Exhibit 4.1
DUKE ENERGY CORPORATION
and
THE BANK OF NEW YORK
Rights Agent
--------------------
Rights Agreement
Dated as of December 17, 1998
Table of Contents
Page
Section 1. Certain Definitions.............................................2
Section 2. Appointment of Rights Agent.....................................6
Section 3. Issue of Rights Certificates....................................7
Section 4. Form of Rights Certificates.....................................9
Section 5. Countersignature and Registration..............................11
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates............................................12
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.........................................................13
Section 8. Cancellation of Rights Certificates............................17
Section 9. Reservation and Availability of Capital Stock..................17
Section 10. Preference Stock Record Date...................................20
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights............................................21
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares.........................................................35
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power..................................................35
Section 14. Fractional Rights and Fractional Shares........................39
Section 15. Rights of Action...............................................41
Section 16. Agreement of Rights Holders....................................42
Section 17. Rights Certificate Holder Not Deemed a Shareholder.............43
Section 18. Concerning the Rights Agent....................................44
Section 19. Merger or Consolidation or Change of Name of Rights
Agent..........................................................44
Section 20. Duties of Rights Agent.........................................45
Section 21. Change of Rights Agent.........................................50
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Section 22. Issuance of New Rights Certificates............................51
Section 23. Redemption and Termination.....................................52
Section 24. Exchange.......................................................53
Section 25. Notice of Certain Events.......................................56
Section 26. Notices........................................................58
Section 27. Supplements and Amendments.....................................59
Section 28. Successors.....................................................60
Section 29. Determinations and Actions by the Board of Directors,
etc............................................................60
Section 30. Benefits of this Agreement.....................................61
Section 31. Severability...................................................61
Section 32. Governing Law..................................................61
Section 33. Counterparts...................................................62
Section 34. Descriptive Headings...........................................62
Exhibit A -- Form of Articles of Amendment
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
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RIGHTS AGREEMENT, dated as of December 17, 1998 (the "Agreement"),
between Duke Energy Corporation, a North Carolina corporation (the
"Corporation"), and The Bank of New York, a New York banking corporation, as
Rights Agent (the "Rights Agent", which term shall include any successor Rights
Agent hereunder).
W I T N E S S E T H
WHEREAS, on December 17, 1998, the Board of Directors of the
Corporation authorized and declared, subject to receipt by the Corporation of
certain regulatory approvals, a dividend distribution of one Preference Stock
Purchase Right (each, a "Right") for each share of common stock, without par
value, of the Corporation (the "Common Stock") outstanding at the close of
business on a record date (the "Record Date") to be fixed by the Management
Committee of the Board of Directors upon receipt of such approvals; and
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Corporation issued between the Record Date and the Distribution
Date (as hereinafter defined), each Right initially representing the right to
purchase one ten-thousandth (1/10,000) of a share of Series A Participating
Preference Stock, $100 par value, of the Corporation, having the preferences,
limitations and relative rights set forth in the form of Articles of Amendment
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, on February 9, 1999 (the "Rights Dividend Distribution
Date"), the Management Committee of the Board of Directors, after receipt by the
Corporation of all requisite regulatory approvals, fixed February 22, 1999 as
the Record Date for the dividend distribution;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Corporation, any Subsidiary of the Corporation,
any employee benefit plan or employee stock plan of the Corporation or of any
Subsidiary of the Corporation, or any trust or other entity organized,
appointed, established or holding Common Stock for or pursuant to the terms of
any such plan, or (ii) any Person, together with all Affiliates and Associates
of such Person, who or which would be an Acquiring Person solely by reason of
(x) being the Beneficial Owner of shares of Common Stock, the Beneficial
Ownership of which was acquired by such Person pursuant to any action or
transaction or series of related actions or transactions approved by the Board
of Directors of the Corporation before such Person otherwise became an Acquiring
Person, or (y) a reduction in the number of issued and outstanding shares of
Common Stock pursuant to a transaction or a series of related transactions
approved by the Board of Directors of the Corporation (provided that, in case
the Person set forth in clause (ii) does not become an Acquiring Person by
reason of clause (x) or (y) above, such Person set forth in clause (ii) shall
nonetheless become an Acquiring Person upon acquisition of any additional shares
of Common Stock unless such acquisition of additional Common Stock will not
result in such Person or group becoming an Acquiring Person by reason of such
clause (x) or (y)). Notwithstanding the foregoing, if the Board of Directors of
the Corporation determines in good faith that a Person
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who would otherwise be an "Acquiring Person" as defined pursuant to the
foregoing provisions of this paragraph (a) has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person" as
defined pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed an "Acquiring Person" for any purposes of this
Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution
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Date or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether
or not in writing; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given
in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or Associates)
has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except pursuant
to a revocable proxy or consent as described in the proviso to
subparagraph (ii) of this paragraph (c)) or disposing of any voting
securities of the Corporation; provided, however, that nothing in this
paragraph (c) shall cause a Person engaged in business as an
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underwriter of securities to be deemed the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
p.m., New York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" shall mean the common stock, without par
value, of the Corporation, except that "Common Stock" when used with reference
to any Person other than the Corporation shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(g) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(h) "Preference Stock" shall mean shares of Series A
Participating Preference Stock, $100 par value, of the Corporation, and, to the
extent that there are not a sufficient number of shares of Series A
Participating Preference Stock authorized to permit the full exercise of the
Rights, any other series of Preference Stock, $100 par value, of the Corporation
designated for such purpose containing terms substantially similar to the terms
of the Series A Participating Preference Stock.
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(i) "Section 11(a)(ii) Event" shall mean an event described
in Section 11(a)(ii) hereof.
(j) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(k) "Stock Acquisition Date" shall mean the
first date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Corporation or an Acquiring Person that an Acquiring Person
has become such.
(l) "Subsidiary" shall mean, with reference to any Person,
any corporation or other entity of which an amount of securities or other
ownership interests having voting power sufficient to elect at least a majority
of the directors or other persons performing similar functions are beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(m) "Trading Day" shall have the meaning set forth in
Section 11(d)(i) hereof.
(n) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Corporation hereby
appoints the Rights Agent to act as agent for the Corporation in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable upon prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such Co-Rights Agent.
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Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), or (ii) the close of business on the tenth business day (or such
later date as the Board of Directors of the Corporation shall determine) after
the date of the commencement of, or first public announcement of the intent of
any Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan or employee stock plan of the Corporation or of any
Subsidiary of the Corporation, or any Person or entity organized, appointed or
established by the Corporation for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (c) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Corporation). The Corporation shall
give the Rights Agent prompt written notice of the Distribution Date. As soon as
practicable after the Distribution Date and receipt of written notice of the
Distribution Date from the Corporation, the Rights Agent will, at the expense of
the Corporation, send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Corporation, one or more rights certificates, in substantially the form of
Exhibit B hereto (the
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"Rights Certificates"), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per share of Common Stock has been made pursuant to
Section 11(p) hereof, at the time of distribution of the Rights Certificates,
the Corporation may make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date,
the Corporation will send a copy of a Summary of Rights, in substantially the
form attached hereto as Exhibit C (the "Summary of Rights"), by first-class,
postage prepaid mail, to each record holder of Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Corporation. With respect to certificates for Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date (as such term is defined
in Section 7 hereof), the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of
Common Stock which are issued after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
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This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between
Duke Energy Corporation (the "Corporation") and The Bank of
New York (the "Rights Agent") dated as of December 17, 1998
(the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal offices of the Corporation. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The
Corporation will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
9
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. The Rights Certificates
shall be in a machine-printable format and in a form reasonably satisfactory to
the Rights Agent. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the Record
Date, show the date of countersignature, and on their face shall entitle the
holders thereof to purchase such number of one ten-thousandths of a share of
Preference Stock as shall be set forth therein at the price set forth therein
(such exercise price per one ten-thousandth of a share, the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)
or Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Corporation has
determined is part of a plan, arrangement or understanding which has the purpose
or effect of avoiding the provisions of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other
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Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Agreement.
The Corporation shall instruct the Rights Agent in writing of the
Rights which should be so legended and shall (to the extent feasible) supply the
Rights Agent with such legended Rights Certificates.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of
the Corporation by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Corporation's seal or a facsimile thereof which shall be attested by
the Secretary or an Assistant Secretary of the Corporation, either manually or
by facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent manually and shall not be valid for any purpose unless so
countersigned. In case any officer of the Corporation who shall have signed any
of the Rights Certificates shall cease to be such officer of the Corporation
before countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Corporation; and any Rights Certificates may be signed
on behalf of the Corporation by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper
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officer of the Corporation to sign such Rights Certificate, although at the date
of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e),
Section 14 and Section 24 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of one ten-thousandths of a
share of Preference Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Corporation shall be obligated to
take any action whatsoever with respect to the transfer of
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any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Corporation shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 24 hereof, countersign and deliver to the Person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Corporation may require payment by holders of the Rights of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Corporation and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Corporation and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Rights
Certificate, if mutilated, the Corporation will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date
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upon surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one ten-thousandths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the close of business on
December 16, 2008 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof or (iii) the date on which
such Rights are exchanged as provided in Section 24 hereof (the earliest of (i),
(ii) and (iii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one ten-thousandth of a
share of Preference Stock pursuant to the exercise of a Right shall initially be
$190, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one ten-thousandth of a share of Preference Stock (or
other securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preference Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one ten-thousandths of a share of
Preference Stock to be purchased and the Corporation hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Corporation shall have elected to
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deposit the total number of shares of Preference Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one ten-thousandths of a
share of Preference Stock as are to be purchased (in which case certificates for
the shares of Preference Stock represented by such receipts shall be deposited
by the transfer agent with the depositary agent) and the Corporation will direct
the depositary agent to comply with such request, (ii) requisition from the
Corporation the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to, or upon the order of,
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to, or upon the order of, the registered holder of
such Rights Certificate. The payment of the Purchase Price (as such amount may
be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable to the order of the Corporation. In
the event that the Corporation is obligated to issue other securities (including
Common Stock) of the Corporation, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Corporation will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate. The
Corporation reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preference Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered
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to, or upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, subject to
the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Corporation has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the provisions of this
Section 7(e), shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Corporation shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Rights Certificates or other Person as a result of
its failure to make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Corporation shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this
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Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Corporation
shall reasonably request.
Section 8. Cancellation of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Corporation shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Corporation.
Section 9. Reservation and Availability of Capital Stock.
(a) The Corporation covenants and agrees that it will cause
to be reserved and kept available out of its authorized and unissued shares of
Preference Stock (and, following the occurrence of a Triggering Event, out of
its authorized and unissued shares of Common Stock and/or other securities), the
number of shares of Preference Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit
the exercise in full of all outstanding Rights.
17
(b) So long as the shares of Preference Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Corporation shall use its
reasonable best efforts to cause, from and after such time as the Rights become
exercisable (but only to the extent that it is reasonably likely that the Rights
will be exercised), all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Corporation shall use its reasonable best efforts to
(i) file, as soon as practicable following the earliest date after the first
occurrence of a Section 11(a)(ii) Event on which the consideration to be
delivered by the Corporation upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Corporation
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Corporation may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in clause
(i) of the first sentence of this Section 9(c), the exercisability of the Rights
in order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Corporation shall issue a public
announcement stating that the exercisability
18
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect, in each case with
simultaneous written notice to the Rights Agent. In addition, if the Corporation
shall determine that a registration statement is required following the
Distribution Date, the Corporation may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been declared
effective. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law or a registration statement
shall not have been declared effective. The Rights Agent may assume, unless
notified in writing to the contrary by the Corporation, that any Right exercised
is permitted to be exercised under applicable law and shall have no liability
for acting in reliance upon such assumption.
(d) The Corporation covenants and agrees that it will take
all such action as may be necessary to ensure that all one ten-thousandths of a
share of Preference Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Corporation further covenants and agrees that it
will pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for a number of one ten-thousandths
of a share of Preference Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Corporation shall not, however, be
required
19
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one ten-thousandths of a share of Preference Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one ten-thousandths of a share of Preference Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Corporation's
satisfaction that no such tax is due.
Section 10. Preference Stock Record Date. Each person in whose name
any certificate for a number of one ten-thousandths of a share of Preference
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preference Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preference Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Corporation are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preference Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Corporation are open. Prior to the exercise of the Rights
20
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a shareholder of the Corporation with respect to shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Corporation, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after
the date of this Agreement (A) declare a dividend on the Preference Stock
payable in shares of Preference Stock, (B) subdivide the outstanding Preference
Stock, (C) combine the outstanding Preference Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification of
the Preference Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and Section
7(e) hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preference Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preference Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preference Stock transfer books of the
Corporation were open,
21
he would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the
event that any Person, alone or together with its Affiliates and
Associates, becomes an Acquiring Person, unless the event causing the 15%
threshold to be crossed is a transaction set forth in Section 13(a)
hereof, then, promptly following the occurrence of such event, proper
provision shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of a number of one
ten-thousandths of a share of Preference Stock, such number of shares of
Common Stock of the Corporation as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
ten-thousandths of a share of Preference Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and (y) dividing that product (which, following such
first occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized by the Corporation's Restated Articles of
Incorporation but not
22
outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Corporation shall: (A)
determine the value of the Adjustment Shares issuable upon the exercise of
a Right (the "Current Value"), and (B) with respect to each Right (subject
to Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Corporation
(including, without limitation, shares, or units of shares, of preferred
stock, such as the Preference Stock, which the Board of Directors of the
Corporation has deemed to have essentially the same value or economic
rights as shares of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt securities of the
Corporation, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value (less the amount of
any reduction in the Purchase Price), where such aggregate value has been
determined by the Board of Directors of the Corporation based upon the
advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Corporation; provided, however, that if the
Corporation shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later
of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Corporation's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Corporation shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the
23
Purchase Price, shares of Common Stock (to the extent available), and
then, if necessary, such number of shares of Preference Stock or fractions
thereof (to the extent available), and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. For
purposes of the preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase Price. If the Board
of Directors of the Corporation determines in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day period
set forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Corporation may seek shareholder approval for the authorization of
such additional shares (such thirty (30) day period, as it may be
extended, is herein called the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Corporation (1) shall provide, subject to Section
7(e) hereof, that such action shall apply uniformly to all outstanding
Rights, and (2) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek such shareholder
approval for such authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any such
suspension, the Corporation shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of each
Adjustment Share shall be the Current Market Price per share of the Common
Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit
value of any Common
24
Stock Equivalent shall be deemed to equal the Current Market Price per
share of the Common Stock on such date.
(b) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants to all holders of Preference Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preference Stock (or
shares having the same preferences, limitations and relative rights as the
shares of Preference Stock ("equivalent preference stock")) or securities
convertible into Preference Stock or equivalent preference stock at a price per
share of Preference Stock or per share of equivalent preference stock (or having
a conversion price per share, if a security convertible into Preference Stock or
equivalent preference stock) less than the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preference Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preference Stock outstanding on such record date, plus the number of shares
of Preference Stock which the aggregate offering price of the total number of
shares of Preference Stock and/or equivalent preference stock so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price, and the denominator
of which shall be the number of shares of Preference Stock outstanding on such
record date, plus the number of additional shares of Preference Stock and/or
equivalent preference stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as
25
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preference Stock owned by or held for the account of the Corporation shall not
be deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Corporation shall fix a record date for a
distribution to all holders of Preference Stock (including any such distribution
made in connection with a consolidation or merger in which the Corporation is
the continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend of the Corporation in compliance with Section
55-6-40 of the North Carolina Business Corporation Act), assets (other than a
dividend payable in Preference Stock, but including any dividend payable in
stock other than Preference Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preference Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Corporation,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preference Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per share of Preference Stock.
26
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
27
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors. If on any such date no market maker is
making a market in the Common Stock, the fair value of such shares on such date
as determined in good faith by the Board of Directors of the Corporation shall
be used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities exchange,
a Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preference Stock shall be determined in
the same manner as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last
28
sentence thereof). If the Current Market Price per share of Preference
Stock cannot be determined in the manner provided above or if the
Preference Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the Current Market Price
per share of Preference Stock shall be conclusively deemed to be an amount
equal to 10,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied
by the Current Market Price per share of the Common Stock. If neither the
Common Stock nor the Preference Stock is publicly held or so listed or
traded, Current Market Price per share of the Preference Stock shall mean
the fair value per share as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock or other share or hundred-millionth of a share of Preference Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
29
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preference Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preference Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preference
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
ten-thousandths of a share of Preference Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Corporation shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one ten-thousandths of a share of Preference Stock (calculated to the nearest
hundred-millionth) obtained by (i) multiplying (x) the number of one
ten-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
30
(i) The Corporation may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one ten-thousandths of a share of Preference Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one ten-thousandths of a share of Preference Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Corporation, shall cause to be distributed to such
holders of record in substitution and replacement for the Rights Certificates
held by such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Corporation, new Rights Certificates evidencing all
the Rights to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned in
the manner provided for herein (and may bear, at the option of the Corporation,
the adjusted Purchase Price) and shall be registered in the names of the holders
of record of Rights Certificates on the record date specified in the public
announcement.
31
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one ten-thousandths of a share of Preference Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
ten-thousandth of a share and the number of one ten-thousandths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one ten-thousandths of a share of Preference Stock issuable upon exercise of
the Rights, the Corporation shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable such number of one
ten-thousandths of a share of Preference Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one ten-thousandths of a share of Preference Stock and other
capital stock or securities of the Corporation, if any, issuable upon such
exercise over and above the number of one ten-thousandths of a share of
Preference Stock and other capital stock or securities of the Corporation, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Corporation shall deliver
to such holder a due bill or other appropriate instrument evidencing
32
such holder's right to receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Corporation shall be entitled to make such reductions in
the Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Corporation shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preference Stock, (ii) issuance wholly
for cash of any shares of Preference Stock at less than the current market
price, (iii) issuance wholly for cash of shares of Preference Stock or
securities which by their terms are convertible into or exchangeable for shares
of Preference Stock, (iv) stock dividends, or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Corporation to
holders of its Preference Stock shall not be taxable to such shareholders.
(n) The Corporation covenants and agrees that it shall not,
at any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Corporation in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Corporation in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o) hereof), if (x) at
the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
shareholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.
33
(o) The Corporation covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Corporation shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable 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, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
34
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Corporation shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preference Stock and the Common Stock, a copy of such certificate,
and (c) mail, or cause the Rights Agent to mail, a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock) in accordance with
Section 26 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition
Date, directly or indirectly, (x) the Corporation shall consolidate with, or
merge with and into, any other Person (other than a Subsidiary of the
Corporation in a transaction which complies with Section 11(o) hereof), and the
Corporation shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Corporation in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Corporation, and the Corporation
shall be the continuing or surviving corporation of such consolidation or merger
and, in connection with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or the Corporation or cash or any other
property, or (z) the
35
Corporation shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Corporation and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Corporation or any Subsidiary of the
Corporation in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one ten-thousandths of a share of
Preference Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one ten-thousandths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the Current Market Price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Corporation
pursuant to this Agreement; (iii) the term "Corporation" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
36
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Corporation are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in
any such case, (1) if the Common Stock of such Person is not at such time
and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of two or more of
which are and have been so registered,
37
"Principal Party" shall refer to whichever of such Persons is the issuer
of the Common Stock having the greatest aggregate market value.
(c) The Corporation shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Corporation and
such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
38
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall, subject to the
provisions of Section 7(e) hereof, thereafter become exercisable in the manner
described in Section 13(a).
(d) In no event shall the Rights Agent have any liability in
respect of any such Principal Party transactions, including, without limitation,
the propriety thereof. The Rights Agent may rely and be fully protected in
relying upon a certificate of the Corporation stating that the provisions of
this Section 13 have been fulfilled. Notwithstanding anything in this Agreement
to the contrary, the prior written consent of the Rights Agent must be obtained
in connection with any supplemental agreement which alters in any adverse manner
the rights or duties of the Rights Agent.
Section 14. Fractional Rights and Fractional Shares.
(a) The Corporation shall not be required to issue fractions
of Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there may be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as
39
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Corporation. If on any such date no such market maker is making
a market in the Rights the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Corporation shall be used.
(b) The Corporation shall not be required to issue fractions
of shares of Preference Stock (other than fractions which are integral multiples
of one ten-thousandth of a share of Preference Stock, which may, at the option
of the Corporation, be evidenced by depositary receipts) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preference Stock (other than fractions which are integral multiples of one
ten-thousandth of a share of Preference Stock). In lieu of fractional shares of
Preference Stock that are not integral multiples of one ten-thousandth of a
share of Preference Stock, the Corporation may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
ten-thousandth of a share of Preference Stock. For purposes of this Section
14(b),
40
the current market value of one ten-thousandth of a share of Preference
Stock shall be one ten-thousandth of the closing price of a share of Preference
Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Corporation shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Corporation may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate
41
in the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Corporation and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Corporation and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
42
(d) notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall have any liability
to any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Corporation must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
ten-thousandths of a share of Preference Stock or any other securities of the
Corporation which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Corporation or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting shareholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
43
Section 18. Concerning the Rights Agent.
(a) The Corporation agrees to pay to the Rights Agent such
compensation as shall be agreed to in writing between the Corporation and the
Rights Agent for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim (whether asserted by the Corporation, a holder of
Rights or any other Person) of liability in the premises. The provisions of this
Section 18(a) shall survive the expiration of the Rights and the termination of
this Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed and executed by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting
44
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall
45
be read into this Agreement against the Rights Agent, upon the following terms
and conditions, by all of which the Corporation and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Corporation), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or established by the
Corporation prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Corporation and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be
46
required to verify the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall be deemed to
have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of actual
notice of any such adjustment); nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Common Stock or Preference Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock
or Preference Stock will, when so issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or
47
any Assistant Treasurer of the Corporation, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions. Any application by the Rights Agent for written
instructions from the Corporation may, at the option of the Rights Agent, set
forth in writing any action proposed to be taken or omitted by the Rights Agent
under this Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in such application on or after the date specified in such
application (which date shall not be less than three Business Days after the
date any officer of the Corporation actually receives such application, unless
any such officer shall have consented in writing to any earlier date) unless
prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act,
48
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Corporation resulting from any such act, default, neglect or misconduct;
provided, however, reasonable care was exercised in the selection thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with the
Corporation.
(l) In addition to the foregoing, the Rights Agent shall
be protected and shall incur no liability for, or in respect of, any action
taken or omitted by it in connection with its administration of this Agreement
if such acts or omissions are in reliance upon (i) the proper execution of the
certification appended to the form of assignment and the form of election to
purchase attached hereto unless the Rights Agent shall have actual knowledge
that, as executed, such certification is untrue, or (ii) the non-execution of
such certification including, without limitation, any refusal to honor any
otherwise permissible assignment or election by reason of such non-execution.
49
(m) The Corporation agrees to give the Rights Agent prompt
written notice of any event or ownership which would prohibit the exercise or
transfer of the Rights Certificates.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Corporation,
and to each transfer agent of the Common Stock and Preference Stock, by
registered or certified mail. The Corporation may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preference Stock, by registered or certified mail.
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Corporation shall appoint a successor to the Rights
Agent. If the Corporation shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the
Corporation), then the Rights Agent, at the expense of the Corporation, or any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Corporation or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of New York (or of any other state of the United States), in good
standing, which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After
50
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Corporation shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preference Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Corporation
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Corporation
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, granted
or awarded as of the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Corporation, and (b) may, in
any other case, if deemed necessary or appropriate by the Board of Directors of
the Corporation, issue Rights
51
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Corporation shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Corporation or the Person to whom such Rights
Certificate would be issued, and (ii) no such Rights Certificate shall be issued
if, and to the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Corporation may, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth Business Day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth Business Day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding any action taken by any
Person or Persons subsequent to the date hereof, the Corporation's right of
redemption hereunder may be exercised only by the Board of Directors of the
Corporation acting solely in its discretion in accordance with its fiduciary
duties to the Corporation and its shareholders. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Corporation's right of redemption hereunder has expired.
52
(b) The Corporation may, at its option, pay the Redemption
Price in cash, shares of Common Stock (based on the "Current Market Price," as
defined in Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors of the Corporation.
(c) Immediately upon the action of the Board of Directors of
the Corporation ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors of the
Corporation ordering the redemption of the Rights, the Corporation shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) By the vote of the Board of Directors of the
Corporation, the Corporation may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights which have become void
pursuant to Section 7(e) hereof) for shares of Common Stock at an exchange rate
of one share of Common Stock per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (the "Exchange
53
Ratio"). Notwithstanding the foregoing, the Board of Directors of the
Corporation shall not be empowered to effect such exchange at any time after any
Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan or employee stock plan of the Corporation or of any
Subsidiary of the Corporation, or any Person or entity organized, appointed or
established by the Corporation for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock of the Corporation then
outstanding.
(b) Without any further action and without any notice, the
right to exercise the Rights to be so exchanged will terminate immediately upon
the action of the Board of Directors of the Corporation ordering the exchange
and the only right thereafter of each holder of such Rights, subject to the
limitations set forth in paragraph (a) of this Section, shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Corporation shall promptly give
notice of the exchange to the Rights Agent and holders of such Rights then
outstanding by mailing such notice to all such holders at their last addresses
as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice; provided, however, that
the failure to give, or any defect in, any such notice shall not affect the
validity of such exchange. Each such notice shall state the method by which the
exchange for Rights will be effected and, in the event of a partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to Section 7(e) hereof) held by each holder of Rights. In
any exchange pursuant to this
54
Section 24, the Corporation, at its option, may substitute Preference Stock (or
equivalent preference stock, as such term is defined in paragraph (b) of Section
11 hereof) for Common Stock exchangeable for Rights, at the initial rate of one
ten-thousandth of a share of Preference Stock (or equivalent preference stock)
for each share of Common Stock, as appropriately adjusted to reflect stock
splits, stock dividends and other similar transactions after the date hereof.
(c) In the event that there shall not be sufficient shares
of Common Stock or Preference Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Corporation shall either take such action as may be
necessary to authorize additional Common Stock or Preference Stock for issuance
upon exchange of the Rights or, alternatively, by the vote of the Board of
Directors of the Corporation with respect to each Right, (i) pay cash in an
amount equal to the Purchase Price, in lieu of issuing Common Stock or
Preference Stock in exchange therefor or (ii) issue debt or equity securities,
or a combination thereof, having a value equal to the Current Value (as
hereinafter defined) of the Common Stock or Preference Stock exchangeable for
each such Right, where the value of such securities shall be determined in good
faith by the Board of Directors of the Corporation or (iii) deliver any
combination of cash, property, Common Stock, Preference Stock and/or other
securities having a value equal to the Current Value in exchange for each Right.
The term "Current Value," for purposes of this Section 24, shall mean the
product of the per share market price of the Common Stock (determined pursuant
to Section 11(d) on the date of the occurrence of the event described above in
paragraph (a)) multiplied by the number of shares of Common Stock for which the
Right otherwise would be exchangeable if there were sufficient shares available.
To the extent that the Corporation determines that some
55
action need be taken pursuant to clauses (i), (ii) or (iii) of this Section
24(c), the Board of Directors of the Corporation may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Stock or Preference Stock and/or
to decide the appropriate form of distribution to be made pursuant to the above
provision and to determine the value thereof. In the event of any such
suspension, the Corporation shall issue a public announcement, with simultaneous
written notice to the Rights Agent, stating that the exercisability of the
Rights has been temporarily suspended.
(d) The Corporation shall not be required to issue fractions
of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock for purposes of this Section 24. In lieu of
such fractional shares of Common Stock, the Corporation shall pay to each
registered holder of a Rights Certificate with regard to which a fractional
share of Common Stock would otherwise be issuable an amount in cash equal to the
same fraction of the fair market value of a whole share of Common Stock. For the
purposes of this paragraph (d), the fair market value of a whole share of Common
Stock shall be the closing price of a share of Common Stock (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the
date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Corporation shall propose, at any time after
the Distribution Date, (i) to pay any dividend payable in stock of any class to
the holders of Preference Stock or to make any other distribution to the holders
of Preference Stock (other than a regular quarterly cash dividend of the
Corporation in compliance with Section 55-6-40 of the North Carolina Business
Corporation Act), or (ii) to offer to the holders of Preference Stock
56
rights or warrants to subscribe for or to purchase any additional shares of
Preference Stockor shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preference Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preference Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Corporation in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Corporation and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Corporation and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Corporation, then, in each such case, the
Corporation shall give to each holder of a Rights Certificate and to the Rights
Agent, to the extent feasible and in accordance with Section 26 hereof, a notice
of such proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding-up is to take place and the date of participation therein
by the holders of the shares of Preference Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least ten (10) days prior to the record date for
determining holders of the shares of Preference Stock for purposes of such
action, and in the case of any such other action, at least ten (10) days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Preference Stock, whichever shall be the
earlier.
57
(b) In case a Section 11(a)(ii) Event shall occur, then, in
any such case, (i) the Corporation shall as soon as practicable thereafter give
to each holder of a Rights Certificate and to the Rights Agent, to the extent
feasible and in accordance with Section 26 hereof, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preference Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Corporation shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Rights Agent) as follows:
Duke Energy Corporation
422 South Church Street
Charlotte, NC 28202
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Corporation or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Corporation) as follows:
The Bank of New York
101 Barclay Street 12 West
New York, New York 10286
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made
58
if sent by first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Corporation.
Section 27. Supplements and Amendments. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 27, the Corporation
and the Rights Agent shall, if the Board of Directors of the Corporation so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 27, the Corporation and the Rights Agent shall, if the Board of
Directors of the Corporation so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Corporation may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Rights Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Corporation which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be
59
made which changes the number of one ten-thousandths of a share of Preference
Stock for which a Right is exercisable or which advances the Final Expiration
Date nor may any amendment or supplement pursuant to this Section 27 alter in
any adverse manner the Rights Agent's rights or duties without the Rights
Agent's consent. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Corporation shall have the
exclusive power and authority to administer this Agreement and to exercise the
rights and powers specifically granted to the Board of Directors or to the
Corporation, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors of the Corporation in good faith,
shall (x) be final, conclusive and binding on the Corporation, the
60
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board of Directors of the Corporation to any liability to the
holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Corporation, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Corporation determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of North Carolina and for all purposes shall be governed
by and construed in accordance with the
61
laws of such State applicable to contracts made and to be performed entirely
within such State; provided, however, that the rights and obligations of the
Rights Agent shall be governed by and construed in accordance with the laws of
the State of New York.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: DUKE ENERGY CORPORATION
By: By:
------------------------------ --------------------------------------
Name: Richard W. Blackburn Name: Richard B. Priory
Title: Secretary Title: Chairman of the Board,
President and
Chief Executive Officer
Attest: THE BANK OF NEW YORK,
as Rights Agent
By: By:
------------------------------ --------------------------------------
Name: Name:
Title: Title: Vice President
63
Exhibit A
FORM OF ARTICLES OF AMENDMENT
of
DUKE ENERGY CORPORATION
The undersigned corporation hereby submits these Articles of
Amendment for the purpose of amending its Articles of Incorporation to fix the
designation, preferences, limitations and relative rights of a series of its
Preference Stock:
1. The name of the corporation is Duke Energy Corporation.
2. The following resolution relating to the fixing of the
designation, preferences, limitations and relative rights of the Series A
Participating Preference Stock, $100 par value, of the Corporation was duly
adopted by the Board of Directors of the Corporation at a meeting held on the
17th day of December, 1998, without shareholder approval, which was not required
because the Restated Articles of Incorporation of the Corporation provide that
the Board of Directors may determine the preferences, limitations and relative
rights of that class:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation (hereinafter the "Board of Directors"
or the "Board") by the Restated Articles of Incorporation, the Board of
Directors hereby creates a series of Preference Stock, par value $100 per share
(the "Series A Participating Preference Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the preferences,
limitations and relative rights thereof as follows:
Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preference Stock" (the "Series A
Preference Stock"), and the number of shares constituting the Series A
Preference Stock shall be 50,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Series A Preference Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preference Stock.
Dividends and Distributions. Subject to the rights of the holders of
any shares of any series of capital stock ranking prior and superior to the
Series A Preference Stock with respect to dividends, the holders of shares of
Series A Preference Stock, in preference to the holders of Common Stock, and of
any junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preference Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 10,000
A-1
times the aggregate per share amount of all cash dividends, and 10,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preference Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preference Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
The Board of Directors shall declare a dividend or distribution on
the Series A Preference Stock as provided in the first paragraph of this section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Preference Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
Dividends on shares of Series A Preference Stock shall be
cumulative: (i) on the first such shares issued, from the date of issuance; and
(ii) on any such shares issued thereafter, from the Quarterly Dividend Payment
Date next preceding the date of issuance. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preference Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preference
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Reacquired Shares. Any shares of Series A Preference Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preference Stock and may be reissued as part of a new series of Preference Stock
subject to the conditions and restrictions on issuance set forth in this
resolution, in the Restated Articles of Incorporation, or in any other Articles
of Amendment creating a series of Preference Stock or any similar stock or as
otherwise required by law.
Liquidation, Dissolution or Winding-Up. Upon any liquidation,
dissolution or winding-up of the Corporation (whether voluntary or involuntary),
no distribution shall be made
A-2
(1) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding-up) to the Series A Preference Stock
unless, prior thereto, the holders of shares of Series A Preference Stock shall
have received $100.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment; provided that the holders of shares of Series A Preference Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 10,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock or (2) to the holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding-up) with the Series A
Preference Stock, except distributions made ratably on the Series A Preference
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding-up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preference Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preference Stock shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 10,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preference Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Redemption. The outstanding shares of Series A Preference Stock may
be redeemed, at the option of the Board of Directors, in whole or in part, at
any time, or from time to time, at a cash price per share equal to (i) 100% of
the product of the Adjustment Number (as such term is hereinafter defined) times
the Average Market Value (as such term is hereinafter defined) of the Common
Stock, plus (ii) all dividends which on the redemption date have accrued on the
shares to be redeemed and have not been paid or declared and a sum sufficient
for the payment thereof set apart, without interest. The "Adjustment Number" is
10,000, provided,
A-3
however, that in the event the Corporation shall at any time after February 9,
1999 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event, and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. The "Average Market Value" is the
average of the closing sale prices of a share of the Common Stock during the
30-day period immediately preceding the date before the redemption date on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended, on
which such stock is listed, or, if such stock is not listed on any such
exchange, the average of the closing sale prices with respect to a share of
Common Stock during such 30-day period, as quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System or any system then in use,
or if no such quotations are available, the fair market value of a share of the
Common Stock, as determined by the Board of Directors in good faith.
Fractional Shares. Series A Preference Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preference Stock.
A-4
IN WITNESS WHEREOF, DUKE ENERGY CORPORATION has caused these
Articles of Amendment, which were duly adopted by the Board of Directors of the
Corporation on December 17, 1998, to be signed by its Chairman of the Board,
President and Chief Executive Officer and its Secretary and has caused its
corporate seal to be hereunto affixed, on this 9th day of February, 1999.
DUKE ENERGY CORPORATION
By:
-----------------------------------------
Name: Richard B. Priory
Title: Chairman of the Board, President
and Chief Executive Officer
Attest:
By:
------------------------------
Name: Richard W. Blackburn
Title: Secretary
A-5
Exhibit B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _____________ Rights
NOT EXERCISABLE AFTER DECEMBER 16, 2008 OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
CORPORATION, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1
Rights Certificate
DUKE ENERGY CORPORATION
This certifies that , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of December 17, 1998 (the "Rights Agreement"), between Duke
Energy Corporation, a North Carolina corporation (the "Corporation"), and The
Bank of New York, a New York banking corporation (the "Rights Agent"), to
purchase from the Corporation at any time prior to 5:00 p.m. (New York City
time) on December 16, 2008 at the office or offices of the Rights Agent
designated for such purpose, or its successor as Rights Agent, one
ten-thousandth of a fully paid, nonassessable share of Series A Participating
Preference Stock (the "Preference Stock") of the Corporation, at a purchase
price of $190 per one ten-thousandth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of February 9, 1999
based on the Preference Stock as constituted at such date.
- ----------------------
1 The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
B-1
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preference Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal offices of the
Corporation and are also available upon written request to the Corporation.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one ten-thousandths of a share of Preference
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at its option
at a redemption price of $.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth Business Day following the Stock Acquisition
Date, and (ii) the Final Expiration Date. In addition, subject to the provisions
of the Rights Agreement, the Rights may be exchanged under certain circumstances
by the Corporation, in whole or in part, for shares of Common Stock, or for
Preference Stock or shares of another series of preference stock of the
Corporation having equivalent preferences, limitations and relative rights.
Immediately upon the action of the Board of Directors of the Corporation
authorizing any such exchange, and without any further action or any notice, the
Rights (other than Rights which are not subject to such exchange) will terminate
and the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preference Stock are required to be issued
upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral
B-2
multiples of one ten-thousandth of a share of Preference Stock, which may, at
the election of the Corporation, be evidenced by depositary receipts), but in
lieu thereof a cash payment may be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of shares of
Preference Stock or any other securities of the Corporation which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Corporation or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to give or withhold consent to any corporate action, or,
to receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by an authorized signatory of the
Rights Agent.
B-3
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal.
Dated as of __________, ____
ATTEST: DUKE ENERGY CORPORATION
By:
- ------------------------------- -------------------------------------
Secretary Title:
Countersigned: Date:
----------------------------------
THE BANK OF NEW YORK
By:
----------------------------
Authorized Signatory
B-4
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________ hereby sells, assigns
and transfers unto _______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ,
---------------------- -------- ---------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ,
--------------------- --------- -------------------------------
Signature
Signature Guaranteed:
B-5
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-6
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate)
To: DUKE ENERGY CORPORATION:
The undersigned hereby irrevocably elects to exercise ____________
Rights represented by this Rights Certificate to purchase the shares of
Preference Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
- ---------------------------------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- ---------------------------------------------------------------------------
(Please print name and address)
- ---------------------------------------------------------------------------
Dated:
----------------------, ------ --------------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement); and
B-7
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
-----------------, ---- -------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-8
Exhibit C
FORM OF SUMMARY OF RIGHTS TO PURCHASE
SERIES A PARTICIPATING PREFERENCE STOCK
On December 17, 1998, the Board of Directors of Duke Energy
Corporation (the "Corporation") authorized and declared, subject to receipt of
certain regulatory approvals, a dividend distribution of one right (a "Right")
for each outstanding share of common stock, without par value, of the
Corporation (the "Common Stock") to shareholders of record at the close of
business on a record date to be fixed upon receipt of such approvals. On
February 9, 1999, after receipt of such approvals, the Management Committee of
the Board of Directors fixed February 22, 1999 as the record date. Each Right
entitles the registered holder to purchase from the Corporation a unit (a
"Unit") consisting of one ten-thousandth of a share of Series A Participating
Preference Stock, $100 par value, of the Corporation (the "Preference Stock"),
at a Purchase Price of $190 per Unit (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement (the "Rights Agreement"), dated as of December 17, 1998, between the
Corporation and The Bank of New York, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common Stock
and a Distribution Date will occur upon the earlier of (i) ten days following
public announcement that a person or group of affiliated or associated persons,
with such exceptions as are set forth in the Rights Agreement (an "Acquiring
Person"), has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock (the "Stock Acquisition
Date") or (ii) ten Business Days (or such later date as the Board of Directors
may determine) following the commencement of, or first public announcement of
the intent of a person or group to commence, a tender offer or exchange offer
that would result in a person or group (with such exceptions as are set forth in
the Rights Agreement) beneficially owning 15% or more of such outstanding shares
of Common Stock. Until the Distribution Date, (i) the Rights will be evidenced
by the Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after
February 22, 1999 will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Stock outstanding at the close of business on February 22, 1999 or thereafter
will also constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 16, 2008, unless earlier redeemed or
exchanged by the Corporation as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock outstanding prior to the
Distribution Date will be issued with Rights.
C-1
In the event that an Acquiring Person becomes the beneficial owner
of 15% or more of the then outstanding shares of Common Stock, each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Corporation), having a value equal to two times the Exercise Price of the Right.
The Exercise Price is the Purchase Price times the number of shares of Common
Stock associated with each Right (initially, one). Notwithstanding any of the
foregoing, following the occurrence of an event set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void. However, Rights are not exercisable following the occurrence of an event
set forth in this paragraph until such time as the Rights are no longer
redeemable by the Corporation as set forth below.
In the event that, following the Stock Acquisition Date, (i) the
Corporation is acquired in a merger or consolidation in which the Corporation is
not the surviving corporation, (ii) the Corporation engages in a merger or
consolidation in which the Corporation is the surviving corporation and the
Common Stock of the Corporation is changed or exchanged, or (iii) more than 50%
of the Corporation's assets or earning power is sold or transferred, each holder
of a Right (except Rights which have previously been voided as set forth above)
shall thereafter have the right to receive, upon exercise of the Right, Common
Stock of the acquiring company having a value equal to two times the Exercise
Price of the Right.
The Purchase Price payable, and the number of Units of Preference
Stock or other securities or property issuable upon exercise of the Rights, are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preference Stock, (ii) if holders of the Preference Stock are granted certain
rights or warrants to subscribe for Preference Stock or securities convertible
into Preference Stock at less than the current market price of the Preference
Stock, or (iii) upon the distribution to holders of the Preference Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of Units of
Preference Stock issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a dividend on
the Common Stock payable in Common Stock or subdivisions or combinations of the
Common Stock occurring, in any such case, prior to the Distribution Date.
With certain exceptions, no adjustments in the Purchase Price will
be required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units are required to be issued and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preference Stock
on the last trading date prior to the date of exercise.
At any time after a person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such person
or group of 50% or more of the outstanding Common Stock, the Board of Directors
may exchange the Rights (other than Rights owned by such person or its
affiliates and associates, which have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, or one ten-thousandth of a share of
C-2
Preference Stock (or of a share of a series of the Corporation's preference
stock having equivalent preferences, limitations and relative rights), per Right
(subject to adjustment).
At any time until ten Business Days following the Stock Acquisition
Date, the Corporation may redeem the Rights in whole, but not in part, at a
price of $.01 per Right, subject to adjustment. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
redemption price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Corporation, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
should not be taxable to shareholders or to the Corporation, shareholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Corporation as set forth above or in the event that the Rights are redeemed.
Except as set forth below, any of the provisions of the Rights
Agreement may be amended at the direction of the Board of Directors prior to the
Distribution Date. After the Distribution Date, any provision of the Rights
Agreement may be amended at the direction of the Board of Directors without the
approval of holders of Rights Certificates in order to make changes which do not
adversely affect the interests of holders of Rights Certificates (excluding the
interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement, except that no amendment to lengthen the time period
governing redemption may be made at such time as the Rights are not redeemable
nor may any other time period be lengthened except to protect the rights of
holders of Rights. In no case, however, may the Rights Agreement be amended to
change (other than pursuant to certain adjustments therein) the fraction of a
share of Preference Stock for which a Right is exercisable or to advance the
Final Expiration Date.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Corporation.
This Summary Description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
C-3