalent to the
adjustments provided for by such Section prior to such transaction. The
Corporation shall not consummate any such merger, consolidation or similar
transaction unless all the terms of this Section 8(A) are complied with.
(B) In the event that the Corporation shall consummate any
consolidation or merger or similar transaction, however named, pursuant to
which the outstanding shares of Common Stock are by operation of law exchanged
for or changed, reclassified or converted into other shares or securities or
cash or any other property, or any combination thereof, other than any such
consideration which is constituted solely of qualifying employer securities
that are common stock (as referred to in Section 8(A)) and cash payments, if
applicable, in lieu of fractional shares, outstanding shares of Class B
Preferred Stock shall, without any action on the part of the Corporation or any
holder thereof (but subject to Section 8(C)), be automatically converted
immediately prior to the consummation of such merger, consolidation or similar
transaction into shares of Common Stock at the conversion rate then in effect
so that each share of Class B Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of shares, securities,
cash or other property (payable in like kind) receivable by a holder of the
number of shares of Common Stock into which such shares of Class B Preferred
Stock could have been converted immediately prior to such transaction if such
holder of Common Stock failed to exercise any rights of election as to the kind
or amount of shares, securities, cash or other property receivable upon such
transaction (provided that, if the kind or amount of shares, securities, cash
or other property receivable upon such transaction is not the same for each
non-electing share, then the kind and amount of shares, securities, cash or
other property receivable upon such transaction for each non-electing share
shall be the kind and amount so receivable per share by a plurality of
non-electing shares).
(C) In the event the Corporation shall enter into any agreement
providing for any consolidation or merger or similar transaction described in
Section 8(B), then the Corporation shall as soon as practicable thereafter (and
in any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Class B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Corporation, to receive, upon
consummation of such transaction (if and when such transaction is consummated),
out of funds legally available therefor, from the Corporation or the successor
of the Corporation, in redemption and retirement of such Class B Preferred
Stock, in lieu of any cash or other securities which such holder would
otherwise be entitled to receive under Section 8(B) hereof, a cash payment
equal to the redemption price specified in Section 6(A) in effect on the date
of the consummation of such transaction plus an amount equal to all accrued
(whether or not accumulated) and unpaid dividends. No such notice
31
of redemption shall be effective unless given to the Corporation prior to the
close of business of the fifth business day prior to consummation of such
transaction, unless the Corporation or the successor of the Corporation shall
waive such prior notice, but any notice of redemption so given prior to such
time may be withdrawn by notice of withdrawal given to the Corporation prior to
the close of business on the fifth business day prior to consummation of such
transaction.
9. Anti-dilution Adjustments.
(A)(1) Subject to the provisions of Section 9(E), in the event the
Corporation shall, at any time or from time to time while any of the shares of
the Class B Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide the outstanding shares of Common Stock into a greater number of
shares, in each case whether by reclassification of shares, recapitalization of
the Corporation (excluding a recapitalization or reclassification effected by a
merger or consolidation to which Section 8 hereof applies) or otherwise, then,
in such event, the Board of Directors shall, to the extent legally permissible,
declare a dividend in respect of the Class B Preferred Stock in shares of Class
B Preferred Stock (a "Special Dividend") in such a manner that a holder of
Class B Preferred Stock will become a holder of that number of shares of Class
B Preferred Stock equal to the product of the number of such shares held prior
to such event times a fraction (the "Sec. 9(A) Non-Dilutive Share 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 outstanding immediately before such event. A Special
Dividend declared pursuant to this Section 9(A)(1) shall be effective, upon
payment of such dividend or distribution in respect of the Common Stock, as of
the record date for the determination of shareholders entitled to receive such
dividend or distribution (on a retroactive basis), and in the case of a
subdivision shall become effective immediately as of the effective date
thereof. Concurrently with the declaration of the Special Dividend pursuant to
this Section 9(A)(1), the Conversion Price, the Liquidation Price and the
Regular Preferred Dividend Rate of all shares of Class B Preferred Stock shall
be adjusted by dividing the Conversion Price, the Liquidation Price and the
Regular Preferred Dividend Rate, respectively, in effect immediately before
such event by the Sec. 9(A) Non-Dilutive Share Fraction.
(2) The Corporation and the Board of Directors shall each use
its best efforts to take all necessary steps or to take all actions as are
reasonably necessary or appropriate for declaration of the Special Dividend
provided in Section 9(A)(1) but shall not be required to call a special meeting
of shareholders in order to implement the provisions thereof. If for any reason
the Board of Directors is precluded from giving full effect to the Special
Dividend provided in Section 9(A)(1), then no such Special Dividend shall be
declared, but instead the Conversion Price shall automatically be adjusted by
dividing the Conversion Price in effect immediately before the event by the
Sec. 9(A) Non-Dilutive Share Fraction and the Liquidation Price and the Regular
Preferred Dividend Rate will not be adjusted. An adjustment to the Conversion
Price made pursuant to this Section 9(A)(2) shall be given effect, upon payment
of such a dividend or distribution, as of the record date for the determination
of holders entitled to receive such dividend or distribution (on a retroactive
basis), and in the case of a subdivision shall become effective immediately as
of the effective date thereof. If subsequently the Board of Directors is able
to give full effect to the Special Dividend as provided in Section 9(A)(1),
then such Special Dividend will be declared and other adjustments will be made
in accordance with the provisions
32
of Section 9(A)(1) and the adjustment in the Conversion Price as provided in
this Section 9(A)(2) will automatically be reversed and nullified
prospectively.
(3) Subject to the provisions of Section 9(E) hereof, in the
event the Corporation shall, at any time or from time to time while any of the
shares of the Class B Preferred Stock are outstanding, combine the outstanding
shares of Common Stock into a lesser number of shares, whether by
reclassification of shares, recapitalization of the Corporation (excluding a
recapitalization or reclassification effected by a merger, consolidation or
other transaction to which Section 8 hereof applies) or otherwise, then, in
such event, the Conversion Price shall automatically be adjusted by dividing
the Conversion Price in effect immediately before such event by the Sec. 9(A)
Non-Dilutive Share Fraction and the Liquidation Price and the Regular Preferred
Dividend Rate will not be adjusted. An adjustment to the Conversion Price made
pursuant to this Section 9(A)(3) shall be given effect immediately as of the
effective date of such combination.
(B)(1) Subject to the provisions of Section 9(E), in the event the
Corporation shall, at any time or from time to time while any of the shares of
Class B Preferred Stock are outstanding issue to holders of shares of Common
Stock as a dividend or distribution, including by way of reclassification of
shares or a recapitalization of the Corporation, any right or warrant to
purchase shares of Common Stock (but not including as a right or warrant for
this purpose any security convertible into or exchangeable for shares of Common
Stock) for a consideration having a Fair Market Value (as defined in Section 9
(G)(2) hereof) per share less than the Fair Market Value of a share of Common
Stock on the date of issuance of such right or warrant, then, in such event,
the Board of Directors shall, to the extent legally permissible, declare a
Special Dividend in such a manner that a holder of Class B Preferred Stock will
become a holder of that number of shares of Class B Preferred Stock equal to
the product of the number of such shares held prior to such event times a
fraction (the "Sec. 9(B) Non-Dilutive Share Fraction"), the numerator of which
is the number of shares of Common Stock outstanding immediately before such
issuance of rights or warrants plus the maximum number of shares of Common
Stock that could be acquired upon exercise in full of all such rights and
warrants and the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance of warrants or rights plus the
number of shares of Common Stock which could be purchased at the Fair Market
Value of a share of Common Stock at the time of such issuance for the maximum
aggregate consideration payable upon exercise in full of all such rights and
warrants. A Special Dividend declared pursuant to this Section 9(B)(1) shall be
effective upon such issuance of rights or warrants. Concurrently with the
declaration of the Special Dividend pursuant to this Section 9(B)(1), the
Conversion Price, the Liquidation Price and the Regular Preferred Dividend Rate
of all shares of Class B Preferred Stock shall be adjusted by dividing the
Conversion Price, the Liquidation Price and the Regular Preferred Dividend
Rate, respectively, in effect immediately before such event by the Sec. 9(B)
Non-Dilutive Share Fraction.
(2) The Corporation and the Board of Directors shall each use
its best efforts to take all necessary steps or to take all actions as are
reasonably necessary or appropriate for declaration of the Special Dividend
provided in Section 9(B)(1) but shall not be required to call a special meeting
of shareholders in order to implement the provisions thereof. If for any reason
the Board of Directors is precluded from giving full effect to the Special
Dividend provided in Section 9(B)(1), then no such Special Dividend shall be
declared, but instead the Conversion Price shall automatically be adjusted by
dividing the Conversion Price in effect immediately
33
before the event by the Sec. 9(B) Non-Dilutive Share Fraction and the
Liquidation Price and the Preferred Dividend Rate will not be adjusted. An
adjustment to the Conversion Price made pursuant to this Section 9(B)(2) shall
be given effect upon issuance of rights or warrants. If subsequently the Board
of Directors is able to give full effect to the Special Dividend as provided in
Section 9(B)(1), then such Special Dividend will be declared and other
adjustments will be made in accordance with the provisions of Section 9(B)(1)
and the adjustment in the Conversion Price as provided in this Section 9(B)(2)
will automatically be reversed and nullified prospectively.
(C)(1)(i) Subject to the provisions of Section 9(E), in the
event the Corporation shall, at any time or from time to time while any of the
shares of Class B Preferred Stock are outstanding, issue, sell or exchange
shares of Common Stock (other than pursuant to (x) any right or warrant to
purchase or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock), or (y) any employee or director incentive, compensation or benefit plan
or arrangement of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted) at a purchase price per share less than the
Fair Market Value of a share of Common Stock on the date of such issuance, sale
or exchange, then, in such event, the Board of Directors shall, to the extent
legally permissible, declare a Special Dividend in such a manner that a holder
of Class B Preferred Stock will become the holder of that number of shares of
Class B Preferred Stock equal to the product of the number of such shares held
prior to such event times a fraction (the "Sec. 9(C)(1)(i) Non-Dilutive Share
Fraction"), the numerator of which is the number of shares of Common Stock
outstanding immediately before such issuance, sale or exchange plus the number
of shares of Common Stock so issued, sold or exchanged and the denominator of
which is the number of shares of Common Stock outstanding immediately before
such issuance, sale or exchange plus the number of shares of Common Stock which
could be purchased at the Fair Market Value of a share of Common Stock at the
time of such issuance, sale or exchange for the maximum aggregate consideration
paid therefor.
(ii) In the event that the Corporation shall, at any time
or from time to time while any Class B Preferred Stock is outstanding, issue,
sell or exchange any right or warrant to purchase or acquire shares of Common
Stock (including as such a right or warrant any security convertible into or
exchangeable for shares of Common Stock other than pursuant to (x) any employee
or director incentive, compensation or benefit plan or arrangement of the
Corporation or any subsidiary of the Corporation heretofore or hereafter
adopted and (y) any dividend or distribution on shares of Common Stock
contemplated in Section 9(A)(1)) for a consideration having a Fair Market
Value, on the date of such issuance, sale or exchange, less than the
Non-Dilutive Amount (as defined in Section 9(G)(3) hereof), then, in such
event, the Board of Directors shall, to the extent legally permissible, declare
a Special Dividend in such a manner that a holder of Class B Preferred Stock
will become the holder of that number of shares of Class B Preferred Stock
equal to the product of the number of such shares held prior to such event
times a fraction (the "Sec. 9(C)(1)(ii) Non-Dilutive Share Fraction"), the
numerator of which is the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of shares
of Common Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Common Stock which could be purchased at
the Fair Market Value of a share of Common Stock at the time of such issuance
for the total of (x) the maximum
34
aggregate consideration payable at the time of the issuance, sale or exchange
of such right or warrant and (y) the maximum aggregate consideration payable
upon exercise in full of all such rights or warrants.
(iii) A Special Dividend declared pursuant to this Section
9(C)(1) shall be effective upon the effective date of such issuance, sale or
exchange. Concurrently with the declaration of the Special Dividend pursuant to
this Section 9(C)(1), the Conversion Price, the Liquidation Price and the
Regular Preferred Dividend Rate of all shares of Class B Preferred Stock shall
be adjusted by dividing the Conversion Price, the Liquidation Price and the
Regular Preferred Dividend Rate, respectively, in effect immediately before
such event by the Sec. 9(C)(1)(i) or Sec. 9(C)(1)(ii) Non-Dilutive Share
Fraction, as the case may be.
(2) The Corporation and the Board of Directors shall each use
its best efforts to take all necessary steps or to take all actions as are
reasonably necessary or appropriate for declaration of the Special Dividend
provided in Section 9(C)(1)(i) or (ii) but shall not be required to call a
special meeting of shareholders in order to implement the provisions thereof.
If for any reason the Board of Directors is precluded from giving full effect
to any Special Dividend provided in Section 9(C)(1), then no such Special
Dividend shall be declared, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect
immediately before the event by the Sec. 9(C)(1)(i) or Sec. 9(C)(1)(ii)
Non-Dilutive Share Fraction, as the case may be, and the Liquidation Price and
the Regular Preferred Dividend Rate will not be adjusted. An adjustment to the
Conversion Price made pursuant to this Section 9(C)(2) shall be given effect
upon the effective date of such issuance, sale or exchange. If subsequently the
Board of Directors is able to give full effect to the Special Dividend as
provided in Section 9(C)(1), then such Special Dividend will be declared and
other adjustments will be made in accordance with the provisions of Section
9(C)(1) and the adjustment in the Conversion Price as provided in this Section
9(C)(2) will automatically be reversed and nullified prospectively.
(D)(1) Subject to the provisions of Section 9(E), in the event the
Corporation shall, at any time or from time to time while any of the shares of
Class B Preferred Stock are outstanding, make an Extraordinary Distribution (as
defined in Section 9(G)(1) hereof) in respect of the Common Stock, whether by
dividend, distribution, reclassification of shares or recapitalization of the
Corporation (including capitalization or reclassification effected by a merger
or consolidation to which Section 8 hereof does not apply) or effect a Pro Rata
Repurchase (as defined in Section 9(G)(4) hereof) of Common Stock, then, in
such event, the Board of Directors shall, to the extent legally permissible,
declare a Special Dividend in such a manner that a holder of Class B Preferred
Stock will become a holder of that number of shares of Class B Preferred Stock
equal to the product of the number of such shares held prior to such event
times a fraction (the "Sec. 9(D) Non-Dilutive Share Fraction"), the numerator
of which is the product of (a) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata Repurchase
minus, in the case of a Pro Rata Repurchase, the number of shares of Common
Stock repurchased by the Corporation multiplied by (b) the Fair Market Value of
a share of Common Stock on the day before the ex-dividend date with respect to
an Extraordinary Distribution which is paid in cash and on the distribution
date with respect to an Extraordinary Distribution which is paid other than in
cash, or on the applicable expiration date (including all extensions thereof)
of any tender offer which is a Pro Rata Repurchase or on the date of purchase
with respect to any Pro Rata Repurchase which is not a
35
tender offer, as the case may be, and the denominator of which is (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution or Pro Rata Repurchase multiplied by (y)
the Fair Market Value of a share of Common Stock on the day before the
ex-dividend date with respect to an Extraordinary Distribution which is paid in
cash and on the distribution date with respect to an Extraordinary Distribution
which is paid other than in cash, or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of the
Pro Rata Repurchase, as the case may be. The Corporation shall send each holder
of Class B Preferred Stock (i) notice of its intent to make an Extraordinary
Distribution and (ii) notice of any offer by the Corporation to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as practicable after,
such offer is first communicated to holders of Common Stock or, in the case of
an Extraordinary Distribution, the announcement of a record date in accordance
with the rules of any stock exchange on which the Common Stock is listed or
admitted to trading. Such notice shall indicate the intended record date and
the amount and nature of such dividend or distribution, or the number of shares
subject to such offer for a Pro Rata Repurchase and the purchase price payable
by the Corporation pursuant to such offer, as well as the Conversion Price and
the number of shares of Common Stock into which a share of Class B Preferred
Stock may be converted at such time. Concurrently with the Special Dividend
paid pursuant to this Section 9(D)(1), the Conversion Price, the Liquidation
Price and the Regular Preferred Dividend Rate of all shares of Class B
Preferred Stock shall be adjusted by dividing the Conversion Price, the
Liquidation Price and the Regular Preferred Dividend Rate, respectively, in
effect immediately before such Extraordinary Distribution or Pro Rata
Repurchase by the Sec. 9(D) Non-Dilutive Share Fraction determined pursuant to
this Section 9(D)(1).
(2) The Corporation and the Board of Directors shall each use
its best efforts to take all necessary steps or to take all actions as are
reasonably necessary or appropriate for declaration of the Special Dividend
provided in Section 9(D)(1) but shall not be required to call a special meeting
of shareholders in order to implement the provisions thereof. If for any reason
the Board of Directors is precluded from giving full effect to the Special
Dividend provided in Section 9(D)(1), then no such Special Dividend shall be
declared, but instead the Conversion Price shall automatically be adjusted by
dividing the Conversion Price in effect immediately before the event by the
Sec. 9(D) Non-Dilutive Share Fraction, and the Liquidation Price and the
Regular Preferred Dividend Rate will not be adjusted. If subsequently the Board
of Directors is able to give full effect to the Special Dividend as provided in
Section 9(D)(1), then such Special Dividend will be declared and other
adjustments will be made in accordance with the provisions of Section 9(D)(1)
and the adjustment in the Conversion Price as provided in this Section 9(D)(2)
will automatically be reversed and nullified prospectively.
(E) Notwithstanding any other provision of this Section 9, the
Corporation shall not be required to make (i) any Special Dividend or any
adjustment of the Conversion Price, the Liquidation Price or the Regular
Preferred Dividend Rate unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of shares of Class B
Preferred Stock outstanding, or, (ii) if no additional shares of Class B
Preferred Stock are issued, any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%)
in the Conversion Price. Any lesser adjustment
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shall be carried forward and shall be made no later than the time of, and
together with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the number of shares of Class B
Preferred Stock outstanding or, if no additional shares of Class B Preferred
Stock are being issued, an increase or decrease of at least one percent (1%) of
the Conversion Price, whichever the case may be.
(F) If the Corporation shall make any dividend or distribution
on the Common Stock or issue any Common Stock, other capital stock or other
security of the Corporation or any rights or warrants to purchase or acquire
any such security, which transaction does not result in an adjustment to the
number of shares of Class B Preferred Stock outstanding or the Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Corporation may, in its sole discretion, consider whether such action is
of such a nature that some type of equitable adjustment should be made in
respect of such transaction. If in such case the Board of Directors of the
Corporation determines that some type of adjustment should be made, an
adjustment shall be made effective as of such date as determined by the Board
of Directors of the Corporation. The determination of the Board of Directors of
the Corporation as to whether some type of adjustment should be made pursuant
to the foregoing provisions of this Section 9(F), and, if so, as to what
adjustment should be made and when, shall be final and binding on the
Corporation and all shareholders of the Corporation. The Corporation shall be
entitled to make such additional adjustments, in addition to those required by
the foregoing provisions of this Section 9, as shall be necessary in order that
any dividend or distribution in shares of capital stock of the Corporation,
subdivision, reclassification or combination of shares of the Corporation or
any recapitalization of the Corporation shall not be taxable to holders of the
Common Stock.
(G) For purposes hereof, the following definitions shall apply:
(1) "Extraordinary Distribution" shall mean any dividend or
other distribution to holders of Common Stock effected while any of the shares
of Class B Preferred Stock are outstanding of (i) cash or (ii) any shares of
capital stock of the Corporation (other than shares of Common Stock), other
securities of the Corporation (other than securities of the type referred to in
Section 9(B)), evidences of indebtedness of the Corporation or any other person
or any other property (including shares of any subsidiary of the Corporation),
or any combination thereof, where the aggregate amount of such cash dividend or
other distribution together with the amount of all cash dividends and other
distributions made during the preceding period of twelve (12) months, when
combined with the aggregate amount of all Pro Rata Repurchases (for this
purpose, including only that portion of the aggregate purchase price of such
Pro Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the applicable expiration date (including
all extensions thereof) of any tender offer or exchange offer which is a Pro
Rata Repurchase, or the date of purchase with respect to any other Pro Rata
Repurchase which is not a tender offer or exchange offer) made during such
period, exceeds twelve and one-half percent (12.5%) of the aggregate Fair
Market Value of all shares of Common Stock outstanding on the day before the
ex-dividend date with respect to such Extraordinary Distribution which is paid
in cash and on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash. The Fair Market Value of an
Extraordinary Distribution for purposes of Section 9(D) shall be the sum of the
Fair Market Value of such Extraordinary Distribution plus the aggregate amount
of any cash dividends or
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other distributions which are not Extraordinary Distributions made during such
twelve month period and not previously included in the calculation of an
adjustment pursuant to Section 9(D), but shall exclude the aggregate amount of
regular quarterly dividends declared by the Board of Directors and paid by the
Corporation in such twelve month period.
(2) "Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation or any
other issuer which are publicly traded, the average of the Current Market
Prices (as hereinafter defined) of such shares or securities for each day of
the Adjustment Period (as hereinafter defined). "Current Market Price" of
publicly traded shares of Common Stock or any other class of capital stock or
other security of the Corporation or any other issuer for a day shall mean the
last reported sales price, regular way, or, in case no sale takes place on such
day, the average of the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange Composite Tape or, if
such security is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which such security
is listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, on the NASDAQ National Market System or, if
such security is not quoted on such National Market System, the average of the
closing bid and asked prices on each such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such security on each such
day shall not have been reported through NASDAQ, the average of the bid and
asked prices for such day as furnished by any New York Stock Exchange member
firm regularly making a market in such security selected for such purpose by
the Board of Directors of the Corporation on each trading day during the
Adjustment Period. "Adjustment Period" shall mean the period of five
consecutive trading days, selected by the Board of Directors of the
Corporation, during the twenty (20) trading days preceding, and including, the
date as of which the Fair Market Value of a security is to be determined. The
"Fair Market Value" of any security which is not publicly traded or of any
other property shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the valuation
of such securities or property selected in good faith by the Board of Directors
of the Corporation, or, if no such investment banking or appraisal firm is in
the good faith judgment of the Board of Directors available to make such
determination, as determined in good faith by the Board of Directors of the
Corporation.
(3) "Non-Dilutive Amount" in respect of an issuance, sale or
exchange by the Corporation of any right or warrant to purchase or acquire
shares of Common Stock (including any security convertible into or exchangeable
for shares of Common Stock) shall mean the difference between (i) the product
of the Fair Market Value of a share of Common Stock on the day preceding the
first public announcement of such issuance, sale or exchange multiplied by the
maximum number of shares of Common Stock which could be acquired on such date
upon the exercise in full of such rights or warrants (including upon the
conversion or exchange of all such convertible or exchangeable securities),
whether or not exercisable (or convertible or exchangeable) at such date, and
(ii) the aggregate amount payable pursuant to such right or warrant to purchase
or acquire such maximum number of shares of Common Stock; provided, however,
that in no event shall the Non-Dilutive Amount be less than zero. For purposes
of the foregoing sentence, in the case of a security convertible into or
exchangeable for shares of Common Stock, the amount payable pursuant to a right
or warrant to purchase or acquire shares of Common Stock shall be the Fair
Market Value of such security on the date of the issuance, sale or exchange of
such security by the Corporation.
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(4) "Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or any subsidiary thereof, whether for cash,
shares of capital stock of the Corporation, other securities of the
Corporation, evidences of indebtedness of the Corporation or any other person
or any other property (including shares of a subsidiary of the Corporation ),
or any combination thereof, effected while any of the shares of Class B
Preferred Stock are outstanding, pursuant to any tender offer or exchange offer
subject to Section 13(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor provision of law, or pursuant to any
other offer available to substantially all holders of Common Stock, provided,
however, that no purchase of shares by the Corporation or any subsidiary
thereof made in open market transactions shall be deemed a Pro Rata Repurchase.
For purposes of this Section 9(G), shares shall be deemed to have been
purchased by the Corporation or any subsidiary thereof "in open market
transactions" if they have been purchased substantially in accordance with the
requirements of Rule 10b-18 as in effect under the Exchange Act on the date
shares of Class B Preferred Stock are initially issued by the Corporation or on
such other terms and conditions as the Board of Directors of the Corporation
shall have determined are reasonably designed to prevent such purchases from
having a material effect on the trading market for the Common Stock.
(H) Whenever an adjustment increasing the number of shares of
Class B Preferred Stock outstanding is required pursuant hereto, the Board of
Directors shall take action as is necessary so that a sufficient number of
shares of Class B Preferred Stock are designated with respect to such increase
resulting from such adjustment. Whenever an adjustment to the Conversion Price,
the Liquidation Price or the Regular Preferred Dividend Rate of the Class B
Preferred Stock is required pursuant hereto, the Corporation shall forthwith
place on file with the transfer agent for the Common Stock and the Class B
Preferred Stock, if there be one, and with the Treasurer of the Corporation, a
statement signed by the Treasurer or any Assistant Treasurer of the Corporation
stating the adjusted Conversion Price, Liquidation Price and Regular Preferred
Dividend Rate determined as provided herein. Such statement shall set forth in
reasonable detail such facts as shall be necessary to show the reason and the
manner of computing such adjustment, including any determination of Fair Market
Value involved in such computation. Promptly after each adjustment to the
number of shares of Class B Preferred Stock outstanding, the Conversion Price,
the Liquidation Price or the Regular Preferred Dividend Rate, the Corporation
shall mail a notice thereof and of the then prevailing number of shares of
Class B Preferred Stock outstanding, the Conversion Price, the Liquidation
Price and the Regular Preferred Dividend Rate to each holder of shares of Class
B Preferred Stock.
10. Miscellaneous
(A) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
receipt thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms hereof) with postage prepaid, addressed: (i) if to
the Corporation, to its office at 5959 Las Colinas Boulevard, Irving, Texas
75039 (Attention: Treasurer) or to the transfer agent for the Class B Preferred
Stock, or other agent of the Corporation designated as permitted hereby or (ii)
if to any holder of the Class B Preferred Stock or Common Stock, as the case
may be, to such holder at the address of such holder as listed in the stock
record books of the Corporation (which may include the records of any transfer
agent for the Class B Preferred Stock or Common Stock, as the case may be) or
(iii) to such other
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address as the Corporation or any such holder, as the case may be, shall have
designated by notice similarly given.
(B) The term "Common Stock" as used herein means the
Corporation's no par value common stock, as the same exists at the Effective
Date, or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to without par value, or from without par value to par
value. In the event that, at any time as a result of an adjustment made
pursuant to Section 9 hereof, the holder of any shares of the Class B Preferred
Stock upon thereafter surrendering such shares for conversion shall become
entitled to receive any shares or other securities of the Corporation other
than shares of Common Stock, the anti-dilution provisions contained in Section
9 hereof shall apply in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock, and the provisions
of Sections 1 through 8 and 10 hereof with respect to the Common Stock shall
apply on like or similar terms to any such other shares of securities.
(C) The term "Effective Date" shall mean the date of
effectiveness of the Certificate of Merger of Lion Acquisition Subsidiary
Corporation with and into Mobil Corporation filed in the office of the
Secretary of State of the State of Delaware.
(D) The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Class B Preferred Stock or shares of Common Stock or
other securities issued on account of Class B Preferred Stock pursuant thereto
or certificate representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax which may be payable in respect
of any transfer involved in the issuance or delivery of shares of Class B
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Class B Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid or is not payable.
(E) In the event that a holder of shares of Class B Preferred
Stock shall not by written notice designate the name in which shares of Common
Stock to be issued upon conversion of such shares should be registered or to
whom payment upon redemption of shares of Class B Preferred Stock should be
made or the address to which the certificate or certificates representing such
shares, or such payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the holder of such
Class B Preferred Stock as shown on the records of the Corporation and to send
the certificate or certificates or other documentation representing such
shares, or such payment, to the address of such holder shown on the records of
the Corporation.
(F) The Corporation may appoint, and from time to time discharge
and change, a transfer agent for the Class B Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of Class
B Preferred Stock.
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(G) Any shares of Common Stock into which the shares of Class B
Preferred Stock shall be converted, may be uncertificated shares, provided that
________
the names of the holders of all uncertificated shares and the number of such
shares held by each holder shall be registered at the offices of the
Corporation or the transfer agent for such shares. In the event that any shares
shall be uncertificated, all references herein to surrender or issuance of
stock certificates shall have no application to such uncertificated shares.
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