PG&E CORPORATION
and
MELLON INVESTOR SERVICES LLC
Rights Agent
Rights Agreement
Dated as of December 22, 2000
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TABLE OF CONTENTS
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Page
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SECTION 1. Certain Definitions...............................................1
SECTION 2. Appointment of Rights Agent.......................................5
SECTION 3. Issue of Rights Certificates......................................5
SECTION 4. Form of Rights Certificates.......................................7
SECTION 5. Countersignature and Registration.................................8
SECTION 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates........................................8
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.........................................................9
SECTION 8. Cancellation and Destruction of Rights Certificates..............11
SECTION 9. Reservation and Availability of Capital Stock....................11
SECTION 10. Preferred Stock Record Date.....................................12
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights.............................................13
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares......21
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power...................................................21
SECTION 14. Fractional Rights and Fractional Shares.........................24
SECTION 15. Rights of Action................................................25
SECTION 16. Agreement of Rights Holders.....................................25
SECTION 17. Rights Certificate Holder Not Deemed a Shareholder..............26
SECTION 18. Concerning the Rights Agent.....................................26
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent.......27
SECTION 20. Duties of Rights Agent..........................................27
SECTION 21. Change of Rights Agent..........................................30
SECTION 22. Issuance of New Rights Certificates.............................31
SECTION 23. Redemption and Termination......................................31
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SECTION 24. Notice of Certain Events........................................32
SECTION 25. Notices.........................................................32
SECTION 26. Supplements and Amendments......................................33
SECTION 27. Successors......................................................34
SECTION 28. Determinations and Actions by the Board of Directors, etc.......34
SECTION 29. Benefits of this Agreement......................................34
SECTION 30. Severability....................................................35
SECTION 31. Governing Law...................................................35
SECTION 32. Counterparts....................................................35
SECTION 33. Descriptive Headings............................................35
SECTION 34. Exchange........................................................35
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 22, 2000 (this
"Agreement"), between PG&E CORPORATION, a California corporation (the
"Company"), and MELLON INVESTOR SERVICES LLC, a New Jersey limited liability
company (the "Rights Agent").
WHEREAS, effective December 20, 2000 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a distribution of one Right (each, a "Right") for each share of Common
Stock, no par value per share, of the Company (the "Company Common Stock")
outstanding at the Close of Business (as defined below) on January 2, 2001 (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant hereto) for each share of Company Common Stock
issued between the Record Date and, except as otherwise provided in Section 22,
the Distribution Date, each Right initially representing the right to purchase
upon the terms and subject to the conditions hereinafter set forth one Unit (as
defined below) of Series A Preferred Stock (as defined below);
WHEREAS, the Company desires to set forth certain terms and
conditions governing the Rights; and
WHEREAS, the Company desires to appoint the Rights Agent to
act as rights agent hereunder, in accordance with the terms and conditions
hereof;
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,
alone or together with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of 15% or more of the shares of Company
Common Stock then outstanding, but shall not include (i) the Company,
any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity or (ii) any such Person
who has become and is such a Beneficial Owner solely because (A) of a
change in the aggregate number of shares of the Company Common Stock
since the last date on which such Person acquired Beneficial Ownership
of any shares of the Company Common Stock or (B) it acquired such
Beneficial Ownership in the good faith belief that such acquisition
would not (1) cause such Beneficial Ownership to be equal to or exceed
15% of the shares of the Company Common Stock then outstanding and such
Person relied in good faith in computing the percentage of its
Beneficial Ownership on publicly filed reports or documents of the
Company that are inaccurate or out-of-date or (2) otherwise cause a
Distribution Date or the adjustment provided for in Section 11(a)(iii)
to occur. Notwithstanding clause (ii)(B) of the prior sentence, if any
Person that is not an Acquiring Person due to such clause (ii)(B) does
not reduce its percentage of Beneficial Ownership of the Company Common
Stock to less than 15% by the Close of Business on
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the fifth Business Day after notice from the Company (the date on which
such notice is first mailed or sent or delivered being the first day)
that such person's Beneficial Ownership of the Company Common Stock is
equal to or exceeds 15%, such Person shall, at the end of such five
Business Day period, become an Acquiring Person (and such clause
(ii)(B) shall no longer apply to such Person). For purposes of this
definition, the determination whether any Person acted in "good faith"
shall be conclusively determined by the Board of Directors of the
Company, acting by a vote of those directors of the Company whose
approval would be required to redeem the Rights under Section 23
hereof.
(b) "Adjustment Shares" has the meaning set forth in Section
11(a)(iii).
(c) "Adjustment Spread" has the meaning set forth in Section
34(a)(ii).
(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the Exchange Act
Regulations as in effect on the date of this Agreement.
(e) "Agreement" has the meaning set forth in the preamble to
this Agreement.
(f) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own", and shall be deemed to have
"Beneficial Ownership" of, any securities:
(i) of which such Person or any of such Person's
Affiliates or Associates is considered to be a "beneficial
owner" under Rule 13d-3 of the Exchange Act Regulations as in
effect on the date of this Agreement; provided, however, that
a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own", or to have "Beneficial Ownership" of, any
securities under this subparagraph (i) as a result of an
agreement, arrangement or understanding to vote such
securities if such agreement, arrangement or understanding (A)
arises solely from a revocable proxy given in response to a
proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act
and the Exchange Act Regulations, and (B) is not reportable by
such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report);
(ii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
of such other Person) 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 as described in the proviso to subparagraph
(i) of this paragraph (f)) or disposing of such securities; or
(iii) that 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 or upon the
satisfaction of
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conditions) 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 under this paragraph (f) a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own", or to have
"Beneficial Ownership" of, (A) securities tendered pursuant to a tender
or exchange offer made in accordance with Exchange Act Regulations by
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B)
securities that may be issued upon exercise of Rights at any time prior
to the occurrence of a Triggering Event or (C) securities that may be
issued 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 Date
or pursuant to Section 3(c) or Section 22 or pursuant to Section 11(i)
in connection with an adjustment made with respect to any such Rights.
(g) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of
California or the State of New Jersey are authorized or obligated by
law or executive order to close.
(h) "Close of Business" on any given date shall mean 5:00
p.m., California time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 p.m., California time, on
the next succeeding Business Day.
(i) "Common Stock" of any Person other than the Company shall
mean the capital stock of such Person with the greatest voting power,
or, if such Person shall have no capital stock, the equity securities
or other equity interest having power to control or direct the
management of such Person.
(j) "Company" has the meaning set forth in the preamble to
this Agreement.
(k) "Company Common Stock" has the meaning set forth in the
recitals to this Agreement.
(l) "Current Value" has the meaning set forth in Section
11(a)(iv).
(m) "Depositary Agent" has the meaning set forth in Section
7(c).
(n) "Distribution Date" has the meaning set forth in Section
3(a).
(o) "Equivalent Preferred Stock" has the meaning set forth in
Section 11(b).
(p) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(q) "Exchange Act Regulations" shall mean the General Rules
and Regulations promulgated under the Exchange Act.
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(r) "Expiration Date" has the meaning set forth in Section
7(a).
(s) "Final Expiration Date" has the meaning set forth in
Section 7(a).
(t) "Person" shall mean any individual, partnership, limited
liability company, firm, corporation, joint venture, association,
trust, unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act.
(u) "Preferred Stock" shall mean the Series A Preferred Stock,
par value $100 per share, of the Company having the voting powers,
designation, preferences and relative, participating, optional or other
special rights and qualifications, limitations and restrictions
described in the Certificate of Determination set forth as Exhibit C
hereto.
(v) "Preferred Stock Equivalents" has the meaning set forth in
Section 11(a)(iv).
(w) "Principal Party" has the meaning set forth in Section
13(b).
(x) "Purchase Price" has the meaning set forth in Section
7(b).
(y) "Record Date" has the meaning set forth in the recitals to
this Agreement.
(z) "Redemption Price" has the meaning set forth in Section
23(a).
(aa) "Registered Common Stock" has the meaning set forth in
Section 13(b)(ii).
(bb) "Registration Date" has the meaning set forth in Section
9(c).
(cc) "Registration Statement" has the meaning set forth in
Section 9(c).
(dd) "Right" has the meaning set forth in the recitals to this
Agreement.
(ee) "Rights Agent" has the meaning set forth in the preamble
to this Agreement.
(ff) "Rights Certificates" has the meaning set forth in
Section 3(a).
(gg) "Rights Dividend Declaration Date" has the meaning set
forth in the recitals to this Agreement.
(hh) "Section 11(a)(iii) Event" has the meaning set forth in
Section 11(a)(iii).
(ii) "Section 11(a)(iv) Trigger Date" has the meaning set
forth in Section 11(a)(iv).
(jj) "Section 13 Event" has the meaning set forth in Section
13(a).
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(kk) "Section 34(a)(i) Exchange Ratio" has the meaning set
forth in Section 34(a)(i).
(ll) "Section 34(a)(ii) Exchange Ratio" has the meaning set
forth in Section 34(a)(ii).
(mm) "Securities Act" shall mean the Securities Act of 1933,
as amended.
(nn) "Spread" has the meaning set forth in Section 11(a)(iv).
(oo) "Stock Acquisition Date" shall mean the first date of
public announcement (including, without limitation, the filing of any
report pursuant to Section 13(d) of the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become such.
(pp) "Subsidiary" of any Person shall mean any corporation or
other Person of which a majority of the voting power of the voting
equity securities or equity interest is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(qq) "Summary of Rights" has the meaning set forth in Section
3(b).
(rr) "Trading Day" has the meaning set forth in Section
11(d)(i).
(ss) "Triggering Event" shall mean any Section 11(a)(iii)
Event or any Section 13 Event.
(tt) "Unit" has the meaning set forth in Section 7(b).
SECTION 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. With the consent of the Rights Agent, the Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable. The
Rights Agent shall have no duty to supervise, and in no event shall be liable
for, the acts or omissions of any such co-Rights Agent.
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
and (ii) the Close of Business on the tenth Business Day (or such later date as
may be determined by action of the Company's Board of Directors prior to such
time as any Person becomes an Acquiring Person, and of which the Company will
give the Rights Agent prompt written notice) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity) is first published or sent or given within the meaning of Rule
14d-4(a) of the Exchange Act Regulations or any successor rule, if upon
consummation thereof such Person would be the Beneficial Owner of 15% or more of
the shares of Company Common Stock then outstanding (the earlier of (i) and (ii)
above being the "Distribution Date"), (x) the Rights will be evidenced (subject
to the provisions of paragraph (b)
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of this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
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 Company Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Company shall promptly notify in writing the Rights Agent
of the occurrence of the Distribution Date and, if the Rights Agent is no
longer the Company's transfer agent, provide the Rights Agent with the names and
addresses of all record holders of Commmon shares (together with all other
necessary information), and the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of shares of Company Common Stock as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more rights certificates, in
substantially the form attached hereto as Exhibit A (the "Rights Certificates"),
evidencing one Right for each share of Company Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Company Common Stock has been made pursuant to Section
11(p), at the time of distribution of the Rights Certificates, the Company may
make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a)) so that Rights Certificates evidencing 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
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
a form that may be appended to certificates that evidence shares of Company
Common Stock, in substantially the form attached hereto as Exhibit B (the
"Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in
respect of all shares of Company Common Stock that are issued (including any
shares of Company Common Stock held in treasury) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date. Certificates
evidencing such shares of Company Common Stock issued after the Record Date
shall bear the following legend or such similar legend as the Company may deem
appropriate and as is not inconsistent with the provisions of this Agreement:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement, dated as
of December 22, 2000 (the "Rights Agreement"), between PG&E Corporation
(the "Company") and Mellon Investor Services LLC (the "Rights Agent"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the office of the Rights Agent designated
for such purpose. 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
Company 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
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Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void."
With respect to certificates evidencing shares of Company
Common Stock (whether or not such certificates include the foregoing legend or
have appended to them the Summary of Rights), until the earlier of the
Distribution Date and the Expiration Date, the Rights associated with the shares
of Company Common Stock evidenced by such certificates shall be evidenced by
such certificates alone and registered holders of the shares of Company 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 shares of Company Common Stock evidenced by such
certificates.
SECTION 4. Form of Rights Certificates. (a) The Rights
Certificates (and the forms of election to purchase, assignment and certificate
to be printed on the reverse thereof) shall each be substantially in the form
attached hereto as Exhibit A and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate (which do not affect the duties or responsibilities
of the Rights Agent) and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or any rule
or regulation thereunder 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. Subject
to the provisions of Section 11 and Section 22, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of Units of Preferred
Stock as shall be set forth therein at the price set forth therein, but the
amount and type of securities, cash or other assets that may be acquired 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 hereto that
evidences 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) that becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) that becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and that receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer that a majority of the Company's Board of Directors has determined to
be part of a plan, arrangement or understanding that has as a primary purpose or
effect the avoidance of Section 7(e), shall, upon the written direction of a
majority of the Company's Board of Directors, contain (to the extent the Rights
Agent has notice thereof and to the extent feasible) the following legend or
such similar legend as the Company may deem appropriate and as is not
inconsistent with the provisions of this Agreement:
"The Rights evidenced by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or
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Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement). Accordingly, this Rights Certificate and the Rights
evidenced hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement."
SECTION 5. Countersignature and Registration. (a) Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, the President or any of its Senior Vice Presidents, under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any one or more of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing the manual
or facsimile signatures of the individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at the
date of such Rights Certificates. No Rights Certificate shall be entitled to any
benefit under this Agreement or be valid for any purpose unless there appears on
such Rights Certificate a countersignature duly executed by the Rights Agent by
manual signature of an authorized signatory, and such countersignature upon any
Rights Certificate shall be conclusive evidence, and the only evidence, that
such Rights Certificate has been duly countersigned as required hereunder. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates on behalf of the Company had not
ceased to be such officer of the Company.
(b) Following the Distribution Date and receipt by the Rights
Agent of the written notice referred to in Section 3(a), the Rights Agent will
keep or cause to be kept, at its office designated 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 name and
address of each holder of the Rights Certificates, the number of Rights
evidenced on its face by each Rights Certificate and the date of each Rights
Certificate.
SECTION 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14, 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 Units
of Preferred Stock (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder 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 office of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have properly completed and
executed the certificate set forth in the form of assignment on the reverse side
of
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such Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) of the Rights
evidenced by such Rights Certificate or Affiliates or Associates thereof as the
Company or the Rights Agent shall reasonably request; whereupon the Rights Agent
shall, subject to the provisions of Sections 4(b), 7(e) and 14, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment 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. The Rights Agent shall have no duty or obligation under
this Section 6 or any other similar provision of this Agreement unless and until
it is satisfied that all such taxes and/or governmental charges have been paid.
(b) If a Rights Certificate shall be mutilated, destroyed,
lost or stolen, upon request by the registered holder of the Rights evidenced
thereby and upon payment to the Company and the Rights Agent of all reasonable
expenses incident thereto, there shall be issued, in exchange for and upon
cancellation of the mutilated Rights Certificate, or in substitution for the
lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
evidencing the equivalent number of Rights, but, in the case of loss, theft or
destruction, only upon receipt of evidence satisfactory to the Company and the
Rights Agent of such loss, theft or destruction of such Rights Certificate and,
if requested by the Company or the Rights Agent, indemnity also satisfactory to
it.
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Prior to the earlier of (i) the Close of Business on the tenth
anniversary hereof (the "Final Expiration Date") and (ii) the time at which the
Rights are redeemed as provided in Section 23 (the earlier of (i) and (ii) being
the "Expiration Date"), the registered holder of any Rights Certificate may,
subject to the provisions of Sections 7(e) and 9(c), exercise the Rights
evidenced thereby in whole or in part at any time after the Distribution Date
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 office of the Rights Agent designated for such purpose, together
with payment of the aggregate Purchase Price (as hereinafter defined) for the
number of Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) for which such surrendered
Rights are then exercisable.
(b) The purchase price for each one one-hundredth of a share
(each such one one-hundredth of a share being a "Unit") of Preferred Stock upon
exercise of Rights shall be $95, subject to adjustment from time to time as
provided in Sections 11 and 13(a) (such purchase price, as so adjusted, being
the "Purchase Price"), and shall be payable in accordance with paragraph (c)
below.
(c) As promptly as practicable following the occurrence of the
Distribution Date, the Company shall deposit with a Person in good standing
organized under the laws of the United States or any State of the United States,
that is authorized under such laws to exercise shareholder services business,
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority (such institution being the
"Depositary Agent"), certificates evidencing the shares of Preferred Stock that
may be acquired upon exercise of the Rights and shall cause such Depositary
Agent to enter into an agreement pursuant to which the Depositary Agent shall
issue receipts evidencing interests in the shares of Preferred Stock so
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deposited. Upon receipt of written notice that the Distribution Date has
occurred and receipt of a Rights Certificate evidencing 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 for
the Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) to be purchased thereby as
set forth below and an amount equal to any applicable tax or governmental charge
or evidence satisfactory to the Company of payment of such tax or governmental
charge, the Rights Agent shall, subject to Section 20(k), thereupon promptly (i)
requisition from the Depositary Agent depositary receipts or certificates
evidencing such number of Units of Preferred Stock as are to be purchased and
the Company will direct the Depositary Agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14, (iii) after receipt of such
depositary receipts or certificates, 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. In the event that the Company is obligated to
issue Company Common Stock, other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a), the Company will make all
arrangements necessary so that such Company Common Stock, other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when necessary to comply with this Agreement. Subject to Section 34, the payment
of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iv)) may be made in cash or by certified or bank check payable to the
order of the Company, or by wire transfer of immediately available funds to the
account of the Company (provided that notice of such wire transfer shall be
given by the holder of the related Right to the Rights Agent).
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing the Rights remaining unexercised shall be issued by the
Rights Agent and 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, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of any Section 11(a)(iii) Event or
Section 13 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) that becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) that becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and that receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, shares of Company Common Stock or the Company or (B) a transfer that a
majority of the Company's Board of Directors has determined to be part of a
plan, arrangement or understanding that has as a primary purpose or effect the
avoidance of this Section 7(e), shall be 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
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Company shall use all reasonable efforts to ensure that the provisions of this
Section 7(e) and Section 4(b) are complied with, but neither the Company nor the
Rights Agent shall have any liability to any holder of Rights or any other
Person as a result of the Company's failure to make any determination under this
Section 7(e) or Section 4(b) with respect to an Acquiring Person or its
Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise by such registered holder unless such
registered holder shall have (i) properly completed and executed the certificate
following 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) of the Rights evidenced by such Rights Certificate or
Affiliates or Associates thereof as the Company shall request.
SECTION 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
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 this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Rights Certificates acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Capital Stock. (a)
The Company shall at all times prior to the Expiration Date cause to be reserved
and kept available, out of its authorized and unissued shares of Preferred
Stock, the number of shares of Preferred Stock that, as provided in this
Agreement, will be sufficient to permit the exercise in full of all outstanding
Rights. Upon the occurrence of any events resulting in an increase in the
aggregate number of shares of Preferred Stock (or other equity securities of the
Company) issuable upon exercise of all outstanding Rights above the number then
reserved, the Company shall make appropriate increases in the number of shares
so reserved.
(b) If the shares of Preferred Stock to be issued and
delivered upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall during the period from the Distribution
Date through the Expiration Date use its best efforts to cause all securities
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts (i) as soon as
practicable following the occurrence of a Section 11(a)(iii) Event and a
determination by the Company in accordance with Section 11(a)(iv) of the
consideration to be delivered by the Company upon exercise of the Rights or, if
so required by law, as soon as practicable following the Distribution Date (such
date being the "Registration Date"), to file a registration statement on an
appropriate form under the
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Securities Act with respect to the securities that may be acquired upon exercise
of the Rights (the "Registration Statement"), (ii) to cause the Registration
Statement to become effective as soon as practicable after such filing, (iii) to
cause the Registration Statement to continue to be effective (and to include a
prospectus complying with the requirements of the Securities Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for the
securities covered by the Registration Statement and (B) the Expiration Date and
(iv) to take as soon as practicable following the Registration Date such action
as may be required to ensure that any acquisition of securities upon exercise of
the Rights complies with any applicable state securities or "blue sky" laws. If
the Registration Statement does not become effective prior to the Close of
Business on the 45th Business Day following the occurrence of a Section
11(a)(iii) Event, the Company shall, unless otherwise determined by a majority
of the Company's Board of Directors, on the 46th Business Day following the
occurrence of such Section 11(a)(iii) Event, be obligated to exercise the option
described in Section 34 and shall promptly notify the Rights Agent in writing of
such exercise.
(d) The Company shall take such action as may be necessary to
ensure that all shares of Preferred Stock (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company shall pay any tax or governmental charge
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, that the Company shall not be
required to pay any such tax imposed in connection with the issuance or delivery
of Units of Preferred Stock, or any certificates or depositary receipts for such
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to any Person other
than the registered holder of the Rights Certificates evidencing the Rights
surrendered for exercise. The Company shall not be required to issue or deliver
any certificates or depositary receipts for Units of Preferred Stock (or,
following the occurrence of a Triggering Event, any other securities, cash or
assets, as the case may be) to, or in a name other than that of, the registered
holder of the Rights Certificate upon the exercise of any Rights evidenced
thereby until any such tax or governmental charge shall have been paid (any such
tax or governmental charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax or governmental charge is due.
SECTION 10. Preferred Stock Record Date. Each Person in whose
name any certificate or depositary receipt for Units of Preferred Stock (or,
following the occurrence of a Triggering Event, other securities) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Units of Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) evidenced thereby on, and such
certificate or depositary receipt shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable taxes or governmental charges) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Stock (or, following the occurrence of a Triggering Event,
other securities) transfer books of the Company are closed, such Person shall be
deemed
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to have become the record holder of such securities on, and such certificate or
depositary receipt shall be dated, the next succeeding Business Day on which the
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) transfer books of the Company are open; and further provided,
however, that if delivery of Units of Preferred Stock is delayed as a result of
a failure to register such Units of Preferred Stock pursuant to Section 9(c),
such Persons shall be deemed to have become the record holders of such Units of
Preferred Stock only when such Units first become deliverable. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to securities 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 Company, 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
securities 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 Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), 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 Preferred Stock or capital stock, as the case may be, issuable on such date
upon exercise of the Rights, 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 Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs that
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(iii), 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)(iii).
(ii) Upon the declaration of a dividend in connection with any
spin-off or other similar transaction effected by the Company (whether occurring
before or after a Distribution Date), the Purchase Price in effect at the time
of the record date therefor, and the number and kind of shares of Preferred
Stock or capital stock, as the case may be, issuable at such time upon exercise
of the Rights, may be adjusted by action of a majority of the Company's Board of
Directors, after receiving advice from a nationally recognized investment
banking firm, in a manner that reflects the impact on the Company Common Stock
of such spin-off or other similar transaction. If an event occurs that the
Company's Board of Directors determines would require an adjustment under both
this Section 11(a)(ii) and Section 11(a)(iii), the adjustment
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provided for in this Section 11(a)(ii) shall be in addition to, and shall be
made prior to, any adjustment required pursuant to Section 11(a)(iii).
(iii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, shall (1) merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and Company Common
Stock shall remain outstanding and unchanged, (2) in one transaction or
a series of transactions, transfer any assets to the Company or to any
of its Subsidiaries in exchange (in whole or in part) for shares of
Company Common Stock, for other equity securities of the Company or any
such Subsidiary, or for securities exercisable for or convertible into
shares of equity securities of the Company or any of its Subsidiaries
(whether Company Common Stock or otherwise) or otherwise obtain from
the Company or any of its Subsidiaries, with or without consideration,
any additional shares of such equity securities or securities
exercisable for or convertible into such equity securities (other than
pursuant to a pro rata distribution to all holders of Company Common
Stock), (3) sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan
acting in such capacity, assets (including securities) on terms and
conditions less favorable to the Company or such Subsidiary or plan
than those that could have been obtained in arm's-length negotiations
with an unaffiliated third party, other than pursuant to a transaction
set forth in Section 13(a), (4) sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with the Company
or any of the Company's Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity (other than
transactions, if any, consistent with those engaged in, as of the date
hereof, by the Company and such Acquiring Person or such Associate or
Affiliate), assets (including securities) having an aggregate fair
market value of more than $5,000,000, other than pursuant to a
transaction set forth in Section 13(a), (5) sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
the Company or any of its Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity, any
material trademark or material service mark, other than pursuant to a
transaction set forth in Section 13(a), (6) receive, or any designee,
agent or representative of such Acquiring Person or any Affiliate or
Associate of such Acquiring Person shall receive, any compensation from
the Company or any of its Subsidiaries other than compensation for
full-time employment as a regular employee at rates in accordance with
the Company's (or its Subsidiaries') past practices, or (7) receive the
benefit, directly or indirectly (except proportionately as a holder of
Company Common Stock or as required by law or governmental regulation),
of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantage provided by the
Company or any of its Subsidiaries or any employee benefit plan
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maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity; or
(B) any Person shall become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a
transaction set forth in Section 13(a); or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of
its Subsidiaries, other than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with or into or
otherwise involving an Acquiring Person), which has the effect,
directly or indirectly, of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of
the Company or any of its Subsidiaries that is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or
Affiliate of any Acquiring Person;
then, immediately upon the date of the occurrence of an event described in
Section 11(a)(iii)(A), (B) or (C) (a "Section 11(a)(iii) Event"), proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e)) 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 the number of Units of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section
11(a)(iii) Event, such number of Units of Preferred Stock as shall equal the
result obtained by (x) multiplying the then-current Purchase Price by the then
number of Units of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(iii) Event (such product
thereafter being, for all purposes of this Agreement other than Section 13, the
"Purchase Price"), and (y) dividing that product by 50% of the then-current
market price (determined pursuant to Section 11(d)) per Unit of Preferred Stock
on the date of such first occurrence (such Units of Preferred Stock being the
"Adjustment Shares").
(iv) In the event that the number of shares of Preferred Stock
that are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (iii) of this Section 11(a), the
Company, by the vote of a majority of the Company's Board of Directors, shall:
(A) determine the excess of (1) the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value") over (2) the Purchase Price (such
excess being the "Spread"), and (B) with respect to each Right, make adequate
provision to substitute for such Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Company Common Stock or other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock (such other
shares being "Preferred Stock Equivalents")), (4) debt securities of the
Company, (5) other assets or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value, where such aggregate value has been
determined by a majority of the Company's Board of Directors, after receiving
advice from a nationally recognized investment banking firm; provided, however,
that if the Company shall not have made adequate provision to deliver value
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pursuant to clause (B) above within thirty days following the later of (x) the
first occurrence of a Section 11(a)(iii) Event and (y) the date on which the
Company'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)(iv) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, Units of
Preferred Stock (to the extent available) and then, if necessary, cash, which
Units of Preferred Stock and/or cash shall have an aggregate value equal to the
Spread. To the extent that the Company determines that some action need be taken
pursuant to the first sentence of this Section 11(a)(iv), the Company shall
provide, subject to Section 7(e), that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iv), the value of a Unit
of Preferred Stock shall be the current market price (as determined pursuant to
Section 11(d)) per Unit of Preferred Stock on the Section 11(a)(iv) Trigger Date
and the value of any preferred stock equivalent shall be deemed to have the same
value as the Preferred Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five calendar days after such record date) shares of Preferred Stock (or
shares having substantially the same rights, privileges and preferences as
shares of Preferred Stock ("Equivalent Preferred Stock")) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per
share of Preferred Stock or per share of Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the current market price (as determined
pursuant to Section 11(d)) per share of Preferred 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 sum of the number of shares
of Preferred Stock outstanding on such record date plus the number of shares of
Preferred Stock which the aggregate offering price of the total number of shares
of Preferred Stock and/or Equivalent Preferred 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 Preferred Stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred 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 determined in good faith by a majority of the Company's Board of
Directors, 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 Preferred Stock owned by or held for the account of the
Company or any Subsidiary 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 that would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained
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earnings of the Company), assets (other than a dividend payable in shares of
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b)), 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)) per share of
Preferred Stock on such record date less the fair market value (as determined in
good faith by a majority of the Company's Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holder of the Rights) of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants distributable in respect of a share of Preferred Stock and
the denominator of which shall be such current market price (as determined
pursuant to Section 11(d)) per share of Preferred Stock. 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 that would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" per share of Company Common Stock or Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such shares for the ten consecutive Trading Days immediately prior to, but not
including, such date; provided, however, if prior to the expiration of such
requisite ten Trading Day period the issuer announces either (A) a dividend or
distribution on such shares payable in such shares or securities convertible
into such shares (other than the Rights) or (B) any subdivision, combination or
reclassification of such shares, then, following the ex-dividend date for such
dividend or the record date for such subdivision, as the case may be, the
"current market price" shall be properly adjusted to take into account such
event. The closing price for each day shall be, if the shares are listed and
admitted to trading on a national securities exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such shares are
listed or admitted to trading or, if such shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by The Nasdaq Stock Market Consolidated Quotations Service
or such other system then in use, or, if on any such date such shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such shares
selected by a majority of the Company's Board of Directors. If, on any such date
no market maker is making a market in such shares, the fair value of such shares
on such date as determined in good faith by a majority of the Company's Board of
Directors shall be used. If such shares are 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 a majority of the Company's Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. The term "Trading Day" shall
mean, if such shares are listed or admitted to trading on any national
securities exchange, a day on which the principal national securities exchange
on which such shares are listed or admitted to trading is open for the
transaction of business or, if such shares are not so listed or admitted, a
Business Day.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for
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Company Common Stock in clause (i) of this Section 11(d) (other than the fourth
sentence thereof). If the current market price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred 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 Preferred Stock
shall be conclusively deemed to be an amount equal to 100 (as such amount may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to Company Common Stock occurring after the date
of this Agreement) multiplied by the current market price per share of Company
Common Stock. If neither Company Common Stock nor Preferred Stock is publicly
held or so listed or traded, "current market price" per share of the Preferred
Stock shall mean the fair value per share as determined in good faith by a
majority of the Company's Board of Directors, 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. For all purposes of this Agreement,
the "current market price" of a Unit of Preferred Stock shall be equal to the
"current market price" of one share of Preferred Stock divided by 100.
(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 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 one-hundredth of a share of Company Common
Stock or Common Stock or other share or ten-thousandth of a share of Preferred
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 years from the date of the transaction that mandates
such adjustment and (ii) the Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section
11(a)(iii) or 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred 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 Preferred Stock contained in Sections 11(a), (b),
(c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Units of Preferred Stock
(or other securities or amount of cash or combination thereof) that may be
acquired from time to time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(h) Unless the Company 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
Units of Preferred Stock (calculated to the nearest one ten-thousandth of a
Unit)
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obtained by (i) multiplying (x) the number of Units of Preferred Stock 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.
(i) The Company 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 Units of Preferred Stock that may be acquired 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 Units of Preferred
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 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 Company shall make a public announcement (with prompt
written notice thereof to the Rights Agent) 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 days later than the
date of such public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company 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, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, 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 Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, 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.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Units of Preferred Stock issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Unit and the number of Units of
Preferred Stock that were expressed in the Initial Rights Certificates issued
hereunder without prejudice to any such adjustment or change.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then-par value of the number of Units of
Preferred Stock issuable upon exercise of the Rights, the Company shall take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue such fully paid and
non-assessable number of Units of Preferred 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 Company may elect to defer (and shall promptly notify the
Rights Agent of any such election) until the
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occurrence of such event the issuance to the holder of any Right exercised after
such record date of that number of Units of Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of Units of Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing 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 Company 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 a majority of
the Company's Board of Directors shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash or shares of Preferred Stock or securities
that by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock, shall not be taxable to such holders or shall reduce the taxes
payable by such holders.
(n) The Company shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o)), (ii) merge with or
into any other Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(o)), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) and other
than in connection with any public offering of the capital stock of any of the
Company's subsidiaries or any spin-off or other similar transaction), 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 that 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
Person that constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) shall have distributed or otherwise transferred to its
shareholders or other Persons holding an equity interest in such Person Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, that this Section 11(n) shall not affect the ability of any
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not, except
as permitted by Section 23 or Section 26, 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.
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(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company 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 Company Common Stock payable in shares
of Company Common Stock, (ii) subdivide the outstanding shares of Company Common
Stock, (iii) combine the outstanding shares of Company Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of Company Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), the number of Rights associated with each share of
Company 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 Company Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Company Common Stock immediately
prior to such event by a fraction the numerator of which shall be the total
number of shares of Company Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Company Common Stock outstanding immediately following the
occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts and computations accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Company Common Stock, a copy of such
certificate, and (c) 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 evidencing shares of Company Common Stock) in accordance with
Section 25. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained, and shall have no duty with
respect to and shall not be deemed to have knowledge of any 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, either (x) the Company shall consolidate with, or
merge with and into, any other Person (other than a Subsidiary of the Company in
a transaction that complies with Section 11(o)), and the Company shall not be
the continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction that complies
with Section 11(o)) shall consolidate with, or merge with or into, the Company,
and the Company 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 Company Common Stock shall be converted
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer) to any Person or
Persons (other than the Company or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) and other than in
connection with any public offering of the capital stock of any of the Company's
subsidiaries or any spin-off or other similar transaction), in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries, taken as a whole (any such
event described in clause (x),
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(y) or (z) being a "Section 13 Event"), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e), shall thereafter have the right to receive, upon the exercise
thereof at the then-current Purchase Price, such number of validly authorized
and issued, fully paid and non-assessable shares of Common Stock of the
Principal Party, which shares shall not be subject to any liens, encumbrances,
rights of first refusal, transfer restrictions or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then-current Purchase
Price by the number of Units of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(iii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such Units for which a Right would be
exercisable hereunder but for the occurrence of such Section 11(a)(iii) Event by
the Purchase Price that would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the first occurrence
of a Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d)) 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 Company pursuant to this Agreement; (iii)
the term "Company" shall, for all purposes of this Agreement, thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 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 ensure that the provisions of this
Agreement shall thereafter be applicable to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(iii) shall be of no further effect following the first
occurrence of any Section 13 Event.
(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), (A) the Person that is the
issuer of any securities into which shares of Company Common Stock are
converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer of Common Stock that has the highest
aggregate current market price (determined pursuant to Section 11(d))
and (B) if no securities are so issued, the Person that is the other
party to such merger or consolidation, or, if there is more than one
such Person, the Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d));
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 largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power transferred pursuant to
such transaction or transactions or if the Person receiving the largest
portion of the assets or earning power cannot be determined, whichever
Person the Common Stock of which has the highest aggregate current
market price (determined pursuant to Section 11(d)); provided, however,
that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been
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continuously over the preceding twelve-month period registered under
Section 12 of the Exchange Act ("Registered Common Stock"), or such
Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person that has Registered Common Stock
outstanding, "Principal Party" shall refer to such other Person; (2) if
the Common Stock of such Person is not Registered Common Stock or such
Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person but is not a direct or indirect Subsidiary
of another Person that has Registered Common Stock outstanding,
"Principal Party" shall refer to the ultimate parent entity of such
first-mentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person,
and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other
Persons is the issuer of the Registered Common Stock having the highest
aggregate current market price (determined pursuant to Section 11(d));
and (4) if the Common Stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is directly
or indirectly controlled by more than one Person, and none of such
other Persons have Registered Common Stock outstanding, "Principal
Party" shall refer to whichever ultimate parent entity is the
corporation having the greatest shareholders' equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever
ultimate parent entity is the entity having the greatest net assets.
(c) The Company 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 that 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 Company 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 the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement
under the Securities Act with respect to the Common Stock that may be
acquired upon exercise of the Rights, (B) cause such registration
statement to remain effective (and to include a prospectus complying
with the requirements of the Securities Act) until the Expiration Date,
and (C) as soon as practicable following the execution of such
agreement take such action as may be required to ensure that any
acquisition of such Common Stock upon the exercise of the Rights
complies with any applicable state securities or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In case the Principal Party that is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Articles of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of
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Common Stock of such Principal Party at less than the then-current market price
per share (determined pursuant to Section 11(d)) or securities exercisable for,
or convertible into, Common Stock of such Principal Party at less than such
then-current market price (other than to holders of Rights pursuant to this
Section 13) or (ii) providing for any special payment, tax or similar provisions
in connection with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of this Section 13, then, in such event, the Company
shall not consummate any such transaction unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) 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)(iii) Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates that evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the Persons to which such fractional Rights would
otherwise be issuable, an amount in cash equal to such fraction of the market
value of a whole Right. For purposes of this Section 14(a), the 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, if the
Rights are listed or admitted to trading on a national securities 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 The Nasdaq Stock Market Consolidated
Quotations Service 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 a majority of the Company's Board of Directors. 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 a majority of the
Company's Board of Directors shall be used and such determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions that are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates that evidence such fractional shares of Preferred
Stock (other than fractions that are integral multiples of one one-hundredth of
a share of Preferred Stock). In lieu of such fractional shares of Preferred
Stock that are not integral multiples of one one-hundredth of a share, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided
24
<PAGE>
an amount in cash equal to the same fraction of the then-current market price of
a share of Preferred Stock on the day of exercise, determined in accordance with
Section 11(d).
(c) The holder of a Right by the acceptance of such Right
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.
(d) Whenever a payment for fractional Rights or fractional
shares is to be made by the Rights Agent, the Company shall (i) promptly prepare
and deliver to the Rights Agent a certificate setting forth the prices and/or
formulas utilized in calculating such payments, and (ii) provide sufficient
monies to the Rights Agent in the form of fully collected funds to make such
payments. The Rights Agent shall be fully protected in relying upon such a
certificate and shall have no duty with respect to, and shall not be deemed to
have knowledge of any payment for fractional Rights or fractional shares under
any Section of this Agreement relating to the payment of fractional Rights or
fractional shares unless and until the Rights Agent shall have received such a
certificate and sufficient monies.
SECTION 15. Rights of Action. All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to Section 18 and Section 20 hereof, are vested in the respective
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the registered holders of certificates evidencing shares of Company Common
Stock); and any registered holder of a Rights Certificate (or, prior to the
Distribution Date, of a certificate evidencing shares of Company 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 a certificate evidencing
shares of Company Common Stock), may, on such registered holder's own behalf and
for such registered holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company or any other Person
to enforce, or otherwise act in respect of, such registered holder's right to
exercise the Rights evidenced by such Rights Certificate 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 Company 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 Company 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 office 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 duly executed;
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(c) subject to Section 6(a) and Section 7(f), the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Company
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
Company Common Stock certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to the last sentence of Section
7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or any 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, judgment or ruling (whether interlocutory or final) 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 Company must use its best efforts to
have any such order, decree, judgment or ruling lifted or otherwise
overturned as promptly as practicable.
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
shares of Preferred Stock or any other securities of the Company that may at any
time be issuable on the exercise of the Rights evidenced 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 Company 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, except as provided in Section 24,
to receive notice of meetings or other actions affecting shareholders, or to
receive dividends or subscription rights, or otherwise.
SECTION 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses, including reasonable fees and disbursements of its
counsel, incurred in connection with the preparation, delivery, execution,
administration and amendment of this Agreement and the exercise and performance
of its duties hereunder. The Company shall indemnify the Rights Agent for, and
hold it harmless against, any loss, liability, damage, judgment, fine, penalty,
claim, demand, settlement, cost or expense, incurred without gross negligence,
bad faith or willful misconduct (each as finally determined by a court of
competent jurisdiction) on the part of the Rights Agent, for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement or the exercise and performance of its duties
hereunder, including, without limitation, the costs and expenses of defending
against any claim of liability hereunder. The indemnity provided herein shall
survive the termination of this Agreement, the termination and the expiration of
the Rights, and the resignation or removal of the Rights Agent. The costs and
expenses incurred in enforcing this right of indemnification shall be paid by
the Company.
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(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 the acceptance and administration of this Agreement in reliance
upon any Rights Certificate or certificate or depositary receipt for Preferred
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to have been signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons. The Rights Agent shall not be
deemed to have any duty or notice unless and until the Company has provided the
Rights Agent with written notice.
SECTION 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
corporate trust or shareholder services 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 document or any further act on
the part of any of the parties hereto; provided that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21. 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 only
undertakes the duties and obligations expressly imposed by this Agreement (and
no implied duties or obligations) upon the following terms and conditions, by
all of which the Company 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 Company), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the
Rights Agent, and the Rights Agent shall incur no liability for or in
respect of any action taken, suffered or omitted by it in good faith
and in accordance with such advice or opinion.
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(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 Company prior to taking, suffering or
omitting any action hereunder, such fact or matter (unless other
evidence in respect thereof be specified herein) 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 Company and delivered to the Rights Agent and such
certificate shall be full authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for or in respect
of any action taken, suffered or omitted 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 (each as finally
determined by a court of competent jurisdiction). Anything in this Agreement to
the contrary notwithstanding, in no event shall the Rights Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever (including, without limitation, loss profits), even if the Rights
Agent has been advised of the possibility of such loss or damage.
(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 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 Company only.
(e) The Rights Agent shall not have any liability for or be
under any responsibility for the validity of this Agreement or the
execution and delivery hereof (except the due execution and delivery
hereof by the Rights Agent) or for the validity or execution of any
Rights Certificate (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or failure
by the Company to satisfy conditions 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 or 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 the certificate describing any
such adjustment contemplated by Section 12); 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 Preferred Stock or any
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or any other
securities will, when so issued, be validly authorized and issued,
fully paid and non-assessable.
(f) The Company shall perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further acts, instruments and assurances as may reasonably be
required by the Rights Agent for the performance by the Rights Agent of
its duties under this Agreement.
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<PAGE>
(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 any
Assistant Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and such
instructions shall be full authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for or in respect
of any action taken, suffered or omitted to be taken by it in good
faith in accordance with the advice or instructions of any such
officer. The Rights Agent shall be fully protected and authorized in
relying upon the most recent instructions received by any such officer.
Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken, suffered or omitted by the Rights
Agent under this Rights Agreement and the date on and/or after which
such action shall be taken, suffered or such omission shall be
effective. The Rights Agent shall not be liable for any action taken or
suffered by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date
specified in such application (which date shall not be less than five
Business Days after the date any such officer of the Company actually
receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking or suffering 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, suffered or
omitted.
(h) The Rights Agent and any shareholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company 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 Company or for any other Person.
(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, default,
neglect, or misconduct of any such attorneys or agents or for any loss
to the Company or any other Person resulting from any such act,
default, neglect or misconduct, absent gross negligence, bad faith or
willful misconduct (each as finally determined by a court of competent
jurisdiction) in the selection and continued employment 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 or in the exercise of
its rights hereunder if the Rights Agent shall have 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 properly completed, not
29
<PAGE>
signed 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 or transfer without first consulting
with the Company. If such certificate has been properly completed and
signed and shows a negative response to clauses 1 and 2 of such
certificate, unless previously instructed otherwise in writing by the
Company, the Rights Agent may assume without further inquiry that the
Rights Certificate is not owned by a Person described in Section 4(b)
or Section 7(e) and shall not be charged with any knowledge to the
contrary.
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 days' prior notice in writing mailed to the Company, and
to each transfer agent of the Preferred Stock and the Company Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates (or
certificates for the Company Common Stock prior to the Distribution Date) by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty days' prior notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Preferred Stock and the Company Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates (or certificates for the
Company Common Stock prior to the Distribution Date) by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty 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 or, prior to the Distribution Date, the
holder of a certificate for the Company Common Stock (who shall, with such
notice, submit such holder's Rights Certificate or certificate for Company
Common Stock, as the case may be, for inspection by the Company), then any
registered holder of any Rights Certificate or, prior to the Distribution Date,
the holder of a certificate for the Company Common Stock may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a Person organized and doing business under the laws of the United
States or any state of the United States in good standing, shall be authorized
to do business in the State of California, shall be authorized under such laws
to conduct the shareholder services business, exercise corporate trust or stock
transfer powers, shall be subject to supervision or examination by federal or
state authorities and shall have at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a
Person described in clause (a). After 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 Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Preferred Stock and the Company Common Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates (or certificates
for the Company Common Stock prior to the Distribution Date). Failure to give
any notice provided for
30
<PAGE>
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.
SECTION 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by a majority of the Company's
Board of Directors to reflect any adjustment or change made in accordance with
the provisions of this Agreement in the Purchase Price or the number or kind or
class of shares or other securities or property that may be acquired upon
exercise of the Rights. In addition, in connection with the issuance or sale of
shares of Company Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (a) shall, with respect to shares of Company Common
Stock so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by a majority of the Company's Board of
Directors, issue Rights Certificates evidencing 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 Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company 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) Subject to Section
28, the Company may, at its option, by action of a majority of the Company's
Board of Directors, at any time prior to the earlier of (i) the Close of
Business on the tenth Day following the Stock Acquisition Date or (ii) the Final
Expiration Date, redeem all but not less than all of the then-outstanding Rights
at a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any spin-off or other similar transaction or any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being the "Redemption Price"), and the Company may, at
its option, by action of a majority of the Company's Board of Directors, pay the
Redemption Price either in shares of Company Common Stock (based on the current
market price, determined in accordance with Section 11(d), of the shares of
Company Common Stock at the time of redemption) or cash. Subject to the
foregoing, the redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish.
(b) Immediately upon the action of a majority of the Company's
Board of Directors ordering the redemption of the Rights, evidence of which
shall be 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 a majority of the Company's
Board of Directors ordering the redemption of the Rights, the Company shall give
prompt written 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 Company Common Stock. Any notice that is mailed in the manner herein
provided shall be
31
<PAGE>
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. Notice of Certain Events. (a) In case the Company
shall propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company),
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, (iii) to effect any
reclassification of the Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
other than in connection with any public offering of the capital stock of any of
the Company's subsidiaries or any spin-off or other similar transaction), 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 or more transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o)) or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Rights Agent and
to each holder of a Rights Certificate (or, prior to the Distribution Date, to
each holder of certificates for Company Common Stock), to the extent feasible
and in accordance with Section 25, 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 Preferred
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 20 days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least 20
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 Preferred Stock, whichever
shall be the earlier; provided, however, no such notice shall be required
pursuant to this Section 24 if any Subsidiary of the Company effects a
consolidation or merger with or into, or effects a sale or other transfer of
assets or earning power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(iii)
shall occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and to each holder of a Rights Certificate,
to the extent feasible and in accordance with Section 25, 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)(iii).
SECTION 25. Notices. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
mailed or sent or delivered (including by facsimile transmission), if to the
Company, at its address at:
PG&E Corporation
One Market, Spear Tower
32
<PAGE>
Suite 2400
San Francisco, CA 94105
Attention: Corporate Secretary
Telecopy No.: (415) 267-7257
with a copy to:
PG&E Corporation
One Market, Spear Tower
Suite 2400
San Francisco, CA 94105
Attention: Bruce Worthington, Esq.
Senior Vice President and General Counsel
Telecopy No.: (415) 267-7257
and if to the Rights Agent, at its address at:
Mellon Investor Services LLC
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Attention: Relationship Manager
Telecopy No.: (415) 743-1423
with a copy to:
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
Attention: General Counsel
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to the holder of any Rights Certificate (or,
if prior to the Distribution Date, to the holder of certificates evidencing
shares of Company Common Stock) shall be sufficiently given or made 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 Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Company
Common Stock.
SECTION 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates evidencing shares of Company Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
as contemplated by
33
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Section 11(a)(ii) or in order (a) to cure any ambiguity, (b) to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, (c) to shorten or lengthen any time period
hereunder or (d) to change or supplement the provisions hereunder in any manner
which the Company 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,
however, that this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (c) of this sentence, (i) subject to Section 30, a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable or (ii) 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 Company or, so long as any Person is an Acquiring
Person hereunder, from the majority of the Company's Board of Directors, that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Company Common Stock.
SECTION 27. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Company Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Company 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 Exchange Act Regulations as in effect on the date hereof. Except as
otherwise specifically provided herein, the Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors of
the Company or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power (i) to interpret the provisions of this Agreement and (ii) to make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board of Directors in good faith shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board of
Directors of the Company or any member thereof to any liability to the holders
of the Rights. The Rights Agent shall always be entitled to assume that the
Company's Board of Directors acted in good faith and shall be protected and
incur no liability in reliance theron.
SECTION 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common Stock)
any legal or equitable right, remedy or claim under this Agreement. This
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock).
34
<PAGE>
SECTION 30. 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 a majority of the
Company's Board of Directors determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the Rights shall not then be redeemable, the right
of redemption set forth in Section 23 shall be reinstated and shall not expire
until the Close of Business on the tenth Business Day following the date of such
determination by a majority of the Company's Board of Directors.
SECTION 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be governed by, and construed in
accordance with, the laws of the State of California; provided, however, that
all provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.
SECTION 32. Counterparts. This Agreement may be executed
(including by facsimile) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 33. Descriptive Headings. The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 34. Exchange. (a) (i) The Company may, at its option,
at any time after any person becomes an Acquiring Person, upon resolution
adopted by a majority of the Company's Board of Directors, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become null and void pursuant Section 7(e)) for Units of Preferred
Stock at an exchange ratio of one Unit of Preferred Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Section 34(a)(i) Exchange Ratio").
Notwithstanding the foregoing, the Company may not effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan maintained by the Company or any of its Subsidiaries,
or any trustee or fiduciary with respect to such plan acting in such capacity),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Company Common Stock then
outstanding.
(ii) The Company may, at its option, at any time after any
person becomes an Acquiring Person, upon resolution adopted by a majority of the
Company's Board of Directors, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to Section 7(e)) for Units of Preferred Stock at an
35
<PAGE>
exchange ratio specified in the following sentence, as appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof. Subject to such adjustment, each Right may be exchanged for
that number of Units of Preferred Stock obtained by dividing the Adjustment
Spread (as defined below) by the then-current market price (determined pursuant
to Section 11(d)) per Unit of Preferred Stock on the earlier of (i) the date on
which any Person becomes an Acquiring Person and (ii) the date on which a tender
or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity) is first published or sent or given within the meaning of Rule
14d-4(a) of the Exchange Act Regulations or any successor rule, if upon
consummation thereof such Person would be the Beneficial Owner of 15% or more of
the shares of Company Common Stock then outstanding (such exchange ratio being
the "Section 34(a)(ii) Exchange Ratio"). The "Adjustment Spread" shall equal (x)
the aggregate market price on the date of such event of the number of Adjustment
Shares determined pursuant to Section 11(a)(iii), minus (y) the Purchase Price.
Notwithstanding the foregoing, the Company may not effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan maintained by the Company or any of its Subsidiaries,
or any trustee or fiduciary with respect to such plan acting in such capacity),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of the Company Common Stock then
outstanding.
Notwithstanding anything contained in this Section 34(a) to
the contrary, the Company may not exchange any Rights pursuant to this Section
34(a) unless at the time of the action of the Board of Directors of the Company
approving such exchange.
(b) Immediately upon the action of a majority of the Company's
Board of Directors ordering the exchange of any Rights pursuant to Section 34(a)
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Units of Preferred Stock equal to the
number of such Rights held by such holder multiplied by the Section 34(a)(i)
Exchange Ratio or Section 34(a)(ii) Exchange Ratio, as the case may be. The
Company shall promptly notify the Rights Agent in writing of such exchange and
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange shall state the method by which the
exchange of Units of Preferred Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights that will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights that have become null and void pursuant to Section 7(e)) held by
each holder of Rights.
(c) In the event that the number of shares of Preferred Stock
that are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit any exchange of Rights as contemplated
in accordance with this Section 34, the Company shall take
36
<PAGE>
all such action as may be necessary to authorize additional shares of Preferred
Stock for issuance upon exchange of the Rights or make adequate provision to
substitute (1) cash, (2) Company Common Stock or other equity securities of the
Company, (3) debt securities of the Company, (4) other assets or (5) any
combination of the foregoing, having an aggregate value equal to the Adjustment
Spread, where such aggregate value has been determined by a majority of the
Company's Board of Directors.
(d) The Company shall not be required to issue fractions of
Units of Preferred Stock or to distribute certificates that evidence fractional
Units. In lieu of fractional Units, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exchanged as herein
provided an amount in cash equal to the same fraction of the current market
price (determined pursuant to Section 11(d)) of one Unit of Preferred Stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their behalf as of the date first above
written.
PG&E CORPORATION
By /s/ Robert D. Glynn, Jr.
------------------------------
Name: Robert D. Glynn, Jr.
Title: Chairman of the Board
Countersigned:
MELLON INVESTOR SERVICES LLC
By /s/ Joseph Thatcher
------------------------------
Name: Joseph Thatcher
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF RIGHTS CERTIFICATE
EXHIBIT A
---------
Certificate No. Rights
------ ------
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR 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 REFERRED TO BELOW). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
------------------
PG&E CORPORATION
This certifies that , or registered assigns, is the registered
holder of the number of Rights set forth above, each of which entitles the
registered holder thereof, subject to the terms and conditions of the Rights
Agreement dated as of December 22, 2000 (the "Rights Agreement"; terms
defined therein are used herein with the same meaning unless otherwise defined
herein) between PG&E Corporation, a California corporation (the "Company"), and
Mellon Investor Services L.L.C., a New Jersey limited liability company, as
Rights Agent (which term shall include any successor Rights Agent under the
Rights Agreement), to purchase from the Company at any time after the
Distribution Date and prior to the Expiration Date at the office of the Rights
Agent, one one-hundredth of a fully paid and non-assessable share of Series A
Preferred Stock, par value $100 per share (the "Preferred Stock"), of the
Company at the Purchase Price initially of $95 per one one-hundredth share (each
such one one-hundredth of a share being a "Unit") of Preferred Stock, upon
presentation and surrender of this Rights Certificate with the Election to
Purchase and related certificate duly executed. The number of Rights evidenced
by this Rights Certificate (and the number of Units which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per Unit set forth
above shall be subject to adjustment in certain events as provided in the Rights
Agreement.
Upon the occurrence of a Section 11(a)(iii) Event or Section 13
Event, if the Rights evidenced by this Rights Certificate are beneficially owned
by an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
or, under certain circumstances described in
--------
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
2
the Rights Agreement, a transferee of any such Acquiring Person, Associate or
Affiliate, 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)(iii) Event or Section 13 Event.
In certain circumstances described in the Rights Agreement, the
Rights evidenced hereby may entitle the registered holder thereof to purchase
capital stock of an entity other than the Company or to receive common stock,
cash or other assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms and
conditions of the Rights Agreement, which terms 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 Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available from the Company upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered 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 Company under certain
circumstances at its option at a redemption price of $.01 per Right, payable at
the Company's option in cash or in common stock of the Company, subject to
adjustment in certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities which may at any time be issuable upon 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 Company 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 Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
<PAGE>
3
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ,
----------------- ----
---------.
ATTEST: PG&E CORPORATION
By ____________________ By _______________________
Name: Name:
Title: Title:
Countersigned:
MELLON INVESTOR SERVICES L.L.C.,
as Rights Agent
By ____________________
Name:
Title:
<PAGE>
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 ____________________________________________________
(Please print name of registered holder)
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
Company, with full power of substitution.
Dated: ,
-------------------- ---- --------
---------------------------------
Signature
Signature Guaranteed:
<PAGE>
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:
--------------------------------------------------------------
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.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate)
To: PG&E CORPORATION
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the
Units of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person or other property which may be
issuable upon the exercise of the Rights) and requests that certificates for
such Units be issued in the name of and delivered to:
--------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------
Please insert social security
or other identifying number: ____________________________
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 print name and address)
--------------------------------------------------------------------------
Please insert social security
or other identifying number: ____________________________
Dated: ,
-------------------- ---- --------
------------------------
Signature
Signature Guaranteed:
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] 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 thereof.
Dated: ,
-------------------- ---- -------- ---------------------------------
Signature
Signature Guaranteed:
--------------------------------------------------------------
NOTICE
------
The signature in the foregoing Election to Purchase and Certificate
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE>
EXHIBIT B
EXHIBIT B
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 20, 2000, the Board of Directors of PG&E Corporation
(the "Company") declared a distribution of one Right for each outstanding share
of Common Stock, no par value, of the Company (the "Company Common Stock"), to
shareholders of record at the close of business on January 2, 2001 (the "Record
Date") and for each share of Company Common Stock issued by the Company
thereafter and prior to the Distribution Date. Each Right entitles the
registered holder, subject to the terms of the Rights Agreement (as defined
below), to purchase from the Company one one-hundredth of a share (a "Unit") of
Series A Preferred Stock, par value $100 per share (the "Preferred Stock"), at a
Purchase Price of $95 per Unit, subject to adjustment. The Purchase Price is
payable in cash or by certified or bank check payable to the order of the
Company or by wire transfer to the account of the Company (provided a notice of
such wire transfer is given by the holder of the related Right to the Rights
Agent). The description and terms of the Rights are set forth in a Rights
Agreement between the Company and Mellon Investor Services LLC, a New Jersey
limited liability company, as Rights Agent (the "Rights Agreement").
Copies of the Rights Agreement and the Certificate of Determination
for the Preferred Stock have been filed with the Securities and Exchange
Commission as exhibits to a Registration Statement on Form 8-A dated December
22, 2000 (the "Form 8-A"). Copies of the Rights Agreement and the Certificate of
Determination are available free of charge from the Company. This summary
description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all the provisions of
the Rights Agreement and the Certificate of Determination, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Determination are incorporated herein by reference.
The Rights Agreement
--------------------
Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Company Common Stock and
the "Distribution Date" will occur upon the earlier of (i) 10 days following a
public announcement (the date of such announcement being the "Stock Acquisition
Date") that a person or group of affiliated or associated persons (other than
the Company, any subsidiary of the Company or any employee benefit plan of the
Company or such subsidiary) (an "Acquiring Person") has acquired, obtained the
right to acquire, or otherwise obtained beneficial ownership of 15% or more of
the then-outstanding
<PAGE>
2
shares of Company Common Stock, and (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to such time as any
person becomes an Acquiring Person) following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 15%
or more of the then-outstanding shares of Company Common Stock. Until the
Distribution Date, (i) the Rights will be evidenced by Company Common Stock
certificates and will be transferred with and only with such Company Common
Stock certificates, (ii) new Company Common Stock certificates issued after the
Record Date (also including shares distributed from Treasury) will contain a
notation incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificates representing outstanding Company Common Stock
will also constitute the transfer of the Rights associated with the Company
Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on the earlier to occur of (i) the tenth
anniversary of the Rights Agreement, unless earlier redeemed by the Company as
described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Company Common Stock as of
the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation in a
merger with an Acquiring Person and shares of Company Common Stock shall remain
outstanding, (ii) a Person becomes an Acquiring Person, (iii) an Acquiring
Person engages in one or more "self-dealing" transactions as set forth in the
Rights Agreement, or (iv) during such time as there is an Acquiring Person, an
event occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., by means of a recapitalization) (each such
event being a "Section 11(a)(iii) Event"), then, in each such case, each holder
of a Right will thereafter have the right to receive, upon exercise, Units of
Preferred Stock (or, in certain circumstances, Company Common Stock, cash,
property or other securities of the Company) having a value equal to two times
the exercise price of the Right. The exercise price is the Purchase Price
multiplied by the number of Units of Preferred Stock issuable upon exercise of a
Right prior to the events described in this paragraph. Notwithstanding any of
the foregoing, following the occurrence of any of the events 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.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger (other than a merger described in the
preceding paragraph) or other business combination and the Company is not the
surviving corporation, (ii) any Person consolidates or merges with the Company
and all or part of the Company Common Stock is converted or exchanged for
securities, cash or property of any other Person or (iii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as described above) shall
thereafter have the right to receive, upon exercise, common stock of the
ultimate parent of the Acquiring Person having a value equal to two times the
exercise price of the Right.
The Purchase Price payable, and the number of Units of Preferred
Stock 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 Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the
<PAGE>
3
Preferred Stock, or (iii) upon the distribution to the holders of the Preferred
Stock of evidences of indebtedness, cash or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than those referred
to above).
Upon the declaration of a dividend in connection with the Proposed
Spin-off or other similar transaction (whether occurring before or after the
Distribution Date), the Purchase Price payable, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable upon
exercise of the Rights, may be adjusted by action of a majority of the Company's
Board of Directors, after receiving advice from a nationally recognized
investment banking firm, in a manner that reflects the impact on the Company
Common Stock of the Proposed Spin-off or other similar transactions.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company is not required to issue fractional Units. In lieu thereof,
an adjustment in cash may be made based on the market price of the Preferred
Stock prior to the date of exercise.
At any time prior to the earlier of (i) ten business days following
the Stock Acquisition Date or (ii) the Final Expiration Date, a majority of the
Company's Board of Directors may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (subject to adjustment in certain events) (the
"Redemption Price"), payable, at the election of such majority of the Company's
Board of Directors, in cash or shares of Company Common Stock. Immediately upon
the action of a majority of the Company's Board of Directors ordering the
redemption of the Rights, the Rights will terminate and the only remaining right
of the holders of Rights will be to receive the Redemption Price.
The Board of Directors, at its option, may exchange each Right for
(i) one Unit of Preferred Stock or (ii) such number of Units of Preferred Stock
as will equal (x) the difference between the aggregate market price of the
number of Units of Preferred Stock to be received upon a Section 11(a)(iii)
Event and the purchase price set forth in the Rights Agreement, divided by (y)
the market price per Unit of Preferred Stock upon a Section 11(a)(iii) Event.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended without
the approval of the holders of Company Common Stock at any time prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
the holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
<PAGE>
4
Description of Preferred Stock
The Units of Preferred Stock that may be acquired upon exercise of
the Rights will be nonredeemable and subordinate to any other shares of
preferred stock that may be issued by the Company.
Each Unit of Preferred Stock will have a minimum preferential
quarterly dividend of $.01 per Unit or any higher per share dividend declared on
the Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred Stock
will receive a preferred liquidation payment equal to the greater of $1.00 per
Unit and the per share amount paid in respect of a share of Company Common
Stock.
Each Unit of Preferred Stock will have one vote, voting together
with the Company Common Stock. The holders of Units of Preferred Stock, voting
as a separate class, shall be entitled to elect two directors if dividends on
the Preferred Stock are in arrears for six fiscal quarters.
In the event of any merger, consolidation or other transaction in
which shares of Company Common Stock are exchanged, each Unit of Preferred Stock
will be entitled to receive the per share amount paid in respect of each share
of Company Common Stock.
The rights of holders of the Preferred Stock to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right is expected to approximate the economic
value of one share of Company Common Stock.
<PAGE>
EXHIBIT C
EXHIBIT C
---------
CERTIFICATE OF DETERMINATION OF PREFERENCES
----------------------------------
Pursuant to Section 401 of the
California General Corporation Law
----------------------------------
ROBERT D. GLYNN, JR. and LESLIE H. EVERETT certify that:
1. They are the Chairman of the Board, Chief Executive Officer, and
President, and the Vice President and Corporate Secretary, respectively, of PG&E
Corporation, a California corporation.
2. Pursuant to authority conferred upon the Board of Directors of
the Corporation by its Restated Articles of Incorporation (the "Articles"), and,
pursuant to the provisions of Section 400 of the California General Corporation
Law, said Board of Directors, at a duly called meeting held on December 20,
2000, at which a quorum was present and acted throughout, adopted the following
resolutions, which resolutions remain in full force and effect on the date
hereof creating a series of 5,000,000 shares of Preferred Stock having a par
value of $100 per share, designated as Series A Preferred Stock (the "Series A
Preferred Stock") out of the class of 80,000,000 shares of preferred stock (the
"Preferred Stock"):
RESOLVED, that pursuant to the authority vested in the Board of
Directors in accordance with the provisions of the Articles, the Board of
Directors does hereby create, authorize and provide for the issuance of the
Series A Preferred Stock having the voting powers, designation, relative,
participating, optional and other special rights, preferences and
qualifications, limitations and restrictions thereof that are set forth as
follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Preferred Stock" and the number of shares
constituting such series shall be 5,000,000.
Section 2. Dividends and Distributions. (A) Subject to the prior and
superior rights of the holders of any shares of any other series of Preferred
Stock or any other shares of preferred stock of the Corporation ranking prior
and superior to the shares of Series A Preferred Stock with respect to
dividends, each holder of one one-hundredth (1/100) of a share (a "Unit") of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for that purpose, (i)
quarterly dividends payable in cash on the last day of March,
<PAGE>
2
June, September and December in each year (each such date being a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of such Unit of Series A Preferred Stock, in an amount
per Unit (rounded to the nearest cent) equal to the greater of (a) $.01 or (b)
subject to the provision for adjustment hereinafter set forth, the aggregate per
share amount of all cash dividends declared on shares of 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 a Unit of
Series A Preferred Stock, and (ii) subject to the provision for adjustment
hereinafter set forth, quarterly distributions (payable in kind) on each
Quarterly Dividend Payment Date in an amount per Unit equal to the aggregate per
share amount 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 shares of
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 a Unit of Series A Preferred Stock. In the event that the
Corporation shall at any time after December 20, 2000 (the "Rights Declaration
Date") (i) declare any dividend on outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount to which the holder of a Unit of
Series A Preferred Stock was entitled immediately prior to such event pursuant
to the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which shall be the number of shares of Common Stock
that are outstanding immediately after such event and the denominator of which
shall be the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on
Units of Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the shares of Common Stock
(other than a dividend payable in shares of Common Stock); provided, however,
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 $.01 per Unit
on the Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and shall be cumulative on each
outstanding Unit of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issuance of such Unit of Series A Preferred
Stock, unless the date of issuance of such Unit is prior to the record date for
the first Quarterly Dividend Payment Date, in which case, dividends on such Unit
shall begin to accrue from the date of issuance of such Unit, or
<PAGE>
3
unless the date of issuance is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of Units of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on Units of
Series A Preferred Stock in an amount less than the aggregate amount of all such
dividends at the time accrued and payable on such Units shall be allocated pro
rata on a Unit-by-Unit basis among all Units of Series A Preferred Stock at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of Units of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of Units of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each Unit of Series A Preferred Stock shall entitle the holder thereof to one
vote on all matters submitted for a vote of the shareholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide outstanding shares of Common Stock or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the number of votes per Unit to which holders of Units of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
Units of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If, at any time, dividends on any Units of Series A
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, then during the period (a "default period") from the
occurrence of such event until such time as all accrued and unpaid dividends for
all previous quarterly dividend periods and for the current quarterly dividend
period on all Units of Series A Preferred Stock then outstanding shall have been
declared and paid or set apart for payment, all holders of Units of Series A
Preferred Stock, voting separately as a class, shall have the right to elect two
Directors.
<PAGE>
4
(ii) During any default period, such voting rights of the holders of
Units of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of shareholders, and thereafter at annual meetings of
shareholders, provided that neither such voting rights nor any right of the
holders of Units of Series A Preferred Stock to increase, in certain cases, the
authorized number of Directors may be exercised at any meeting unless one-third
of the outstanding Units of Preferred Stock shall be present at such meeting in
person or by proxy. The absence of a quorum of the holders of Common Stock shall
not affect the exercise by the holders of Units of Series A Preferred Stock of
such rights. At any meeting at which the holders of Units of Series A Preferred
Stock shall exercise such voting rights initially during an existing default
period, they shall have the right, voting separately as a class, to elect
Directors to fill up to two vacancies in the Board of Directors, if any such
vacancies may then exist, or, if such right is exercised at an annual meeting,
to elect two Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the Series A
Preferred Stock shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the required
number. After the holders of Units of Series A Preferred Stock shall have
exercised their right to elect Directors during any default period, the number
of Directors shall not be increased or decreased except as approved by a vote of
the holders of Units of Series A Preferred Stock as herein provided or pursuant
to the rights of any equity securities ranking senior to the Series A Preferred
Stock.
(iii) Unless the holders of Series A Preferred Stock shall, during
an existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or shareholders
owning in the aggregate not less than 10% of the total number of the Units of
Series A Preferred Stock outstanding may request, the calling of a special
meeting of the holders of Units of Series A Preferred Stock, which meeting shall
thereupon be called by the Secretary of the Corporation. Notice of such meeting
and of any annual meeting at which holders of Units of Series A Preferred Stock
are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Units of Series A Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later then 60 days after such order or request, or, in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any shareholder or shareholders owning in the
aggregate not less than 10% of the total number of outstanding Units of Series A
Preferred Stock. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the 60 days immediately preceding
the date fixed for the next annual meeting of the shareholders.
<PAGE>
4
(iv) During any default period, the holders of shares of Common
Stock and Units of Series A Preferred Stock, and other classes or series of
stock of the Corporation, if applicable, shall continue to be entitled to elect
all the Directors until holders of the Units of Series A Preferred Stock shall
have exercised their right to elect, voting as a separate class, two Directors,
after the exercise of which right (x) the Directors so elected by the holders of
Units of Series A Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the expiration of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the class of
capital stock which elected the Director whose office shall have become vacant.
References in this paragraph (C) to Directors elected by the holders of a
particular class of capital stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Units of Series A Preferred Stock as a separate class to
elect Directors shall cease, (y) the term of any Directors elected by the
holders of Units of Series A Preferred Stock as a separate class shall
terminate, and (z) the number of Directors shall be such number as may be
provided for in the Articles or Bylaws of the Company (the "Bylaws"),
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Articles or Bylaws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors.
(vi) The provisions of this paragraph (C) shall govern the election
of Directors by holders of Units of Preferred Stock during any default period
notwithstanding any provisions of the Articles or the Bylaws to the contrary.
(D) Except as set forth herein, holders of Units of Series A
Preferred Stock shall have no special voting rights and their consents shall not
be required (except to the extent they are entitled to vote with holders of
shares of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions. (A) Whenever quarterly dividends or
other dividends or distributions payable on Units of Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on outstanding
Units of Series A Preferred Stock shall have been paid in full, the Corporation
shall not:
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(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of junior stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of parity stock, except dividends paid ratably on Units of
Series A Preferred Stock and shares of all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of such Units and all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any parity stock, provided, however, that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any junior stock;
(iv) purchase or otherwise acquire for consideration any Units of
Series A Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such Units.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any Units of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
Units shall, upon their cancellation, become authorized but unissued Units of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of
junior stock unless the holders of Units of Series A Preferred Stock shall have
received, subject to adjustment as hereinafter provided in paragraph (B), the
greater of either (a) $1.00 per Unit plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not earned or declared, up until
the date of such payment, or (b) the amount equal to the aggregate per share
amount to be distributed to holders of shares of Common Stock, or (ii) to the
holders of shares of parity stock, unless simultaneously therewith distributions
are made ratably on Units of Series A Preferred Stock and all other shares of
such parity stock in proportion to the total amounts to which the holders of
Units of
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Series A Preferred Stock are entitled under clause (i)(a) of this sentence and
to which the holders of shares of such parity stock are entitled, in each case
upon such liquidation, dissolution or winding up.
(B) In the event the Corporation shall, at any time after the Rights
Declaration Date, (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock, or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of Units
of Series A Preferred Stock were entitled immediately prior to such event
pursuant to clause (i)(b) of paragraph (A) of this Section 6 shall be adjusted
by multiplying such amount by a fraction the numerator of which shall be the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 7. 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 converted into other stock or
securities, cash and/or any other property, then in any such case Units of
Series A Preferred Stock shall at the same time be similarly exchanged for or
converted into an amount per Unit (subject to the provision for adjustment
hereinafter set forth) equal to 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 converted or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock, or (iii) combine
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the immediately preceding sentence with respect to the
exchange or conversion of Units of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of Common Stock that are outstanding immediately after such event and
the denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The Units of Series A Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Units of Series A Preferred Stock shall rank
junior to all other series of the Preferred Stock and to any other class of
preferred stock that hereafter may be issued by the Corporation as to the
payment of dividends and the distribution of assets, unless the terms of any
such series or class shall provide otherwise.
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Section 10. Amendment. The Articles, including, without limitation,
this resolution, shall not hereafter be amended, either directly or indirectly,
or through merger or consolidation with any other corporation or corporations in
any manner that would alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding Units
of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. The Series A Preferred Stock may be
issued in Units or other fractions of a share, which Units or fractions shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
Section 12. Certain Definitions. As used herein with respect to
the Series A Preferred Stock, the following terms shall have the following
meanings:
(A) The term "Common Stock" shall mean the class of stock designated
as the common stock, no par value per share, of the Corporation at the date
hereof or any other class of stock resulting from successive changes or
reclassification of such common stock.
(B) The term "junior stock" (i) as used in Section 4 shall mean the
Common Stock and any other class or series of capital stock of the Corporation
hereafter authorized or issued over which the Series A Preferred Stock has
preference or priority as to the payment of dividends and (ii) as used in
Section 6 shall mean the Common Stock and any other class or series of capital
stock of the Corporation over which the Series A Preferred Stock has preference
or priority in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
(C) The term "parity stock" (i) as used in Section 4, shall mean any
class or series of stock of the Corporation hereafter authorized or issued
ranking pari passu with the Series A Preferred Stock as to the payment of
dividends and (ii) as used in Section 6, shall mean any class or series of
capital stock ranking pari passu with the Series A Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Corporation.
3. The number of shares constituting the Series A Preferred
Stock is 5,000,000.
4. None of the Series A Preferred Stock has been issued.
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We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Date: December 22, 2000
-----------------------------------
Robert D. Glynn, Jr.
Chairman of the Board,
Chief Executive Officer, and
President
-----------------------------------
Leslie H. Everett
Vice President and
Corporate Secretary
