<PAGE> 1
As filed with the Securities and
Exchange Commission on December 23, 1997.
File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------------------------------
FORM U-1 APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
---------------------------------------------------------------
CONECTIV, INC.
800 King Street
Wilmington DE 19899
(Name of company filing this statement and address of principal
executive office)
---------------------------------------------------------------
Conectiv, Inc.
(Name of top registered holding company parent)
---------------------------------------------------------------
Barbara S. Graham Louis M. Walters
President Treasurer
Conectiv, Inc. Conectiv, Inc.
800 King Street 6801 Black Horse Pike
Wilmington, DE 19899 Egg Harbor Township, NJ 08234
(Name and address of agents for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
Dale G. Stoodley, Esq James E. Franklin,II, Esq. Joyce Koria Hayes, Esq
Delmarva Power & Light Atlantic Energy, Inc. 7 Graham Court
800 King Street 800 Black Horse Pike Newark, DE 19711
Wilmington, DE 19899 Egg Harbor Township, NJ 08234
<PAGE> 2
2
Item 1. Description of Proposed Transaction
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reason why it is desired to consummate
the transaction and the anticipated effect thereof. If the transaction is part
of a general program, describe the program and its relation to the proposed
transaction.
I. INTRODUCTION
A. General
Conectiv, Inc. ("Conectiv" or "THE COMPANY"), a Delaware corporation, has
previously filed an Application/Declaration on Form U-1 with the Securities and
Exchange Commission (the "Commission") requesting authorization under Section
9(a)(2) of the Public Utility Holding Company Act of 1935, as amended (the
"Act"), to consummate certain transactions resulting in the acquisition by THE
COMPANY of all of the outstanding voting securities of Delmarva Power & Light
Company, a Delaware and Virginia corporation and an operating public utility
company ("Delmarva"), and of Atlantic City Electric Company, a New Jersey
corporation and an operating public utility company ("ACE") and of certain
direct and indirect nonutility subsidiaries (said transactions are hereinafter
referred to as the "Merger")(See File No. 70-9069) (the "Merger U-1")).
Following the consummation of the transactions described in the Merger U-1, THE
COMPANY will register as a holding company under the Act.
In order to ensure that THE COMPANY and its subsidiaries are able to meet
their capital requirements upon registration and plan their future financing
accurately, THE COMPANY and its subsidiaries have also filed an
Application/Declaration on Form U-1 with the Commission requesting authorization
for financing transactions for the period beginning with the effective date of
an order issued in such proceeding through December 31, 2000 (File No. 70-9095).
<PAGE> 3
3
B. Description of the Parties to the Transaction
Following the consummation of the merger transactions, THE COMPANY will
register as a holding company under the Act and will have two operating utility
subsidiaries (the "Utility Subsidiaries"): Delmarva, an electric and gas utility
company and ACE, an electric utility company. THE COMPANY will also have several
direct and indirect nonutility subsidiaries.
Additional information about THE COMPANY and it subsidiaries and their
businesses is set forth in the Merger U-1 and the exhibits thereto.
II. BACKGROUND FOR PROPOSED RIGHTS DIVIDEND
Unsolicited attempts to acquire public companies have often required
boards of directors and stockholders to make difficult decisions affecting the
value, and on occasion the continued existence of the target company, within
extremely short time periods. Such takeover attempts often occur when a company
is particularly vulnerable and when its board has determined that the Company's
inherent long-term values are inadequately recognized by the marketplace. Many
of these attempts have involved partial or two-tiered offers or the breakup of
the corporate structure and sale of assets, or have taken the form of creeping
acquisitions of stock that deprive stockholders of participation in a control
premium.
The changing regulatory environment (including the possible repeal or
amendment of the Act) suggests that public utility holding companies, which will
include THE COMPANY, and their stockholders are losing to some degree the
regulatory protection against hostile acquisitions that they formerly had. The
electric and gas utility industry is undergoing dramatic regulatory and
<PAGE> 4
4
technological changes resulting in a restructuring of the industry. As a result,
there has been increased takeover activity, including hostile or other unwanted
takeover bids, further indicating that THE COMPANY's stockholders may be at risk
of losing the long-term value of THE COMPANY.
Stockholder rights plans have become widely accepted means to maximize
stockholder value by reducing the risk of nonrealization of stockholder value
due to opportunistic proposals. Adoption of such a plan by THE COMPANY would
encourage potential acquirers to negotiate with the Board of Directors of THE
COMPANY (the "Board") and assist the Board in obtaining the highest value for
THE COMPANY's stockholders, especially in a hostile or unwanted takeover
situation. A rights plan may in certain circumstances permit the Board to thwart
an inadequate offer. A stockholder rights plan also would provide the Board with
a role in discouraging implicitly coercive takeover tactics and would enable the
Board to provide holders of THE COMPANY's Common Stock, $0.01 par value per
share (the "Company Common Stock") and Class A Common Stock, $0.01 par value per
share (the "Class A Common Stock" and collectively with the Company Common Stock
the "Common Stock"), adequate time to assess a takeover bid without undue
pressure. Moreover, a stockholder rights plan may enhance the probability that a
competing bid will emerge. Over 1,800 American public companies have adopted
rights plans, including approximately one-half of the Business Week 1,000 and
Fortune 500 companies and at least 98 public utility companies. Indeed, the
Commission has approved the adoption of rights plans by registered public
utility holding companies. See, e.g., Consolidated Natural Gas Company, HCAR No.
26434 (December 19, 1995), National Fuel Gas Company, HCAR No. 26532 (June 12,
1996), and New Century Energies, HCAR No. 26751 dated July 31, 1997).
<PAGE> 5
5
A stockholder rights plan, however, would not make THE COMPANY
acquisition-proof nor preclude a proxy contest. The fiduciary duties of the
Board under Delaware law would still require the Board to consider an offer that
gives maximum long-term value to all holders of Common Stock and could, under
appropriate conditions, require the Board to redeem the rights or amend the
rights plan in order to allow a proposed transaction to proceed.
Management of THE COMPANY has proposed for consideration by the Board a
stockholder rights plan, the terms of which are described below. However, as
described in the Merger U-1, the full post-Merger Conectiv Board will not take
office until the Merger is consummated. It is appropriate for that full Board of
Directors to give full and final consideration to and ultimately to adopt (or
not adopt) the resolutions implementing the proposed rights plan. This
application/declaration is filed seeking timely notice of the proposed plan so
that the new Board can act expeditiously following the Merger.
III. DESCRIPTION OF RIGHTS TO PURCHASE PREFERRED STOCK
General
Once the rights created under the proposed Rights Agreement (the "Rights")
become exercisable, the Rights issued to holders of the Company Common Stock
would entitle such holder to purchase fractional shares of Series 1 Junior
Participating Preferred Stock (the "Series 1 Preferred Stock") and the Rights
issued to holders of the Class A Common Stock would entitle such holders to
purchase fractional shares of Series 2 Junior Participating Preferred Stock (the
"Series 2 Preferred Stock" and referred to in the aggregate with the Series 1
Preferred Stock as "Preferred Stock"). Since THE COMPANY has two classes of
Common Stock sharing equal voting rights, two forms of Right are required to
<PAGE> 6
6
assure that neither class of Common Stock would be subject to potential dilution
in the event a Triggering Event, as defined below, occurs. If prior to the time
the Rights become exercisable as described below, the Class A Common Stock is
converted into Company Common Stock in accordance with the applicable provisions
of the Restated Certificate of Incorporation of THE COMPANY, the Rights attached
to the shares of Class A Common Stock so converted would be converted to Rights
to purchase Series 1 Preferred Stock pursuant to a conversion ratio equivalent
to the conversion ratio used for converting the Class A Common Stock to Company
Common Stock.
The distribution of the Rights to the holders of Company Common Stock and
Class A Common Stock would be payable on a record date (the "Record Date") to be
established by the Board. Under the proposed rights plan, each Right, once it
becomes exercisable, would entitle the registered holder to purchase from THE
COMPANY one one-hundredth of a share (a "Unit") of the Series 1 or 2 Preferred
Stock, as applicable, at a price per one one-hundredth share to be determined by
the Board (the "Purchase Price"), subject to adjustment. Each Unit of Series 1
Preferred Stock will be designed to mirror as nearly as practicable a share of
the Company Common Stock and each Unit of Series 2 Preferred Stock will be
designed to mirror as nearly as practicable a share of Class A Common Stock. The
Purchase Price for which each type of Right could be exercised would be set by
the Board at a level that the Board believes approximates the long-term market
value of the Company Common Stock or the Class A Common Stock, as the case may
be. It is expected that the respective Purchase Prices will be set at levels
approximately four to five times the market price of the Common Stock or Class A
Common Stock, which premium is consistent with that used by other companies in
setting the purchase price for their rights. The description and
<PAGE> 7
7
terms of the Rights will be set forth in a Rights Agreement (the "Rights
Agreement") between the Company and Conectiv Resource Partners, Inc. or its
successors (the "Rights Agent"). A form of the proposed Rights Agreement is
filed as Exhibit A-3.
Triggering Events; Transfer of Rights
The Rights would become exercisable (i.e. Units of Preferred Stock could
be purchased at the Purchase Price pursuant to the Rights) upon the earlier to
occur of (i) ten calendar days following the date (the "Shares Acquisition
Date") of public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, beneficial ownership of
Common Stock, Class A Common Stock, or other voting securities ("Voting Stock")
representing 15% or more of the total voting power of the outstanding shares of
Voting Stock (such person or group being an "Acquiring Person") or (ii) ten
business days (or such later date as may be determined by action of the Board of
Directors prior to the time any person or group of affiliated persons becomes an
Acquiring Person) following the commencement or announcement by a person or
group of an intention to make a tender offer or exchange offer, the consummation
of which would result in such person or group acquiring, or obtaining the right
to acquire, beneficial ownership of Voting Stock having 15% or more of the total
voting power of the outstanding shares of Voting Stock (the earlier of such
dates being called the "Distribution Date"). Until the Distribution Date, the
Rights will not be exercisable and will trade only as an integral part of the
outstanding shares of Common Stock and Class A Common Stock. Until the
Distribution Date, the Rights will be evidenced, by the Common Stock or Class A
Common Stock certificates, as the case may be. Until the Distribution Date (or
earlier redemption or expiration of the Rights), new
<PAGE> 8
8
Common Stock certificates issued after the Record Date upon transfer or new
issuance of the Common Stock will contain a legend incorporating the Rights
Agreement by reference. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights. Following the distribution of Rights Certificates, the Rights would
trade independently of the Common Stock.
Under the proposed Rights Plan, the Rights will expire at the close of
business on the date that is the 10-year anniversary of the Record Date, unless
earlier redeemed or exchanged by THE COMPANY as described below.
Exercise of Rights Following a Triggering Event
In the event that a person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise, Units of Preferred Stock having a value equal
to two times the Purchase Price, except that 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 after a person or group of affiliated or
associated persons becomes an Acquiring Person, (i) THE COMPANY is acquired
in a merger or other business combination transaction, or (ii) 50% or more of
the assets or earning power of THE COMPANY and its subsidiaries is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
<PAGE> 9
9
exercise, common stock or other equity of the acquiring company having a value
equal to two times the Purchase Price. The events set forth in this paragraph
and in the preceding paragraph are referred to as "Triggering Events".
Adjustments to Purchase Price
The Purchase Prices payable, and the number of Units of Preferred Stock
(or other securities, as the case may be) 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) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for shares of the Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
out of earnings or retained earnings or dividends payable in the Preferred
Stock) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Prices payable upon
the exercise of each class of Rights will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Prices. No
fractional shares of Preferred Stock will be issued upon exercise of the Rights
(other than fractional shares that are integral multiples of one one-hundredth
of a share of Preferred Stock) and, in lieu thereof, an adjustment in cash will
be made based on the market price of the Preferred Stock.
<PAGE> 10
10
Redemption and Exchange of Rights
The Proposed Rights Plan provides that at any time prior to such time as
any person or group of affiliated or associated persons becomes an Acquiring
Person, THE COMPANY may redeem the Rights in whole, but not in part, at a
price of $.01 per Right, subject to adjustment (the "Redemption Price"). In
addition, prior to the Distribution Date and prior to such time as any person or
group of affiliated or associated persons becomes an Acquiring Person, THE
COMPANY may, in connection with the redemption or purchase by THE COMPANY of
shares of Class A Common Stock in accordance with the applicable provisions of
THE COMPANY'S Restated Certificate of Incorporation, redeem the Rights attached
to the shares of Class A Common Stock at a redemption price of $0.01 per Right,
subject to adjustment. Immediately upon the action of the Board electing to
redeem Rights, THE COMPANY shall make announcement thereof, and upon such
action, the right to exercise the Rights so redeemed will terminate and the only
right of the holders of such Rights will be to receive the Redemption Price.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and before any such person or group (other than the
Company and certain related entities) shall have become beneficial owner of 50%
or more of the total voting power of the aggregate of all shares of Voting Stock
then outstanding, the Board of Directors may exchange the Rights (other than
Rights owned by the Acquiring Person or certain transferees of such Acquiring
Person, which shall have become void), in whole or in part, at an exchange ratio
of one one-hundredth of a share of Series 1 or Series 2 Preferred Stock, as
appropriate, per Right (subject to adjustment).
<PAGE> 11
11
Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of THE COMPANY, including, without limitation,
the right to vote or to receive dividends.
Terms of the Preferred Stock
The Preferred Stock will rank junior to all other series of THE COMPANY's
preferred stock with respect to payment of dividends and as to distribution of
assets in liquidation. Each share of Series 1 Preferred Stock or Series 2
Preferred Stock, as the case may be, will have a quarterly dividend rate per
share equal to the greater of $1.00 or 100 times the aggregate per share amount
of all cash dividends declared from time to time on the Company Common Stock or
the Class A Common Stock, as the case may be, since the immediately preceding
quarterly dividend on the Preferred Stock, subject to certain adjustments. The
Series 1 Preferred Stock will not be redeemable. Units of Series 2 Preferred
Stock will be redeemable in certain instances upon substantially the same terms
and conditions that shares of Class A Common Stock may be redeemed in accordance
with THE COMPANY'S Restated Certificate of Incorporation. In the event of
liquidation, the holders of the Preferred Stock will be entitled to receive a
preferred liquidation payment per share of an amount equal to the greater of
$1.00 plus accrued and unpaid dividends thereon or 100 times the payment to be
made per share of Company Common Stock or Class A Common Stock, as the case may
be, subject to certain adjustments. Generally, each share of Preferred Stock
will vote together with the Common Stock and any other series of preferred stock
entitled to vote in such manner and will be entitled to 100 votes, subject to
certain adjustments. In the event of any merger, consolidation, combination, or
other transaction in which shares of the Company Common Stock and/or Class A
<PAGE> 12
12
Common Stock are exchanged for or changed into other stock or securities, cash
and/or other property, each share of Series 1 Preferred Stock or Series 2
Preferred Stock, as the case may be, will be entitled to receive 100 times the
aggregate amount of stock, securities, cash, and/or other property, into which
or for which each share of Common Stock is changed or exchanged, subject to
certain adjustments. The foregoing dividend, voting, and liquidation rights of
the Preferred Stock are protected against dilution in the event that additional
shares of Common Stock are issued pursuant to a stock split or stock dividend or
distribution. Because of the nature of the Preferred Stock's dividend, voting,
liquidation, and other rights, the value of each one one-hundredth of a share of
Series 1 Preferred Stock is intended to approximate the value of one share of
the Company Common Stock and the value of each one one-hundredth of a share of
Series 2 Preferred Stock is intended to approximate the value of one share of
Class A Common Stock.
Amendments to Terms of the Rights
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company without the consent of holders of Rights in order to
cure any ambiguity, defect, or inconsistency, or to make any other changes that
the Board may deem necessary or desirable. After a person or group becomes an
Acquiring Person, the provisions of the Rights Agreement may not be amended in
any manner that would adversely affect the interests of the holders of Rights
(excluding the interests of any Acquiring Person).
<PAGE> 13
13
IV. AUTHORIZATIONS SOUGHT
THE COMPANY herein seeks authorization to implement the proposed
stockholder rights plan as described in this application-declaration and
embodied in the proposed Rights Agreement. This would include, among other
actions permitted by the Agreement, the following transactions:
The dividend distribution of the Rights
The making of adjustments to the Purchase Prices applicable upon exercise
of each type of Right
The sale and issuance of Preferred Stock or other securities, or the
transfer of other assets, upon exercise of the Rights
The redemption of Rights and the issuance of Preferred Stock in connection
herewith, and the issuance of Preferred Stock or other securities, or the
transfer of other assets, in exchange for Rights
Amending of the Agreement as permitted by the terms thereof.
V. STATEMENT PURSUANT TO RULE 54
There will be no proceeds to THE COMPANY from the issuance of the Rights.
Therefore no proceeds will be used by THE COMPANY or a subsidiary for the direct
or indirect acquisition of an exempt wholesale generator ("EWG") or a foreign
utility company ("FUCO"). Rule 54 promulgated under the Act states that in
determining whether to approve the issue or sale of a security by a registered
<PAGE> 14
14
holding company for purposes other than the acquisition of an EWG or FUCO, or
other transactions by such registered holding company or its subsidiaries other
than with respect to EWGs or FUCOs, the Commission shall not consider the effect
of the capitalization or earnings of any subsidiary which is an EWG or a FUCO
upon the registered holding company system if Rules 53(a), (b) or (c) are
satisfied. As set forth below, all conditions of Rule 53(a) are satisfied.
Rule 53 requires that the aggregate investment in EWGs and FUCOs not
exceed 50% of a system's consolidated retained earnings. THE COMPANY's present
investments in EWGs and FUCOs, satisfies the 50% limitation, and the THE COMPANY
will not make any additional investments in EWGs and FUCOs that cause it to
exceed that limitation, unless the Commission otherwise authorizes.
THE COMPANY and its Subsidiaries will maintain books and records to
identify the investments in and earnings from EWGs and FUCOs in which they
directly or indirectly hold an interest, thereby satisfying Rule 53(a)(2). In
addition, the books and records of each such entity are and will be kept in
conformity with United States generally accepted accounting principles ("GAAP"),
the financial statements are and will be prepared according to GAAP, and THE
COMPANY undertakes to provide the Commission access to such books and records
and financial statements as it may request.
Employees of THE COMPANY's domestic public-utility companies will not
render services, directly or indirectly, to the EWGs or FUCOs in the Conectiv
System, thereby satisfying Rule 53(a)(3).
<PAGE> 15
15
THE COMPANY, in connection with any Form U-1 seeking approval of EWG or
FUCO financing, will submit copies of the documents described in Rule 53(a)(4)
with every federal, state or local regulation having jurisdiction over the
retail rates of the public-utility companies in the Conectiv System. Rule
53(a)(4) will be correspondingly satisfied.
None of the conditions described in Rule 53(b) exist with respect to THE
COMPANY, thereby satisfying Rule 53(b) and making Rule 53(c) inapplicable.
(b) Describe briefly, and where practicable state the approximate amount
of, any material interest in the proposed transaction, direct or indirect, of
any associate company or affiliate of the applicant or any affiliate of any such
associate company.
Upon implementation, Conectiv Resource Partners, Inc., a nonutility mutual
service company subsidiary, would act as rights agent and will receive a
reimbursement of expenses on a cost basis.
(c) If the proposed transaction involves the acquisition of securities not
issued by a registered holding company or a subsidiary thereof, describe briefly
the business and property, present or proposed, of the issuer of such
securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or disposition of
assets, describe briefly such assets, setting forth original cost, vendor's book
cost (including the basis of determination) and applicable valuation and
qualifying reserves.
Not applicable.
<PAGE> 16
16
Item 2. Fees, Commissions and Expenses
(a) State (1) the fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by applicant or
declarant to act for the successful bidder.
It is estimated that the fees, commissions and expenses ascertainable at this
time to be incurred by THE COMPANY in connection with the implementation of the
proposed transactions are as follows:
<TABLE>
<S> <C>
Fees for Outside Counsel *
Fee for Investment Adviser *
Printing and Mailing Costs 25,000
Miscellaneous Expenses 5,000
------
Total *
</TABLE>
*To be filed by amendment.
(b) If any person to whom fees or commissions have been or are to be paid
in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
Upon implementation of a Rights Plan, Conectiv Resource Partners, Inc., a
nonutility mutual service company subsidiary, would act as rights agent and will
receive a reimbursement of expenses on a cost basis. It is expected that such
charges, if any, will be de minimis. Any costs and expenses of establishing
Conectiv Resources as the Rights Agent or incurred in the performance of the
duties of Rights Agent will be borne solely by THE COMPANY and will not be
allocated or otherwise charged to any subsidiary of THE COMPANY.
<PAGE> 17
17
Item 3. Applicable Statutory Provisions
(a) State the sections of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of exemption.
Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rule 42 under the Act
are deemed to be applicable to the proposed dividend distribution of Rights, and
any subsequent exercise or redemption of the Rights.
While the Rights technically would be issued pursuant to a dividend on the
Company Common Stock and Class A Common Stock for Delaware corporate law
purposes, in and of themselves the Rights would have no present economic value
upon issuance and, therefore, are not a "dividend" out of capital or capital
surplus for the purpose of Section 12(c) of the Act.
Because there is no intent that the Rights ever become exercisable, they
are regarded more appropriately as being in the nature of an addition to the
rights of stockholders under Sections 6(a)(2) and 7(e) rather than as an
issuance of securities under Section 6(a)(1) and 7 (c) and (d). However, if such
latter sections were to be regarded as applicable, then any issuance of Units of
Preferred Stock pursuant to the Rights are deemed to meet the requirements of
Section 7(c)(2)(D) and none of the negative findings required under Section 7(d)
can be made.
To the extent that the proposed transactions are considered by the
Commission to require authorization, approval, or exemption under any section of
the Act or provision of the rules or regulations other than those specifically
<PAGE> 18
18
referred to herein, request for such authorization, approval, or exemption is
hereby made.
(b) If an applicant is not a registered holding company or a subsidiary thereof,
state the name of each public utility company of which it is an affiliate,
or of which it will become an affiliate as a result of the proposed
transactions, and the reasons why it is or will become such an affiliate.
Not applicable.
Item 4. Regulatory Approval
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transaction.
No State commission and no other Federal commission has jurisdiction over
the proposed transactions.
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
None.
Item 5. Procedure
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
THE COMPANY requests that the Commission issue its order with respect to
the proposed transaction as soon as practicable after the filing hereof to
enable the Rights to be issued as soon as practicable following consummation of
the Merger. The Commission is respectfully requested to issue and publish the
requisite notice under Rule 23 with respect to the filing of this Application
not later than January 9, 1998, such notice to specify a date not later than
February 3, 1998 by which comments may be entered, permitting the Commission to
issue an order granting and permitting the Application to become effective
<PAGE> 19
19
expeditiously following approval of a stockholder rights plan by the post-Merger
Board and completion of the record in this file.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Division of Corporate
Regulation may assist in the preparation of the Commission's decision, and (iv)
whether there should be a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the proposed
transactions. The Office of Public Utility Regulation of the Division of
Investment Management may assist in the preparation of the Commission's
decision. There should be no waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
The following exhibits are made a part of this statement:
(a) Exhibits
A-1 Restated Certificate of Incorporation of THE COMPANY filed as
Annex IV to the Registration Statement on Form S-4 on December 26, 1996
(Registration No. 33-18843) and incorporated herein by reference.
A-2 Restated Bylaws of THE COMPANY filed as Annex V to the
Registration Statement on Form S-4 on December 26, 1996 (Registration No.
33-18843), and incorporated herein by reference.
A-3 Draft of Rights Agreement, including exhibits (exhibits to be
filed by amendment).
F-1 Opinion of counsel (To be filed by amendment).
G-1 Proposed notice pursuant to Rule 22(f).
G-2 Financial Data Schedule (Not Applicable).
<PAGE> 20
20
(b) Financial Statements
Financial statements are not included herein since the issuance of
the Rights would have no financial statement impact in and of themselves and it
is not anticipated that the Rights would become exercisable or that the Series 1
or Series 2 Preferred Stock would ever be issued.
Item 7. Information as to Environmental Effects
(a) Describe briefly the environmental effects of the proposed transaction
in terms of the standards set forth in Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4312(2)(C)). If the response to this item is
a negative statement as to the applicability of Section 102(2)(C) in connection
with the proposed transaction, also briefly state the reasons for that response.
As more fully described in Item 1(a), the proposed transactions subject to
the jurisdiction of this Commission relate only to the dividend of the Rights
and any subsequent exercise, redemption, or exchange of the Rights and involve
no major federal action significantly affecting the human environment.
(b) State whether any other federal agency has prepared or is preparing an
environmental impact statement ("EIS") with respect to the proposed transaction.
If any other Federal agency has prepared or is preparing an EIS, state which
agency or agencies and indicate the status of that EIS preparation.
None.
<PAGE> 21
21
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned company has duly caused this statement to be signed on its
behalf by the undersigned thereunto duly authorized.
CONECTIV, INC.
By: /s/ Barbara S. Graham
------------------------------
Name: Barbara S. Graham
Title: President
Date: December 23, 1997
<PAGE> 1
EXHIBIT A-3
DRAFT
CONECTIV
AND
CONECTIV RESOURCE PARTNERS, INC.
AS RIGHTS AGENT
-------------------------------------
STOCKHOLDERS
RIGHTS AGREEMENT
DATED AS OF
, 199
------------- --
-------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------------
2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------------
3. Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------------------
4. Form of Rights Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------------
5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---------------------------------
6. Transfer, Split Up, Combination, and Exchange of Rights
--------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost, or
--------------------------------------------
Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------------
7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . 10
-------------------------------------------------------------
8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------------------------------
9. Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------------------------
10. Junior Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------------------------------
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . . . . . . . . . . . 16
---------------------------------------------------------------------------
12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . 24
----------------------------------------------------------
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . 24
--------------------------------------------------------------------
14. Fractional Rights; Fractional Shares; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------------------
15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------
16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------------
17. Rights Certificate Holder Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------------------------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
---------------------------
19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 32
---------------------------------------------------------
20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------------------
21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------------
22. Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------------------------------
23. Redemption and Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-------------------------
24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------
25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------------------
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------
27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--------------------------
28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
----------
29. Determinations and Actions by the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 41
----------------------------------------------------
30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--------------------------
31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
------------
32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-------------
33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
------------
34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------------------
</TABLE>
ii
<PAGE> 4
This STOCKHOLDERS RIGHTS AGREEMENT, dated as of [ , 199__]
between CONECTIV, a Delaware corporation (the "Company"), and Conectiv Resource
Partners, Inc., a Delaware corporation (the "Rights Agent").
WHEREAS, effective [ , 199__] (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a distribution of one right for each share of Common Stock, par value
$.01 per share, of the Company (the "Company Common Stock") outstanding at the
close of business on [ , 199__] (the "Record Date"), and has authorized
the issuance of one such right (as such number may hereinafter be adjusted
pursuant hereto) for each share of Company Common Stock that shall become
outstanding (whether originally issued or delivered from the Company's
treasury) between the Record Date and, except as otherwise provided in Section
22 herein, the Distribution Date, each such right initially representing the
right to purchase, upon the terms and subject to the conditions hereinafter set
forth, one Unit of Series 1 Preferred Stock (the "Company Common Rights"); and
WHEREAS, effective on the Rights Dividend Declaration Date, the Board of
Directors of the Company authorized and declared a distribution of one right
for each share of Class A Common Stock, par value $.01 per share, of the
Company (the "Class A Common Stock") outstanding at the close of business on
the Record Date, and has authorized the issuance of one such right (as such
number may hereinafter be adjusted pursuant hereto) for each share of Class A
Common Stock that shall become outstanding (whether originally issued or
delivered from the Company's treasury) between the Record Date and, except as
otherwise provided in Section 22 herein, the Distribution Date, each such right
initially representing the right to purchase, upon the terms and subject to the
conditions hereinafter set forth, one Unit of Series 2 Preferred Stock (the
"Class A Common Rights").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of shares of Voting Stock representing 15% or more of the total Voting
Power of the aggregate of all shares of Voting Stock then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any trustee or
fiduciary holding Voting Stock for, or pursuant to the terms of, any such plan,
acting in such capacity. Notwithstanding the foregoing:
(1) no Person shall become an "Acquiring Person" as the
result of an acquisition of Voting Stock by the Company, which, by
reducing the number of
<PAGE> 5
shares of Voting Stock outstanding, increases the proportionate
percentage of the total Voting Power represented by all shares of
Voting Stock Beneficially Owned by such Person, together with all
Affiliates and Associates of such Person, to 15% or more of the total
Voting Power of the aggregate of all shares of Voting Stock then
outstanding; provided, however, that if a Person, together with all
Affiliates and Associates of such Person, shall become the Beneficial
Owner of shares of Voting Stock representing 15% or more of total
Voting Power of the aggregate of all shares of Voting Stock then
outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner
of any additional shares of Voting Stock, then, subject to Section
1(a)(2), such Person shall be deemed to be an "Acquiring Person;" and
(2) if the Board of Directors of the Company determines
in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests
as promptly as practicable a sufficient number of shares of Voting
Stock so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be an "Acquiring Person" for
any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Exchange Act Regulations, as in
effect on the date of this Agreement; provided, however, that no director or
officer of the Company shall be deemed an Affiliate or Associate of any other
director or officer of the Company solely as a result of his or her being a
director or officer of the Company.
(c) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "Beneficially Own" and to have "Beneficial Ownership" of any
securities:
(i) that such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly (as determined
pursuant to 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 security if the agreement,
arrangement, or understanding to vote such security that would
otherwise render such Person the Beneficial Owner of such security (1)
arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the Exchange
Act and the Exchange Act Regulations, and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable
or successor report);
2
<PAGE> 6
(ii) that such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement, or understanding, whether or not in
writing (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering
of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants, or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to Beneficially Own or to have Beneficial
Ownership of securities tendered pursuant to a tender or exchange
offer made in accordance with the Exchange Act Regulations by or on
behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement, or
understanding (except to the extent contemplated by the proviso to
subparagraph (i) of this paragraph (c)); or
(iii) that are Beneficially Owned, directly or indirectly, by
any other Person (or any Affiliate or Associate of such 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 (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering
of securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to subparagraph (i) of this
paragraph (c)), or disposing of any such securities.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding
that such Person would be deemed to Beneficially Own hereunder.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York City are authorized
or obligated by law or executive order to close.
(e) "Class A Common Right" shall have the meaning set forth in the
Preamble to this Agreement.
(f) "Class A Common Stock" shall have the meaning set forth in the
Preamble to this Agreement.
3
<PAGE> 7
(g) "Close of Business" on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(h) "Common Stock" shall mean the Company Common Stock and the
Class A Common Stock, collectively.
(i) "Common Equity Interest" when used with reference to any
Person other than the Company shall mean the class or series of capital stock
(or equity interest) with the greatest voting power (in relation to any other
classes or series of capital stock (or equity interest)) of such other Person.
(j) "Company Common Stock" has the meaning set forth in the
Preamble to this Agreement.
(k) "Company Common Right" shall have the meaning set forth in the
Preamble to this Agreement.
(l) "Distribution Date" shall have the meaning set forth in
Section 3(a).
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(n) "Exchange Act Regulations" shall mean the General Rules and
Regulations under the Exchange Act.
(o) "Expiration Date" has the meaning set forth in Section 7(a).
(p) "Final Expiration Date" has the meaning set forth in Section
7(a).
(q) "Junior Preferred Stock" shall mean the Series 1 Preferred
Stock and/or the Series 2 Preferred Stock of the Company, as the context
requires, having the voting rights, powers, designation, preferences, and
relative, participating, optional, or other special rights and qualifications,
limitations, and restrictions set forth in Exhibits B-1 and B-2 hereto.
(r) "Person" shall mean any individual, partnership, firm,
corporation, 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.
(s) "Principal Party" shall have the meaning set forth in Section
13(b).
(t) "Purchase Price" shall have the meaning set forth in Section
7(b).
4
<PAGE> 8
(u) "Record Date" shall have the meaning set forth in the Preamble
to this Agreement.
(v) "Rights" shall mean Company Common Rights and/or Class A Common
Rights, as the context requires.
(w) "Rights Certificates" shall have the meaning set forth in
Section 3(a).
(x) "Rights Dividend Declaration Date" shall have the meaning set
forth in the Preamble to this Agreement.
(y) "Section 11(a)(ii) Event" shall mean the event described in
Section 11(a)(ii) hereof that triggers the adjustment provided in Section
11(a)(ii).
(z) "Section 13 Event" shall mean any event described in clause
(x), (y), or (z) of Section 13(a) hereof.
(aa) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(bb) "Series 1 Preferred Stock" shall mean Series 1 Junior
Preferred Stock, par value $.01 per share, having the voting rights, powers,
designations, preferences, and relative, participating, optional, or other
special rights and qualifications, limitations, and restrictions set forth in
Exhibit B-1 hereof.
(cc) "Series 2 Preferred Stock " shall mean Series 2 Junior
Preferred Stock, par value $.01 per share, having the voting rights, powers,
designations, preferences, and relative, participating, optional, or other
special rights and qualifications, limitations, and restrictions set forth in
Exhibit B-2 hereof.
(dd) "Series 1 Purchase Price" has the meaning set forth in Section
7(b).
(ee) "Series 2 Purchase Price" has the meaning set forth in Section
7(b).
(ff) "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.
(gg) "Subsidiary" shall mean, with reference to any Person, any
other Person of which (1) a majority of the Voting Power of the voting
securities or equity interests is Beneficially Owned, directly or indirectly,
by such first-mentioned Person or otherwise controlled by such first-mentioned
Person, or (2) an amount of voting securities or equity
5
<PAGE> 9
interests sufficient to elect at least a majority of the directors or
equivalent governing body of such other Person is Beneficially Owned, directly
or indirectly, by such first-mentioned Person, or otherwise controlled by such
first-mentioned Person.
(hh) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(ii) "Unit" has the meaning set forth in Section 7(b).
(jj) "Voting Power" when used with reference to the capital stock
of, or units of equity interest in, any Person shall mean the number of votes
entitled to be cast generally in the election of directors of such Person (if
such Person is a corporation) or to participate in the management and control
of such Person (if such Person is not a corporation).
(kk) "Voting Stock" shall mean the Common Stock, the Junior Preferred
Stock, and any other class or series of securities of the Company entitled to
vote generally, together with the Common Stock, in the election of directors of
the Company.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 4 hereof, shall prior to the
Distribution Date also be holders of Common Stock) 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.
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 a majority of the Company's Board of Directors
prior to such time as any Person becomes an Acquiring Person and of which later
date 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 holding Voting Stock
for, or pursuant to the terms of, any 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 shares of Voting Stock
representing 15% or more of the total Voting Power of the aggregate of all
shares of Voting Stock then outstanding (including any such date that is after
the date of this Agreement and prior to the issuance of the Rights) (the
earlier of (i) and (ii) above being the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section
3) by the certificates for shares of Common Stock registered in the names of
the holders of shares of Common Stock as of and subsequent to the Effective
Date (which
6
<PAGE> 10
certificates for shares of Common Stock shall be deemed also to be certificates
for Rights) and not by separate rights certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be sent (and the
Rights Agent, if so requested, will send) by first-class, insured, postage
prepaid mail, to each record holder of shares of 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 of Exhibit A-1 hereto (in the case of a Company Common Right) or
Exhibit A-2 hereto (in the case of a Class A Common Right) (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to
Section 11(i) or Section 11(p) hereof, 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) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Junior Preferred
Stock in substantially the form attached as Exhibit B-1 (in the case of a
Company Common Right) or B-2 (in the case of a Class A Common Right) and which
may be appended to certificates that represent shares of Company Common Stock
or Class A Common Stock, as the case may be (hereinafter referred to as the
"Summary of Rights" with respect to the Company Common Rights and/or the Class
A Common Rights, as the context requires), by first-class, postage prepaid
mail, to each record holder of Company Common Stock or Class A Common Stock, as
the case may be, as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company. With respect to
certificates for Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with a copy of the Summary of
Rights attached thereto. Until the earlier of the Distribution Date or the
Expiration Date, the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby.
(c) Rights shall, without any further action, be issued in respect
of all shares of Common Stock that become outstanding (whether originally
issued or delivered from the Company's treasury) after the Record Date but
prior to the earlier of the Distribution Date and the Expiration Date.
Certificates, representing such shares of Common Stock, issued after the Record
Date shall bear the following legend:
7
<PAGE> 11
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between CONECTIV
(the "Company") and Conectiv Resource Partners, Inc. (the "Rights
Agent") dated as of [ , 199__] (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal office of the
Company. 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 after receipt of a
written request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights that are Beneficially Owned by any Person
who is, was, or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such capitalized terms are defined in the Rights
Agreement), or specified transferees of such Acquiring Person (or
Affiliate or Associate thereof) may become null and void."
After the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, if new certificate(s) representing shares of Common Stock are
issued in connection with the transfer, split up, combination, or exchange of
certificate(s) representing shares of Common Stock or if new certificate(s)
representing shares of Common Stock are issued to replace any certificate(s)
that have been mutilated, destroyed, lost, or stolen, then such new
certificate(s) shall bear the foregoing legend. With respect to all
certificates containing the foregoing legend, until the earlier of the
Distribution Date or the Expiration Date, the Rights associated with the shares
of Common Stock represented by such certificates shall be evidenced by such
certificates alone and registered holders of the shares of Common Stock shall
also be the registered holders of the associated Rights, and the transfer of
any of such certificates shall also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificates.
In the event that the Company purchases or acquires any shares of Common Stock
after the Record Date but prior to the Distribution Date, any Rights associated
with such shares of Common Stock shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
shares of Common Stock that are no longer outstanding.
Section 4. Form of Rights Certificate. (a) The Rights
Certificates (and the forms of election to purchase and of assignment and the
certificate to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit A-1 hereto (in the case of a Company Common
Right) or Exhibit A-2 (in the case of a Class A Common Right) and may have such
marks of identification or designation and such legends, summaries, or
endorsements printed thereon as the Company may deem appropriate 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
8
<PAGE> 12
stock exchange that the Rights may from time to time be listed, or to conform
to usage. Subject to the provisions of Sections 7, 11, 13, 22, 24, and 27
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Distribution Date and on their face shall entitle the holders thereof to
purchase such number of Units of Junior 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 represents
Rights Beneficially Owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) 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 written or oral agreement, arrangement, or understanding
regarding either the transferred Rights, shares of Common Stock, or the
Company, or (B) a transfer that the Board of Directors of the Company has
determined in good faith to be part of a plan, arrangement, or understanding
that has as a primary purpose or effect the avoidance of Section 7(e) hereof
shall, upon the written direction of the Board of Directors, contain (to the
extent feasible), the following legend:
"The Rights represented by this Rights Certificate are or were
Beneficially Owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such
capitalized 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."
Section 5. Countersignature and Registration. (a) Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, its Vice Chairman of the
Board, or its Treasurer, shall have affixed thereto the Company's corporate
seal (or a facsimile thereof), and shall be attested by the Company's Secretary
or one of its Assistant Secretaries. The signature of any of these officers on
the Rights Certificates may be manual or by 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 countersigning of such Rights Certificates by the Rights Agent or did not
hold such offices at the date of such
9
<PAGE> 13
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 or facsimile signature of an authorized officer, 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.
(b) Following the Distribution Date, 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 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the Expiration Date, any Rights Certificate or
Certificates (other than Rights Certificates representing Rights that have
become void pursuant to Section 7(e) hereof, that have been redeemed pursuant
to Section 23 hereof, or that have been exchanged pursuant to Section 24
hereof) 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 Junior 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 completed and executed the certificate set forth in the form of assignment
on the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request;
whereupon the Rights Agent shall, subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, 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.
10
<PAGE> 14
(b) If a Rights Certificate shall be mutilated, lost, stolen, or
destroyed,upon request by the registered holder of the Rights represented
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
representing 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 "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof or (iii) the time at which the Rights
are exchanged as provided in Section 24 hereof (the earlier of (i), (ii), and
(iii) being the "Expiration Date"), the registered holder of any Rights
Certificate may, subject to the provisions of Sections 7(e) and 9(c) hereof,
exercise the Rights evidenced thereby (except as otherwise provided herein) 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
Junior 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 of
Series 1 Preferred Stock purchasable upon exercise of a Company Common Right
shall be $[ ] (as adjusted from time to time as provided in Sections 11 and
13(a) hereof) (the "Series 1 Purchase Price"). The purchase price for each one
one-hundredth of a share of Series 2 Preferred Stock upon exercise of a Class A
Common Right shall be $[ ] (as adjusted from time to time as provided in
Sections 11 and 13(a) hereof) (the "Series 2 Purchase Price"). The Series 1
Purchase Price and the Series 2 Purchase Price shall be subject to adjustment
from time to time as provided in Sections 11 and 13(a) hereof and shall be
payable in lawful money of the United States of America in accordance with
paragraph (c)(2) below. Each one one-hundredth of a share of Series 1
Preferred Stock and each one one-hundredth of a share of Series 2 Preferred
Stock shall be referred to herein as a "Unit" of Series 1 Preferred Stock or a
"Unit" of Series 2 Preferred Stock, as the case may be. References in this
Agreement to the "Purchase Price" shall mean the Series 1 Purchase Price and/or
the Series 2 Purchase Price, as the context requires.
(c) (1) Subject to Section 14(b) hereof, following the
Distribution Date, the Company may (at the direction of the Board of Directors)
deposit with a corporation in good
11
<PAGE> 15
standing organized under the laws of the United States or any State of the
United States, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority (the "Depositary Agent") certificates representing
the shares of Junior Preferred Stock that may be acquired upon exercise of the
Rights and may cause such Depositary Agent to enter into an agreement pursuant
to which the Depositary Agent shall issue receipts representing interests in
the shares of Junior Preferred Stock so deposited.
(2) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price for the Units of Junior 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 transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9 hereof, or evidence satisfactory to
the Company of payment of such tax, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i)(A) requisition from any transfer agent of
the Junior Preferred Stock certificates representing such number of shares of
Junior Preferred Stock (or fractions of shares that are integral multiples of
one one-hundredth of a share of Junior Preferred Stock) as are to be purchased
and the Company will direct its transfer agent to comply with all such
requests, or (B) requisition from the Depositary Agent depositary receipts
representing such number of Units of Junior Preferred Stock as are to be
purchased and the Company will direct the Depositary Agent to comply with all
such requests, (ii) requisition from the Company the amount of cash, if any, to
be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or such depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. In the
event that the Company is obligated to issue Company Common Stock or other
securities of the Company, pay cash, and/or distribute other property pursuant
to Section 11(a) hereof, the Company will make all arrangements necessary so
that such Common Stock, other securities, cash, and/or other property is
available for distribution by the Rights Agent, if and when appropriate. The
payment of the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) may be made in cash or by certified or bank check or
money order payable to the order of the Company.
(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.
12
<PAGE> 16
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the time that any Person becomes an Acquiring Person, any Rights
Beneficially Owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and who 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 any such Associate or Affiliate) or to any Person
with whom the Acquiring Person (or such Associate or Affiliate) has any
continuing written or oral agreement, arrangement, or understanding regarding
the transferred Rights, shares of Common Stock, or the Company or (B) a
transfer that the Board of Directors of the Company has determined in good
faith 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 any holder of such Rights thereafter shall have
no rights or preferences whatsoever with respect to such Rights, whether under
any provision of this Agreement, the Rights Certificates, or otherwise
(including, without limitation, rights and preferences pursuant to Sections 7,
11, 13, 23, and 24 hereof). The Company shall use reasonable efforts to ensure
compliance with the provisions of this Section 7(e) and Section 4(b), but shall
have no liability to any holder of Rights or any other Person as a result of
its failure to make any determination under this Section 7(e) or such 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 as set forth in this Section 7 by such
registered holder unless such registered holder shall have (i) 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 represented by such Rights
Certificate or Affiliates or Associates thereof as the Company shall reasonably
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
13
<PAGE> 17
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 but unissued shares of Junior
Preferred Stock and/or out of any shares of Junior Preferred Stock held in its
treasury (and following the occurrence of a Triggering Event, out of the
authorized but unissued shares of such other equity securities of the Company
as may be issuable upon exercise of the Rights and/or out of any shares of such
securities held in its treasury), the number of shares of Junior Preferred
Stock (and following the occurrence of a Triggering Event, the number of shares
of such other equity securities of the Company) that, as provided in this
Agreement, will be sufficient to permit the full exercise of all outstanding
Rights. Upon the occurrence of any events resulting in an increase in the
aggregate number of shares of Junior 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) So long as the shares of Junior Preferred Stock (and following
the occurrence of a Triggering Event, other equity securities of the Company)
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 reasonable best efforts (i) either
(A) as soon as practicable following the first occurrence of a Section
11(a)(ii) Event and a determination by the Company in accordance with Section
11(a)(iii) hereof, if applicable, of the consideration to be delivered by the
Company upon exercise of the Rights, or (B) if so required by law, as soon as
required following the Distribution Date (the earliest of (A) and (B) being the
"Registration Date"), to file a registration statement on an appropriate form
under the 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 remain effective (and to
include a prospectus at all times 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. The Company may temporarily suspend, for a
period of time not to exceed 90 days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to
14
<PAGE> 18
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer in effect
stating that the suspension on the exercisability of the Rights is no longer in
effect. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction (x) if the requisite
qualification in such jurisdiction shall not have been obtained and until a
registration statement has been declared effective or (y) if the exercise
thereof shall not be permitted under applicable law.
(d) The Company shall take such action as may be necessary to
ensure that all shares of Junior 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 (subject to payment of the Purchase Price), duly
and validly authorized and issued, fully paid and non-assessable.
(e) The Company shall pay when due and payable any federal or
state documentary, stamp, or transfer tax, or other charge, that is payable in
respect of the issuance and delivery of the Right Certificates or the issuance
and delivery of any certificates or depository receipts for Junior Preferred
Stock (or other equity securities of the Company that may be delivered upon
exercise of the Rights) upon the exercise of Rights; provided, however, the
Company shall not be required to pay any such tax that may be payable in
connection with the issuance or delivery of Units of Junior Preferred Stock, or
any certificates or depositary receipts for such Units of Junior 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 Junior 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 upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
(f) The Company shall use its reasonable best efforts, on or prior
to the date that is either (A) as soon as practicable following the first
occurrence of a Section 11(a)(ii) Event and a determination by the Company in
accordance with Section 11(a)(iii) hereof, if applicable, of the consideration
to be delivered by the Company upon exercise of the Rights, or (B) if so
required by law, as soon as required following the Distribution Date, to obtain
any and all regulatory approvals that may be required with respect to the
securities purchasable upon exercise of the Rights. The Company may
temporarily suspend, for a period of time not to exceed 90 days after the date
set forth in the first sentence of this
15
<PAGE> 19
Section 9(f), the exercise of the Rights in order to permit the Company to
obtain the necessary regulatory approvals. Upon any such suspension, the
Company shall issue a public announcement stating that the exercise of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect stating that the suspension on
the exercise of the Rights is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable unless and until all required regulatory approvals have been
obtained with respect to the securities purchasable upon exercise of the
Rights.
Section 10. Junior Preferred Stock Record Date. Each Person in
whose name any certificate for Units of Junior 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 Junior Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Junior Preferred
Stock (or, following the occurrence of a Triggering Event, other securities)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such securities on, and such certificate shall be
dated, the next succeeding Business Day on which the Junior Preferred Stock
(or, following the occurrence of a Triggering Event, other securities) transfer
books of the Company are open and, provided further, that if delivery of Units
of Junior Preferred Stock is delayed pursuant to Section 9(c) hereof, such
Persons shall be deemed to have become the record holders of such Units of
Junior 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 Junior Preferred
Stock payable in shares of Junior Preferred Stock, (B) subdivide the
outstanding Junior Preferred Stock, (C) combine the outstanding Junior
Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Junior
Preferred Stock (including any such reclassification in connection
with a consolidation or
16
<PAGE> 20
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 Junior
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 Junior 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; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) In the event any Person becomes an Acquiring Person,
provision shall be made so that each holder of a Right (except as
provided below in Section 11(a)(iii) and in Sections 7(e), 13, and 24
hereof) shall thereafter have the right to receive, upon exercise
thereof, at a price equal to the then current Series 1 Purchase Price
or Series 2 Purchase Price, as the case may be, multiplied by the
number of Units of Series 1 Preferred Stock or Series 2 Preferred
Stock, as the case may be, for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii)
Event, in accordance with the terms of this Agreement, in lieu of the
number of Units of Series 1 Preferred Stock or Series 2 Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, such number of Units of
Series 1 Preferred Stock or Series 2 Preferred Stock, as the case may
be, as shall equal the result obtained by (x) multiplying the then
current Series 1 Purchase Price or Series 2 Purchase Price, as the
case may be, by the number of Units of Series 1 Preferred Stock or
Series 2 Preferred Stock, as the case may be, for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event (such product thereafter being, for all purposes of
this Agreement other than Section 13 hereof, the "Series 1 Purchase
Price" or the "Series 2 Purchase Price," as the case may be, and
collectively, the "Purchase Price"), and (y) dividing that product by
50% of the then current market price (determined pursuant to Section
11(d) hereof) per Unit of Series 1 Preferred Stock or Series 2
Preferred Stock, as the case may be, on the date of such first
occurrence (such Units of Series 1 Preferred Stock or Series 2
Preferred Stock being the "Adjustment Shares").
17
<PAGE> 21
(iii) In the event that the number of shares of Junior
Preferred Stock that are authorized by the Company's Certificate of
Incorporation but are not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is insufficient to
permit the exercise in full of the Company Common Rights or Class A
Common Rights, as the case may be, in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall take all
such action as may be necessary to authorize additional shares of
Series 1 Preferred Stock and/or Series 2 Preferred Stock, as the case
may be, for issuance upon exercise of the Company Common Rights or
Class A Common Rights, as the case may be. In the event that the
Company shall, after good faith effort, be unable to take all such
actions as may be necessary to authorize such additional shares of
Series 1 Preferred Stock and/or Series 2 Preferred Stock, as the case
may be, the Company, by the vote of a majority of the Board of
Directors, shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of each such Right (the
"Current Value") over (2) the Purchase Price (such excess being the
"Spread"), and (B) with respect to each such Right, make adequate
provision to substitute for such Adjustment Shares, upon exercise of
such Rights and payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company, each to the extent permitted by the
Company's Certificate of Incorporation, (including, without
limitation, shares, or units of shares, of preferred stock that the
Board of Directors of the Company has deemed to have the same value as
Units of Series 1 Preferred Stock or Units of Series 2 Preferred
Stock, as the case may be (the "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 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
pursuant to clause (B) above within thirty days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of termination pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to as the "Section
11(a)(iii) 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 Junior Preferred
Stock (to the extent available) and then, if necessary, cash, which
Units of Junior 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)(iii), the Company shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights. For purposes of this Section 11(a)(iii), the value of a Unit
of Junior Preferred Stock shall be the current market price (as
determined pursuant to Section 11(d) hereof) per Unit of Junior
Preferred Stock on the Section
18
<PAGE> 22
11(a)(iii) Trigger Date and the value of any Preferred Stock
Equivalent shall be deemed to have the same value as the Junior
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 any series of Junior Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five calendar days after such record date) shares of such Junior
Preferred Stock (or shares having substantially the same rights, privileges,
and preferences as shares of such Junior Preferred Stock ("Equivalent Preferred
Stock")) or securities convertible into such Junior Preferred Stock or
Equivalent Preferred Stock at a price per share of Junior Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per
share, if a security convertible into such Junior Preferred Stock or Equivalent
Preferred Stock) less than the current market price (as determined pursuant to
Section 11(d) hereof) per share of such Junior Preferred Stock on such record
date, the Purchase Price with respect to such series of Junior Preferred Stock
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 such Junior
Preferred Stock outstanding on such record date plus the number of shares of
such Junior Preferred Stock that the aggregate offering price of the total
number of shares of such Junior 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 such
Junior Preferred Stock outstanding on such record date plus the number of
additional shares of such Junior 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 all or part of
which may be in a form other than cash, the value of such consideration shall
be as determined by the 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 such Junior
Preferred Stock owned by or held for the account of the Company or any
Subsidiary shall not be deemed outstanding for the purpose of 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 any series of Junior Preferred Stock (including any
such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation), evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or retained
earnings of the Company), assets (other than a dividend payable in shares of
such Junior Preferred Stock, but including any dividend payable in stock other
than such Junior Preferred Stock), or subscription rights or warrants
(excluding those
19
<PAGE> 23
referred to in Section 11(b) hereof), the Purchase Price with respect to such
series of Junior Preferred Stock to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current
market price (as determined pursuant to Section 11(d) hereof) per share of such
Junior Preferred Stock on such record date less the fair market value (as
determined in good faith by a majority of the 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 such
Junior Preferred Stock and the denominator of which shall be such current
market price (as determined pursuant to Section 11(d) hereof) per share of such
Junior 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 Common Stock or Common Equity Interest 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 (as such term is hereinafter
defined) immediately prior to 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, to the extent allowable by the
Certificate of Incorporation (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 National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") 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 Board of Directors of the Company. 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 Board of
Directors of the Company 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 Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
20
<PAGE> 24
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 Junior Preferred Stock shall be determined
in the same manner as set forth above for Common Stock in clause (i) of this
Section 11(d) (other than the fourth sentence thereof). If the current market
price per share of either series of Junior Preferred Stock cannot be determined
in the manner provided above or if either series of the Junior 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 such Junior
Preferred Stock shall be conclusively deemed to be (A) in the case of the
Series 1 Preferred Stock, the "current market price" per share of the Company
Common Stock multiplied by 100 (as such amount may be appropriately adjusted to
reflect any stock split, reverse stock split, stock dividend, or any similar
transaction with respect to Company Common Stock occurring after the date of
this Agreement) and (B) in the case of the Series 2 Preferred Stock, the
"current market price" per share of the Class A Common Stock multiplied by 100
(as such amount may be appropriately adjusted to reflect any stock split,
reverse stock split, stock dividend, or any similar transaction with respect to
the Class A Common Stock occurring after the date of this Agreement. If
neither the applicable series of Common Stock nor the applicable series of
Junior Preferred Stock is publicly held or so listed or traded, "current market
price" per share of such Series 1 Preferred Stock shall mean the fair value per
share as determined in good faith by the 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, and "current market
price" per share of such Series 2 Preferred Stock shall mean the fair value per
share as determined in good faith by the 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 either series of Junior
Preferred Stock shall be equal to the "current market price" of one share of
the applicable series of Junior 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 one percent in the Purchase Price; provided,
however, that any adjustments that by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
Common Equity Interest or other share or one-millionth of a share of Junior
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
21
<PAGE> 25
years from the date of the transaction that mandates such adjustment or (ii)
the Expiration Date.
(f) If, as a result of an adjustment made pursuant to Sections
11(a)(ii) or 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Junior
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 Junior Preferred Stock
contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (1),
and (m), and the provisions of Sections 7, 9, 10, 13, and 14 hereof with
respect to the Junior 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 Junior
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 Junior
Preferred Stock (calculated to the nearest one ten-thousandth of a Unit)
obtained by (i) multiplying (x) the number of Units of Junior 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 Junior 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 Junior
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 one
ten-thousandth of a Right) 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, and notify 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
22
<PAGE> 26
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 hereof, 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 Junior 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 Junior
Preferred Stock which was expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the number of Units of Junior
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 Junior 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 until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of Units of Junior 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 Junior 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.
23
<PAGE> 27
(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 the Board of Directors shall determine that any (i)
consolidation or subdivision of the Junior Preferred Stock, (ii) issuance
wholly for cash of any shares of Junior Preferred Stock at less than the
current market price, (iii) issuance wholly for cash of shares of Junior
Preferred Stock or securities that by their terms are convertible into or
exchangeable for shares of Junior 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 Junior 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 direct or indirect,
wholly-owned Subsidiary of the Company in a transaction that complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
direct or indirect, wholly-owned Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof), or (iii) sell or transfer (or permit
any Subsidiary to sell or transfer), in one transaction, or a series of
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 direct or
indirect, wholly-owned Subsidiaries in one or more transactions, each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger, or sale there are any rights, warrants, or other
instruments or securities outstanding or agreements in effect 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) hereof
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, 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 and so long as any Rights shall then
be outstanding (other than Rights that have become void pursuant to Section
7(e) hereof), the Company shall not, except as permitted by Sections 23, 24,
and 27 hereof, take (or permit any Subsidiary of the Company to take) any
action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Effective Date and prior
to the Distribution Date (i) declare a dividend on any class of the outstanding
shares of Common Stock payable in shares
24
<PAGE> 28
of Common Stock, (ii) subdivide any class of the outstanding shares of Common
Stock, (iii) combine any class of the outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of any class of 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 Company
Common Rights (in the case of an event affecting the Company Common Stock) or
Class A Common Rights (in the case of an event affecting the Class A Common
Stock) associated with each share of such class of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of such class of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of such class of Common Stock immediately prior to
such event by a fraction the numerator of which shall be the total number of
shares of such class of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of such class of Common Stock outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11(p)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination, or reclassification is effected. If an event occurs
that would require an adjustment under Section 11(a)(ii) and this Section
11(p), the adjustments provided for in this Section 11(p) shall be in addition
and prior to any adjustment required pursuant to Section 11(a)(ii).
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Junior Preferred Stock and the 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 representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of 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) at any time after a Person has become an Acquiring
Person, in the event that, directly or indirectly, either (x) the Company
shall consolidate with, or merge with and into, any other Person (other than a
direct or indirect, wholly-owned Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a direct or indirect, wholly-owned Subsidiary of the Company
in a transaction that complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the
25
<PAGE> 29
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 Common Stock shall be
converted into or exchanged for stock or other securities of any other Person
(or the Company) 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 direct
or indirect, wholly-owned Subsidiaries in one or more transactions, each of
which complies with Section 11(o) hereof), in one or more transactions, assets
or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) (any such event described in
(x), (y), or (z) being herein referred to as 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)
hereof, shall thereafter have the right to receive, upon the exercise
thereof at the then current Series 1 Purchase Price multiplied by the
number of Units of Series 1 Preferred Stock for which a Company Common
Right is then exercisable (in the case of a Company Common Right) or
the then current Series 2 Purchase Price multiplied by the number of
Units of Series 2 Preferred Stock for which a Class A Common Right is
then exercisable (in the case of a Class A Common Right), in
accordance with the terms of this Agreement and in lieu of Units of
Junior Preferred Stock, such number of validly authorized and issued,
fully paid, and non-assessable shares of Common Equity Interest 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 (A) in the
case of the Company Common Rights (1) multiplying such then current
Series 1 Purchase Price by the number of Units of Series 1 Preferred
Stock for which such Company Common Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section
11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such Units of Series 1
Preferred Stock for which a Company Common Right would be exercisable
hereunder but for the occurrence of such Section 11(a)(ii) Event by
the Series 1 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 "Series 1
Purchase Price" for all purposes of this Agreement) by 50% of the then
current market price (determined pursuant to Section 11(d) hereof) per
share of the Common Equity Interest of such Principal Party on the
date of consummation of such Section 13 Event, or (B) in the case of
the Class A Common Rights (1) multiplying such then current Series 2
Purchase Price by the number of Units of Series 2 Preferred Stock for
which such Class A Common Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of such Units of Series 2 Preferred
Stock for which a Class A Common Right would be exercisable
26
<PAGE> 30
hereunder but for the occurrence of such Section 11(a)(ii) Event by
the Series 2 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 "Series 2
Purchase Price" for all purposes of this Agreement) by 50% of the then
current market price (determined pursuant to Section 11(d) hereof) per
share of the Common Equity Interest of such Principal Party on the
date of consummation of such Section 13 Event (and following the first
occurrence of a Section 13 Event, the Series 1 Purchase Price and the
Series 2 Purchase Price (as adjusted pursuant to this Section 13(a))
shall be referred to collectively as the "Purchase Price" for all
purposes of this Agreement);
(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 thereafter be deemed to refer
to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13 Event;
(iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares
of its Common Equity Interest) in connection with the consummation of
any such transaction as may be necessary to ensure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be
possible, to its shares of Common Equity Interest thereafter
deliverable upon the exercise of the Rights; and
(v) the provisions of Section 11(a)(ii) hereof shall be of no
further effect following the first occurrence of any Section 13 Event,
and the Rights that have not theretofore been exercised shall
thereafter become exercisable in the manner described in this Section
13.
(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 (including
the Company as successor thereto or as the surviving corporation) that
is the issuer of any securities or other equity interests into which
shares of Common Stock are converted in such merger or consolidation,
or, if there is more than one such issuer, the issuer of Common Equity
Interest that has the highest aggregate current market price
(determined pursuant to Section 11(d) hereof) and (B) if no securities
or other equity interests are so issued, the Person (including the
Company as successor thereto or as the surviving
27
<PAGE> 31
corporation) that is the other constituent party to such merger or
consolidation, or, if there is more than one such Person, the Person
that is a constituent party to such merger or consolidation, the
Common Equity Interest of which has the highest aggregate current
market price (determined pursuant to Section 11(d) hereof); 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 that has received assets or earning power pursuant to
such transaction or transactions, the Common Equity Interest of which
has the highest aggregate current market price (determined pursuant to
Section 11(d) hereof);
provided, however, that in any such case, (1) if the Common Equity Interest of
such Person is not at such time and has not been continuously over the
preceding twelve-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), 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 Equity Interest of
such Person is not Registered Common Stock, and such Person is a direct or
indirect Subsidiary of another Person (other than an individual), 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 Equity Interest of such
Person is not Registered Common Stock, 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) hereof); and (4) if the Common Equity Interest of such Person is
not Registered Common Stock, and such Person is directly or indirectly
controlled by more than one Person (one or more of which is a Person other than
an individual), 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 stockholders' 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 Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Equity Interest that have not been issued (or reserved for issuance) or
that are held in its treasury 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
28
<PAGE> 32
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that the Principal Party shall use
its best efforts to:
(i) (A) prepare and 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 shares of
Common Equity Interest that may be acquired upon exercise of the
Rights, (B) cause such registration statement to remain effective (and
to include a prospectus at all times complying with the requirements
of the Securities Act) until the Expiration Date, and (C) take such
action as may be required to ensure that any acquisition of such
shares of Common Equity Interest upon the exercise of the Rights
complies with any applicable state security or "Blue Sky" laws as soon
as practicable following the execution of such agreement; and
(ii) as soon as practicable after the execution of such
agreement, 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 (or any successor form) under the Exchange Act.
(iii) obtain any and all regulatory approvals as may be
required with respect to the shares of Common Equity Interest
securities that may be acquired upon exercise of the Rights.
(d) In case the Principal Party that is to be a party to a
transaction referred to in this Section 13 has at the time of such transaction,
or immediately following such transaction will have, a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or
other instrument governing its corporate affairs, or any other agreements or
arrangements, 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 Common
Equity Interest of such Principal Party at less than the then current market
price per share (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Equity Interest of such Principal
Party at less than such then current market price (other than to holders of
Rights pursuant to this Section 13); (ii) providing for any special payment,
tax, or similar provisions in connection with the issuance of the Common Equity
Interest of such Principal Party pursuant to the provisions of Section 13; or
(iii) otherwise eliminating or substantially diminishing the benefits intended
to be afforded by the Rights in connection with, or as a consequence of, the
consummation of a transaction referred to in 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
29
<PAGE> 33
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)(ii) 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; Fractional Shares; Waiver. (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 that 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 NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors. If on any such date no such market
maker is making a market in the Rights, the fair value of the Rights on such
date as determined in good faith by the Board of Directors of the Company shall
be used and such determination shall be described in a statement filed with the
Rights Agent and the holders of the Rights.
(b) The Company shall not be required to issue fractions of shares of
Junior Preferred Stock (other than fractions that are integral multiples of one
one-hundredth of a share of Junior Preferred Stock) upon exercise of the Rights
or to distribute certificates that evidence such fractional shares of Junior
Preferred Stock (other than fractions that are integral multiples of one
one-hundredth of a share of Junior Preferred Stock). Subject to Section
7(c)(1) hereof, fractions of shares of Junior Preferred Stock in integral
multiples of one one-hundredth of a share of Junior Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a Depositary Agent selected by
it; provided, however, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges, and preferences
to which they are entitled as Beneficial Owners of the shares of Junior
Preferred Stock represented by such depositary receipts. In lieu of such
fractional shares of
30
<PAGE> 34
Junior 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 an amount in cash
equal to the same fraction of the then current market price of a share of
Junior Preferred Stock on the day of exercise, determined in accordance with
Section 11(d) hereof.
(c) The holder of a Right, by the acceptance of the 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.
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 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of certificates representing shares of Common Stock); and any
registered holder of a Rights Certificate (or, prior to the Distribution Date,
of a certificate representing shares of 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 representing shares of Common Stock),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company or any other Person
to enforce, or otherwise act in respect of, his 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 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;
(c) subject to Section 6(a) and Section 7(f) hereof, 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 Common Stock
certificate) is registered as the absolute
31
<PAGE> 35
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the associated
Common Stock certificate made by anyone other than the 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) hereof, 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 or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as promptly as practicable.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
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
Junior Preferred Stock or any other securities of the Company that may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, except as provided in Section 25
hereof, to receive notice of meetings or other actions affecting shareholders,
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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 execution and administration 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, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered, or omitted by it in
connection with, its administration of this
32
<PAGE> 36
Agreement in reliance upon any Rights Certificate or certificate for Junior
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.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stockholder services businesses 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, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement 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 opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
33
<PAGE> 37
(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 or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be specified herein) may be deemed to
be proved conclusively and established by a certificate signed by any one of
the Chairman of the Board, the Chief Executive Officer, the President, the
Vice-Chairman of the Board, the Treasurer, any Assistant Treasurer, the
Secretary, or any Assistant Secretary of the Company and delivered to the
Rights Agent; provided, however, that so long as any Person is an Acquiring
Person hereunder, such certificate shall be signed and delivered by a majority
of the Board of Directors; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith, or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be 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 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 thereon); 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 change in the
exercisability of the Rights (including Rights becoming void pursuant to
Section 7(e) hereof) or any adjustment in the terms of the Rights required
under the provisions of Sections 11, 13, 23, or 24 hereof or for the manner,
method, or amount of any such change or adjustment or the ascertaining of the
existence of facts that would require any such change or 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 Junior Preferred Stock or any other securities to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Junior 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
34
<PAGE> 38
assurances as may reasonably be required by the Rights Agent for the
performance by the Rights Agent of its duties under this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Vice-Chairman of the Board, 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 it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer; provided, however, that so
long as any Person is an Acquiring Person hereunder, the Rights Agent shall
accept such instructions and advice only from the Board of Directors and shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with such instructions of the Board of Directors.
(h) The Rights Agent and any shareholder, director, officer, or
employee of the Rights Agent may buy, sell, or deal in any of the Rights or
other securities of the 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 legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect, or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect, or misconduct provided reasonable care was exercised 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 not been
completed, has not been 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 completed and signed and shows a
negative response
35
<PAGE> 39
to clauses 1 and 2 of such certificate, unless previously instructed otherwise
in writing by the Company (which instructions may impose on the Rights Agent
additional ministerial responsibilities, but no discretionary
responsibilities), 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) hereof 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 Junior Preferred Stock and the Common Stock, by
registered or certified mail, and to the registered holders of the Rights
Certificates 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 Junior Preferred Stock and the Common Stock, by
registered or certified mail, and to the registered holders of the Rights
Certificates 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 (who shall, with such notice, submit his Rights Certificate for
inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
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 as a
banking institution in the State of New York, shall be authorized under such
laws to 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 $100,000,000 or (b) an Affiliate of a corporation 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
Junior Preferred Stock and the Common Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent.
36
<PAGE> 40
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or the Rights Certificates 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 Board of
Directors of the Company 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
under the Rights Certificates. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (a) shall, with respect to shares of Common Stock
so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, 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 the Board of Directors, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the 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 Conversion. (a) The Board of
Directors of the Company may, within its sole discretion, at any time prior to
such time as any Person becomes an Acquiring Person, redeem all, but not less
than all, of the then outstanding Rights at a redemption price of $.01 per
Right, appropriately adjusted to reflect any stock split, reverse stock split,
stock dividend, or similar transaction occurring after the date hereof (such
redemption price, as adjusted, being hereinafter referred to as the "Redemption
Price"). The redemption of the Rights by the Board of Directors pursuant to
this paragraph (a) 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) Prior to the Distribution Date and prior to such time as any
Person becomes an Acquiring Person, the Board of Directors of the Company may,
within its sole discretion, in connection with the redemption or purchase
(whether for cash or in exchange for property or other securities or any
combination thereof) by the Company of shares of Class A Common Stock in
accordance with the applicable provisions of the Restated Certificate of
Incorporation of the Company, redeem the Class A Common Rights attached to the
shares of Class A Common Stock so redeemed or purchased at a redemption price
of $.01 per Class A Common Right, appropriately adjusted to reflect any stock
split, reverse stock split, stock dividend, or similar transaction occurring
after the date hereof (such redemption price, as adjusted, being hereinafter
referred to as the "Class A Common Right Redemption Price"). The redemption of
the Class A Common Rights by the Board of Directors pursuant to this
37
<PAGE> 41
paragraph (b) 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.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of Rights pursuant to paragraph (a) or (b) of
this Section 23, and without any further action and without any notice, the
right to exercise the Rights (if all outstanding Rights are redeemed pursuant
to paragraph (a) hereof) or the Class A Common Rights (if Class A Common Rights
are redeemed pursuant to paragraph (b) hereof) will terminate and the only
right thereafter of the holders of Rights or the Class A Common Rights, as the
case may be, shall be to receive the Redemption Price or the Class A Common
Right Redemption Price, as the case may be. The Company shall promptly give
public notice of any such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights or Class A Common Rights, as the case may
be, the Company shall mail a notice of redemption to all the holders of the
then outstanding Rights or to the holders of the Class A Common Rights so
redeemed, as the case may be, at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price or the Class A Common
Rights Redemption Price, as the case may be, will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire, or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, or other than in connection
with the purchase of shares of Common Stock or the conversion or redemption of
shares of Common Stock in accordance with the applicable provisions of Restated
Certificate of Incorporation of the Company prior to the Distribution Date.
(d) In the event that prior to the Distribution Date, the Class A
Common Stock is converted, in whole or in part, into Company Common Stock (or
other class or series of common stock of the Company (other than Class A Common
Stock)) in accordance with the applicable provisions of the Restated
Certificate of Incorporation of the Company, the Class A Common Rights attached
to the shares of Class A Common Stock so converted shall be converted to
Company Common Rights pursuant to a conversion ratio equivalent to the
conversion ratio used for converting the Class A Common Stock to Company Common
Stock. In the event that on or after the Distribution Date, all outstanding
shares of Class A Common Stock are converted into shares of Company Common
Stock (or other class or series of common stock of the Company (other than
Class A Common Stock)) in accordance with the applicable provisions of the
Restated Certificate of Incorporation of the Company, all Class A Common Rights
then outstanding shall be converted to Company Common Rights pursuant to a
conversion ratio equivalent to the conversion ratio used for converting the
Class A Common Stock to Company Common Stock.
38
<PAGE> 42
Section 24. Exchange. (a) The Board of Directors of the Company
may, at its option, at any time after any Person becomes an Acquiring Person,
(1) exchange all or part of the then outstanding and exercisable Company Common
Rights (which shall not include Company Common Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for Series 1 Preferred Stock
at an exchange ratio of one Unit of Series 1 Preferred Stock per Company Common
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 "Company Common Rights Exchange Ratio") and/or
(2) exchange all or part of the then outstanding and exercisable Class A Common
Rights (which shall not include Class A Common Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for Series 2 Preferred Stock
at an exchange ratio of one Unit of Series 2 Preferred Stock per Class A Common
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 "Class A Common Rights Exchange Ratio;" the
Company Common Rights Exchange Ratio and the Class A Common Rights Exchange
Ratio being hereinafter referred to collectively as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any trustee or fiduciary holding shares of Voting Stock for, or
pursuant to the terms of, any such plan, acting in such capacity), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of shares of Voting Stock representing 50% or more of the total Voting Power of
the aggregate of all shares of Voting Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 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 shares of Junior Preferred
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company 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 will state the method by which the exchange of the shares of Junior
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 void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
39
<PAGE> 43
(c) In the event that there shall not be sufficient shares of
Junior Preferred Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Junior Preferred Stock for issuance upon exchange of the
Rights. In the event the Company shall, after good faith effort, be unable to
take all such action as may be necessary to authorize such additional shares of
Junior Preferred Stock, the Board of Directors of the Company shall not order
the exchange of any Rights.
Section 25. 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 either series of Junior
Preferred Stock or to make any other distribution to the holders of either
series of Junior 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 either series of Junior Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of such Junior Preferred
Stock or shares of stock of any class or any other securities, rights or
options; (iii) to effect any reclassification of either series of Junior
Preferred Stock (other than a reclassification involving only the subdivision
of outstanding shares of such series of Junior 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 which complies with Section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one 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) hereof); or (v) to effect the
liquidation, dissolution or winding up of the Company; then, in each such case,
the Company shall give to each registered holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Junior 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 ten (10) days prior to the record
date for determining holders of the shares of Junior Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of the shares of Junior Preferred Stock
whichever shall be the earlier; provided, however, that no such action shall be
taken pursuant to this Section 25(a) that will or would conflict with any
provision of the Certificate of Incorporation; provided further, that no such
notice shall be required pursuant to this Section 25, if any Subsidiary of the
Company effects a consolidation or merger with or into, or effects a sale or
other transfer of assets or earnings power to, any other Subsidiary of the
Company.
40
<PAGE> 44
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall, as soon as
practicable thereafter, give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding Section 25(a) to Junior Preferred
Stock shall be deemed to refer, if appropriate, to any other securities that
may be acquired upon exercise of a Right.
(c) In case any Section 13 Event shall occur, then the Company
shall, as soon as practicable thereafter, give to each registered holder of a
Right Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights under
Section 13(a) hereof.
Section 26. Notices. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including by facsimile, telegram or cable) and mailed or sent or delivered, if
to the Company, at its address at:
CONECTIV
800 King Street
Wilmington, Delaware 19899
Attention:
-------------------
And if to the Rights Agent, at its address at:
Conectiv Resource Partners, Inc.
[ADDRESS OF RIGHTS AGENT]
Notices or demands authorized 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 representing
shares of 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 Company or the Rights Agent,
as the case may be.
Section 27. Supplements and Amendments. Subject to the
penultimate sentence of this Section 27, the Company may from time to time
supplement or amend this Agreement without the approval of any holders of
Rights in order to cure any ambiguity, to correct or supplement any provision
contained herein that may be defective or inconsistent with any other
provisions herein, to shorten or lengthen any time period hereunder, or to make
any
41
<PAGE> 45
other provisions with respect to the Rights that the Company may deem necessary
or desirable, any such supplement or amendment to be evidenced by a writing
signed by the Company and the Rights Agent; provided, however, that from and
after such time as any Person becomes an Acquiring Person, this Agreement shall
not be amended in any manner that would adversely affect the interests of the
holders of Rights (other than Rights that have become void pursuant to Section
7(e) hereof). Without limiting the foregoing, the Company may at any time
prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not
less than the greater of (i) the sum of .001% and the largest percentage of
Voting Power represented by the then outstanding shares of Voting Stock then
known by the Company to be Beneficially Owned by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any trustee or fiduciary holding
shares of Voting Stock for, or pursuant to the terms of, any such plan, acting
in such capacity), and (ii) 10%. Upon delivery of a certificate from an
appropriate officer of the Company or, so long as any Person is an Acquiring
Person hereunder, from the Board of Directors of the Company, that states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment;
provided, however, that no supplement or amendment may be made to Sections 18,
19, 20, or 21 hereof without the consent of the Rights Agent. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors.
For all purposes of this Agreement, any calculation of the number of shares of
any class or series of Voting Stock outstanding at any particular time,
including for purposes of determining the particular percentage of outstanding
shares of Voting Stock of which any Person is the Beneficial Owner (or the
particular percentage of total Voting Power of such outstanding shares of
Voting Stock represented by shares of Voting 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 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) which are done or made by the Board of
42
<PAGE> 46
Directors 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 or any member thereof to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Common Stock).
Section 31. Severability. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed 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 34. 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.
43
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the date first above written.
ATTEST: CONECTIV
By By
Name: Name:
Title: Title:
ATTEST: CONECTIV RESOURCE PARTNERS, INC.
By By
Name: Name:
Title: Title:
44
<PAGE> 1
22
EXHIBIT G-1
Conectiv, Inc. (70- )
Notice of Proposal to Adopt a Stockholder Rights Plan.
Conectiv, Inc. (the "Company"), 800 King Street, Wilmington, DE 19899, a
registered holding company has filed a declaration pursuant to Sections 6(a), 7,
9(a), 10 and 12(c) of the Act and Rule 42 thereunder. The Company has previously
filed an Application/Declaration on Form U-1 with the Commission requesting
authorization under Section 9(a)(2) of the Act to consummate certain
transactions resulting in the acquisition by the Company of all of the
outstanding voting securities of Delmarva Power & Light Company, a Delaware and
Virginia corporation and an operating public utility company ("Delmarva"), and
of Atlantic City Electric Company, a New Jersey corporation and an operating
public utility company ("ACE") and of certain direct and indirect nonutility
subsidiaries (said transactions are hereinafter referred to as the "Merger")
(File No. 70-9069). The Company and certain subsidiaries have also filed an
Application/Declaration on Form U-1 with the Commission requesting authorization
for financing transactions for the period beginning with the effective date of
the Commission's order authorizing the financing transactions trough December
31, 2000 (File No. 70-9095).
Management of the Company has proposed for consideration by the Board of
Directors of the Company (the "Board") following consummation of the Merger, a
stockholder rights plan, pursuant to which, the Board would declare a dividend
<PAGE> 2
23
distribution of one right ("Right") for each outstanding share of Common Stock
and each outstanding share of Class A Common Stock to stockholders of record at
the close of business on a record date ("Record Date") yet to be established.
When (and, subject to the full discretion of the full Board established
following the Merger, if) the proposed rights plan is adopted by the full
post-Merger Board, the detailed description and terms of the Rights will be set
forth in a Rights Agreement ("Agreement") to be between the Company and Conectiv
Resource Partners, Inc., as Rights Agent ("Agent").(1)
Each Right issued to a registered holder of Common Stock, par value $.01
per share (the" Company Common Stock) would, after the Right becomes
exercisable, entitle such registered holder to purchase from the Company one
one-hundredth of one share of Series 1 junior participating preferred stock and
each Right issued to a registered holder of Class A Common Stock, par value $.01
per share (the "Class A Common Stock") would, after the Rights becomes
exercisable entitle such holder to purchase from the Company one one-hundredth
of one share of Series 2 junior participating preferred stock at prices to be
determined by the Board of Directors as representing the long-term value of the
Company. The purchase price payable upon exercise of the Rights (the "Purchase
Price") will be subject to adjustment as set forth in the Rights Agreement. If
prior to the time the Right becomes exercisable, the Class A Common Stock is
converted into Company Common Stock in accordance with the applicable provisions
of the Restated Certificate of Incorporation of the Company, the Rights attached
- ----------
(1) Conectiv Resources, Inc. ("Resources") is a subsidiary mutual service
company to be established pursuant to Section 13 of the Act pursuant to the
Merger U-1. All costs of establishing Resources as Rights Agent and all costs of
Resources in acting as Rights Agent will be born by the Company and will not be
further allocated. Until the Rights become exercisable, Resources duties as
Rights Agent will be minimal and its costs are expected to be de minimis. It is
not anticipated that the Rights would ever become exercisable.
<PAGE> 3
24
to the shares of Class A Common Stock so converted shall be converted to Rights
to purchase Series 1 Preferred Stock pursuant to a conversion ratio equivalent
to the conversion ratio used for converting the Class A Common Stock to Company
Common Stock. Similarly, prior to such time as any person or group of affiliated
or associated persons becomes an Acquiring Person, the Company may, in
connection with the redemption or purchase by of shares of Class A Common Stock
in accordance with the applicable provisions of the Company's Restated
Certificate of Incorporation, redeem the Rights attached to the shares of Class
A Common Stock so redeemed or purchased at a redemption price of $0.01 per
Right, subject to adjustment.
Until the earlier to occur of (i) ten days following the date ("Stock
Acquisition Date") of the public announcement that a person or group has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of Common Stock (such person or group being an
"Acquiring Person") or (ii) ten business days (unless delayed by the Board)
following the commencement of a tender offer or exchange offer, the consummation
of which would result in such person or group becoming an Acquiring Person (the
earlier of (i) and (ii) being called the "Distribution Date"), the Rights will
not be exercisable and will be evidenced, with respect to any of the Company
Common Stock or Class A Common Stock certificates outstanding as of the Record
Date, by such Company Common Stock or Class A Common Stock Certificate. Until
the Distribution Date, the Rights will be transferred only with the Company
Common Stock or Class A Common Stock, and new Company Common Stock or Class A
Common Stock certificates issued after the Record Date will contain a legend
incorporating the Agreement by reference. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
<PAGE> 4
25
Certificates") will be mailed to holders of record of Company Common Stock or
Class A Common Stock as the case may be, as of the close of business on the
Distribution Date and thereafter such separate Right Certificates alone will
evidence the Rights. Following the distribution of Rights Certificates, the
Rights would trade independently of the Common Stock.
After the Distribution Date: (1) In the event that a person becomes an
Acquiring Person, each holder (other than an Acquiring Person and certain
transferees thereof) may exercise a Right and receive one one-hundredth of a
share of either Series 1 or Series 2 Preferred Stock having a value equal to two
times the Purchase Price then in effect with respect to the Right being
exercised. Rights that are beneficially owned by an Acquiring Person and certain
transferees of an Acquiring Person will be null and void. (2) If, after a person
becomes an Acquiring Person, Conectiv is acquired in a business combination
transaction or 50% or more of its consolidated assets or earning power is sold
or transferred, each holder of a Right (except Rights which previously have been
voided) will have the right to receive, upon exercise, common stock or other
equity of the acquiring company having a value equal to two times the Purchase
Price then in effect with respect to the Right being exercised.
The Purchase Price payable, and the number of shares of Preferred Stock
(or other securities, cash or other property, as the case may be) issuable upon
exercise of the Rights, are subject to adjustment from time to time to prevent
dilution.
<PAGE> 5
26
The proposed Rights Plan provides that at any time prior to such time as
any person or group becomes an Acquiring Person, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, subject to
adjustment ("Redemption Price"). Immediately upon the action of the Board
electing to redeem the Rights, the Company shall make announcement thereof and
the only right of the holders of Rights will be to receive the Redemption Price.
At any time after a person or group becomes an Acquiring Person and before
any such person or group other than the Company and certain related entities)
shall have become beneficial owner of 50% or more of the total voting power of
the aggregate of all shares of voting stock then outstanding, the Board of
Directors may exchange the Rights (other than Rights owned by the Acquiring
Person or certain of its transferees, which shall have become void), in whole or
in part, at an exchange ratio of one one-hundredth of a share of Series 1 or
Series 2 Preferred Stock, as appropriate, per Right (subject to adjustment).
Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of the Company. While the distribution of the
Rights will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Preferred Stock (or other consideration) of the
Company or for the equity of the Acquiring Person.
Any of the provisions of the Agreement may be amended by the Board without
the consent of the holders of the Rights; provided, however, that on or after
the Distribution Date the Agreement may not be amended in any manner that would
<PAGE> 6
27
adversely affect the interests of holders of Rights (other than the interests of
an Acquiring Person an certain transferees of such Acquiring Person).
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
