NOTE 6 - Common and Preferred Shares
In September 1998, the company’s Board of Directors authorized the company to repurchase up to 40 million additional common shares over the subsequent two to three years, subject to market conditions. The company has repurchased approximately 106 million shares since 1994 pursuant to several authorizations, including 6 million under the current authorization. These plans are designed to allow the company to purchase shares, both to offset the issuance of new shares as part of employee compensation plans and to reduce shares outstanding.
Of the common shares authorized but unissued at December 31, 1999, 81 million shares were reserved for issuance for employee stock, employee benefit and dividend reinvestment plans, as well as a stock purchase agreement.
During 1999, the company entered into a stock purchase agreement that partially offsets the company’s exposure from its stock option program. The agreement matures in 2004 and provides for the purchase by the company of 7 million shares at an average price of approximately $146 per share. During the term of the agreement the company may periodically issue shares or receive shares from a third party so that the value of shares held by the third party equals the aggregate purchase price of $1,023 million. At maturity, the company may deliver the aggregate purchase price against delivery of the shares held by the third party, or elect a net cash or net share settlement. The purchase price may be prepaid in whole or in part at any time. This agreement is separate from the company’s previously authorized share repurchase program.
In 1987, Nippon Life purchased 13 million shares of Lehman 5% Series A Preferred Stock for $508 million. In 1990, the company gave Nippon Life the right to exchange these shares (subsequently exchanged by Lehman for Series B shares) into 6.24 million common shares of the company at any time through December 1999 at an exchange price of $81.46. In 1996, Nippon Life informed the company that it had reduced its holding of such preferred shares by approximately 30 percent but maintained the exchange rights related to the shares sold. In 1997, Nippon Life exchanged all of its remaining holdings of these preferred shares for approximately 4.4 million common shares of the company. In January 1998, the company purchased all of Nippon Life’s remaining exchange rights.
Common shares activity for each of the last three years ended December 31 was:
The Board of Directors is authorized to permit the company to issue up to 20 million preferred shares without further shareholder approval.
