File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-1
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
(Name of company or companies filing this statement and
addresses of principal executive officers)
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
Wendy G. Hargus
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
(Names and addresses of agents for service)
With a copy to:
Ferd. C. Meyer, Jr., Esq. Wilbur C. Delp, Jr., Esq.
Senior Vice President and Sidley & Austin
General Counsel One First National Plaza
Central and South West Corporation Chicago, Illinois 60603
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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.
INTRODUCTION
Central and South West Corporation, a Delaware corporation
(the "Company"), proposes to adopt and implement a stockholder rights plan (the
"Plan"). Pursuant to the Plan the Board of Directors (the "Board") of the
Company would declare a dividend of one right (a "Right") for each outstanding
share of Common Stock, par value $3.50 per share (the "Common Stock"), of the
Company payable to stockholders of record on a date to be established. As of
June 30, 1997 there were 212,235,310 shares of Common Stock outstanding. The
Rights will be created by and issued pursuant to a Rights Agreement (the "Rights
Agreement"), to be entered into by the Company and Central and South West
Services, Inc., as Rights Agent. The proposed form of Rights Agreement is filed
herewith as Exhibit A-3. A summary of the Rights is included herein under the
caption "Description of Rights."
The Company is a registered public utility holding company
under the Public Utility Holding Company Act of 1935, as amended (the "Act").
The Company owns all of the outstanding shares of common stock of four public
utility subsidiaries (collectively, the "Electric Operating Subsidiaries"):
Central Power and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company, and West Texas Utilities Company. These
companies provide electric service to approximately 1.7 million customers in a
widely diversified area covering 152,000 square miles in portions of the States
of Arkansas, Louisiana, Oklahoma and Texas.
Other subsidiaries owned by the Company are CSW Energy, Inc.,
which develops and operates independent power and cogeneration projects; CSW
International, Inc., which pursues investments in energy ventures
internationally and which, indirectly, owns all the outstanding share capital of
SEEBOARD p.l.c., one of 12 regional electricity companies in the United Kingdom;
CSW Credit, Inc., which purchases the accounts receivable of the Electric
Operating Subsidiaries and certain non-affiliated electric utilities; CSW
Communications, Inc., which provides communication services to the Electric
Operating Subsidiaries and certain non-affiliates; CSW Leasing, Inc., which
invests in leveraged leases; EnerShop Inc., which provides energy management
services; and Central and South West Services, Inc., which performs, at cost,
various accounting, engineering, tax, legal, financial, electronic data
processing, centralized economic dispatching of electric power and other
services to the Company and its subsidiaries.
REASONS FOR RIGHTS AGREEMENT AND DISTRIBUTION OF RIGHTS
Unsolicited attempts to acquire public companies have required
boards of directors and their stockholders to make difficult decisions affecting
the value, and on occasion, the existence, of companies within extremely short
time periods. Such takeover attempts often occur when a company is particularly
vulnerable and when the board has determined that the company's inherent
long-term value is inadequately recognized by the marketplace.
The electric utility industry is undergoing dramatic changes,
transforming from a highly regulated to a competitive industry. State
initiatives to introduce competition for retail customers, and possible federal
initiatives regarding retail competition, are compelling a restructuring of the
industry. Uncertainty regarding the future and state regulators' focus on
reducing retail rates has resulted in depressed market values for certain
utilities and 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.
Because the Company is a registered public utility holding
company under the Act, acquisitions of more than 5% of the Company's Common
Stock, a merger or consolidation of the Company, and certain other transactions
(such as sales of assets as part of any takeover attempt) would require
Commission approval. Nonetheless, the changing regulatory environment suggests
that public utility holding companies, including the Company, and their
stockholders are losing to some degree the regulatory protection against hostile
acquisitions that they had formerly. Proposals have been introduced in Congress
for repeal or amendment of the Act, some of which have been supported by the
Commission. Further, in response to state or federal legislation or regulatory
requirements or in order to continue to compete in a dynamic utility industry,
the Company may in the future pursue possible strategies that would, among other
things, have the effect of terminating regulation of the Company by the
Commission under the Act.
Stockholder rights plans have become a widely accepted means
to maximize shareholder value by reducing the risk of nonrealization of
shareholder value due to opportunistic proposals. Such a plan would encourage
potential acquirors to negotiate with the Board and assist the Board in
obtaining the highest value for all of the Company's stockholders, especially in
a hostile or unwanted takeover situation. A stockholder rights plan may enhance
the probability that a competing offer will emerge. Over 1,700 public companies
have adopted rights plans, including about half of the Fortune 500 companies and
about 60 utility companies.
The Board believes that the Rights Agreement is appropriate
and necessary to preserve, in the event of an attempted takeover, the Company's
value for its stockholders. In this regard the Rights Agreement is designed to
deter attempts to acquire the Company in a manner or on terms which the Board
determines are not in the best interests of all stockholders. Specifically, the
Rights Agreement is intended to:
(i) reduce the risk of two-tiered, front-end loaded tender
offers or partial tender offers which may not offer fair and equal
value to all stockholders of the Company;
(ii) deter potential accumulators of the Company's shares who
(through open market and/or private purchases) may achieve a position
of substantial influence, or even control, without paying to the
selling or remaining stockholders of the Company an appropriate control
premium for their shares;
(iii) deter potential accumulators of the Company's shares who are
only interested in putting the Company into "play"; and
(iv) preserve for the Company's Board maximum bargaining power and
flexibility to deal with hostile acquirors in order to be in a position
to maximize value for all stockholders.
The Rights Agreement attempts to achieve these goals by
confronting a potential acquiror of more than 15% of the Company's outstanding
Common Stock with the possibility that the Company's stockholders will be able
to increase substantially such acquiror's cost of acquiring the Company.
The Plan may in certain circumstances permit the Board to
thwart an inadequate offer. The Plan would also provide the Board a role
(supplemental to the role of the Commission under the Act) in discouraging
implicitly coercive takeover tactics and would enable the Board to provide its
stockholders adequate time to properly assess a takeover bid without undue
pressure.
However, a Rights Agreement is not designed to prevent a proxy
contest to replace members of the Board or have a significant impact on a fair
offer for the entire Company. 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 and allow the proposed
transaction to proceed.
For all of these reasons, the Board believes that the Plan,
including the adoption of the Rights Agreement and the distribution of the
Rights to the Company's stockholders, would provide appropriate protections for
such stockholders from the takeover abuses mentioned above.
DESCRIPTION OF RIGHTS
The Rights created under the proposed Rights Agreement would
entitle the holders thereof to purchase one-tenth of a share of Common Stock at
a price of $50 per whole share of Common Stock (the "Purchase Price"), subject
to adjustment. This is equivalent to $5 per one-tenth of one share of Common
Stock. The Purchase Price represents the Board's estimation of the long-term
value of the Common Stock. Initially, the Rights would not be exercisable and
would trade as an integral part of the outstanding shares of Common Stock. Upon
the occurrence of the triggering events described below, the Rights would become
exercisable and Rights Certificates representing the Rights would be distributed
and would trade independently of such outstanding shares. However, the Rights
would not entitle the holders thereof to make a discounted purchase of shares of
the Company's Common Stock or of the common stock of the person acquiring the
Company until the occurrence of one of the events or transactions described
below under the captions "Flip-In" and "Flip-Over."
Triggering Events. The Rights would become exercisable (i.e.,
Common Stock could be purchased at the Purchase Price pursuant to the Rights)
upon the earlier to occur of (i) 10 days after the first public announcement
that any person or group (an "Acquiring Person") has acquired beneficial
ownership of 15% or more of the Company's outstanding Common Stock and (ii) 10
business days (unless delayed by the Board of Directors) after any person or
group has commenced a tender or exchange offer which would, upon its
consummation, result in such person or group becoming an Acquiring Person (the
earlier of (i) and (ii) being referred to as the "Distribution Date").
Notwithstanding the prior sentence, Rights may not be exercised following the
occurrence of an event described below under the caption "Flip-In" prior to the
expiration of the Company's right to redeem the Rights.
Flip-In. After the Distribution Date (unless the Triggering
Event is the commencement of a tender or exchange offer as described in (ii)
above under the caption "Triggering Events"), the holders of the Rights (other
than an Acquiring Person and certain transferees thereof) would be entitled to
purchase, upon the payment of the Purchase Price for a whole share of Common
Stock, that number of shares of Common Stock which, at the time of the
occurrence of such event, will have a market value equal to two times the then
current Purchase Price. After the occurrence of a Flip-In event, the Rights
owned by an Acquiring Person and such transferees become void.
Flip-Over. In the event that, on or after the Distribution
Date: (i) the Company merges into or consolidates with another person (with
limited exceptions), (ii) a person (with limited exceptions) merges into or
consolidates with the Company and the shares of Common Stock of the Company are
converted into securities of another person, cash or other property or (iii) the
Company transfers 50% or more of its consolidated assets or earning power to
another person (with limited exceptions), the holders of the Rights (other than
Rights which have become void) would be entitled to purchase, upon payment of
the Purchase Price for a whole share of Common Stock, the number of shares of
common stock of the acquiror (or a person affiliated therewith) which at the
time of consummation of such transaction, will have a market value equal to two
times the then current Purchase Price.
Redemption of Rights. The Rights may be redeemed, as a whole,
at a Redemption Price of $.01 per Right, subject to adjustment, at the direction
of the Board, at any time prior to the earlier of (i) 10 days after the first
public announcement that any person has become an Acquiring Person and (ii) the
date of final expiration of the Rights. As in the case with most rights plans
which are in place, the Rights will expire at the close of business on the tenth
anniversary of the record date, unless earlier redeemed or exchanged by the
Company as described further herein.
Exchange of Shares for Rights. At any time after any person or
group shall have become an Acquiring Person and before any person (other than
the Company and certain related entities), together with its affiliates and
associates, shall have become the beneficial owner of 50% or more of the
outstanding shares of Common Stock, the Board may direct the exchange of shares
of Common Stock for all or any part of the Rights (other than Rights which have
become void) at the exchange rate of one share of Common Stock per Right,
subject to adjustment.
Adjustments to Purchase Price. The Purchase Price payable, and
the number of shares of Common 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 Common Stock, (ii) upon the grant to
holders of the Common Stock of certain rights or warrants to subscribe for or
purchase shares of the Common Stock or convertible securities at less than the
then current market price of the Common Stock or (iii) upon the distribution to
holders of the Common Stock of evidences of indebtedness or assets (excluding
regular periodic cash dividends or dividends payable in Common Stock) or of
subscription rights or warrants (other than those referred to above). Prior to
the date on which the Rights become exercisable, the Board may make such
equitable adjustments as it deems appropriate in the circumstances in lieu of
any adjustment otherwise required by the foregoing.
No adjustment in the Purchase Price will be required until the
time at which cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Common Stock will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the Common Stock on the last trading date prior to the date of exercise.
Amendments. Any of the provisions of the Rights 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 Rights Agreement
may not be amended in any manner that would adversely affect the interests of
holders of Rights.
Adoption and Distribution. The Board has adopted and approved
the Rights Agreement subject to the receipt of an appropriate order under the
Act from the Commission pursuant to this Declaration on Form U-1. Upon receipt
of such an order, the Rights will be distributed as a dividend to the holders of
the Company's outstanding shares of Common Stock.
AUTHORIZATIONS SOUGHT
The Company herein seeks authorization to implement the Plan
as described in this application-declaration and embodied in the Rights
Agreement. This would include, among other actions permitted by the Rights
Agreement, the following transactions:
The dividend distribution of the Rights.
The making of adjustments to the Purchase Price.
The sale and issuance of Common Stock or other securities of the
Company, or the transfer of other assets, upon exercise of the Rights.
The redemption of Rights, and the issuance of Common Stock or other
securities of the Company, or the transfer of other assets, in exchange
for Rights.
Amending of the Agreement as permitted by the terms thereof.
(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.
None.
(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.
Item 2. Fees, Commissions and Expenses
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(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
proposed transactions will not exceed $100,000, $50,000 for outside counsel's
fees, $30,000 for printing and mailing costs and $20,000 for miscellaneous other
expenses. The charges of Central and South West Services, Inc., a subsidiary
service company, will be for services as rendered on a cost basis in connection
with its duties as Rights Agent. It is expected that such charges, if any, will
be deminimus.
<PAGE>
(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.
The charges of Central and South West Services, Inc., a
subsidiary service company, will be for services as rendered on a cost basis in
connection with its duties as Rights Agent. It is expected that such charges, if
any, will be deminimus.
Item 3. Applicable Statutory Provisions
<PAGE>
(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 believed to be applicable to the proposed dividend
distribution of Rights, and any subsequent exercise or redemption of the Rights.
While the Rights are technically a dividend on the Common
Stock for corporate law purposes, in and of themselves the Rights have no
economic value and, therefore, are not a "dividend" out of the Company's 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 appropriate 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 Common Stock pursuant to the Rights is 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 under the Rights
Agreement 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 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
<PAGE>
(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
<PAGE>
(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 by November 10, 1997.
(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:
<PAGE>
(a) Exhibits
A-1 Second Restated Certificate of Incorporation of the Company.
(Incorporated by reference to Exhibits 3.1 and 3.2 to the Company's Form 10-Q
for the Quarter ended June 30, 1995, File No. 1-1443).
A-2 Bylaws of the Company, as amended. (Incorporated by reference to Exhibit
3(b) to the Company's Annual Report on Form 10-K, for the year ended December
31, 1990, File No. 1-1443).
A-3 Draft of Rights Agreement between the Company and Central and South West
Services, Inc., as Rights Agent.
F-1 Opinion of counsel. (To be filed by amendment).
G-1 Proposed notice pursuant to Rule 22(f).
G-2 Financial Statements as of June 30, 1997 and Financial Data Schedules.
(b) Financial Statements
(Included as Exhibit G-2 above).
Item 7. Information as to Environmental Effects
<PAGE>
(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 the Commission 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.
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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.
CENTRAL AND SOUTH WEST CORPORATION
By:/s/ WENDY G. HARGUS
Name: Wendy G. Hargus
Title: Treasurer
Date: September 29, 1997
Exhibit A-3
Central and South West Corporation
and
[ ]
Rights Agent
Rights Agreement
Dated as of _____________, 1997
<PAGE>
Table of Contents
Section Page
1. Certain Definitions...................................1
2. Appointment of Rights Agent...........................4
3. Issue of Rights Certificates..........................4
4. Form of Rights Certificates...........................6
5. Countersignature and Registration.....................7
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates...................................7
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights........................................8
8. Cancellation and Destruction of Rights Certificates...10
9. Reservation and Availability of Capital Stock.........10
10. Common Stock Record Date..............................12
11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights............................12
12. Certificate of Adjusted Purchase Price or Number of
Shares................................................19
13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power......................................19
14. Fractional Rights and Fractional Shares...............21
15. Rights of Action......................................22
16. Agreement of Rights Holders...........................22
17. Rights Certificate Holder Not Deemed a Stockholder....23
18. Concerning the Rights Agent...........................23
19. Merger or Consolidation or Change of Name of Rights
Agent.................................................24
20. Duties of Rights Agent................................24
21. Change of Rights Agent................................26
22. Issuance of New Rights Certificates...................27
23. Redemption and Termination............................27
24. Exchange..............................................28
25. Notice of Certain Events..............................29
26. Notices...............................................30
27. Supplements and Amendments............................30
28. Successors............................................31
29. Determination and Actions by the Board of
Directors, etc........................................31
30. Benefits of this Agreement............................31
31. Severability..........................................32
32. Governing Law.........................................32
33. Counterparts..........................................32
34. Descriptive Headings..................................32
<PAGE>
RIGHTS AGREEMENT
This RIGHTS AGREEMENT, dated as of ___________, 1997 (this
"Agreement"), is by and between Central and South West Corporation, a Delaware
corporation (the "Company"), and [ ], a _____ Corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on __________ __, 1997 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared, a
dividend distribution of one Right (as hereinafter defined) for each share of
Common Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on _______ __, 1997 (the "Record Date"), each Right initially
representing the right to purchase one-tenth of a share of Common Stock of the
Company, upon the terms and subject to the conditions hereinafter set forth (the
"Rights"), and has further authorized the issuance of one Right for each share
of Common Stock issued between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such terms are hereinafter
defined) or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person organized,
appointed or established by the Company for or pursuant to the terms of any such
plan. Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition of shares of Common Stock by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the shares
of Common Stock then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the shares of Common 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 Common Stock, then such Person shall be deemed to be an "Acquiring
Person". Notwithstanding the foregoing, 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 Common Stock so that such Person
would no longer be an "Acquiring Person" (as defined pursuant to the foregoing
provisions of this paragraph (a)), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any such
Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof (the "Original Rights")
or pursuant to Section 11(i) hereof in connection with an adjustment
made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (d)) or disposing of any voting securities of the
Company;
provided, however, that nothing in this paragraph (d) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Texas are authorized or
obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., Texas
time, on such date; provided, however, that if such date is not a Business Day,
it shall mean 5:00 P.M., Texas time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value $3.50 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Person" shall mean any individual, firm, limited liability
company, corporation, partnership or other entity and shall include any
successor (by merger or otherwise) of such entity.
(i) "Section 11(a)(ii) Event" shall mean the event described in
Section 11(a)(ii) hereof.
(j) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(k) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(l) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(m) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
In addition, for purposes of this Agreement, the following terms have
the meanings indicated in specified sections of this Agreement: (i) "Adjustment
Shares" shall have the meaning set forth in Section 11(a)(ii) hereof; (ii)
"common share equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof; (iii) "current market price" shall have the meanings set
forth in Section 11(d) hereof; (iv) "Current Value" shall have the meaning set
forth in Section 11(a)(iii) hereof; (v) "Distribution Date" shall have the
meaning set forth in Section 3(a) hereof; (vi) "equivalent common shares" shall
have the meaning set forth in Section 11(b) hereof; (vii) "Nasdaq" shall have
the meaning set forth in Section 11(d) hereof; (viii) "Principal Party" shall
have the meaning set forth in Section 13(b) hereof; (ix) "Purchase Price" shall
have the meaning set forth in Sections 4(a), 11(a)(ii) and 13 hereof; (x)
"Redemption Price" shall have the meaning set forth in Section 23(a) hereof;
(xi) "Rights Certificates" shall have the meaning set forth in Section 3(a)
hereof; (xii) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof; (xiii) "Spread" shall have the meaning set forth
in Section 11(a)(iii) hereof; (xiv) "Substitution Period" shall have the meaning
set forth in Section 11(a)(iii) hereof; (xv) "Summary of Rights" shall have the
meaning set forth in Section 3(b) hereof; and (xvi) "Trading Day" shall have the
meaning set forth in Section 11(d) hereof.
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 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. 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 (or, if
the tenth day after the Stock Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date), or (ii) the Close of Business on the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors of the Company prior to such time as any Person becomes an
Acquiring Person) 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 of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding (the earlier of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates and (y) the Rights
will be transferable only in connection with the transfer of the underlying
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the Close
of Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more Rights certificates, in substantially the
form of Exhibit A hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as provided herein.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Common Stock, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for the 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 (as such term is
defined in Section 7(a) hereof), the surrender for transfer of any certificate
representing shares of Common Stock in respect of which Rights have been issued,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with such shares of Common
Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date or, in certain circumstances provided in Section 22 hereof,
after the Distribution Date. Certificates representing such shares of Common
Stock shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in the Rights Agreement between Central
and South West Corporation (the "Company") and [ ] (the "Rights Agent")
dated as of ________, 1997 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the 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 promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may become
null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates. In
the event the Company purchases or acquires any shares of its Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such shares shall be deemed cancelled and retired so that the Company shall not
be entitled to exercise any rights associated with shares of Common Stock which
are no longer outstanding.
Section 4. Form of Rights Certificates. (a) The Rights Certificates
(and the forms of election to purchase and of assignment to be printed on the
reverse thereof) shall each be substantially in the form set forth in Exhibit A
hereto 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 with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date or, in
the case of Rights with respect to shares of Common Stock issued or becoming
outstanding after the Record Date, the same date as the stock certificate
evidencing such shares, and on their face shall entitle the holders thereof to
purchase such number of shares of Common Stock as shall be set forth therein at
the price per whole share of Common Stock set forth therein (the "Purchase
Price"), but the amount of Common Stock or other type of securities purchasable
upon the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by any Person known to be:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration. (a) The Rights
Certificates shall be executed on behalf of the Company by its Chairman and
Chief Executive Officer, President and Chief Operating Officer or any Senior or
Executive Vice President, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned manually or by facsimile signature by the Rights Agent and shall
not be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the certificate number and the date of
each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 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 11(a)(ii) 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 shares of Common 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 (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the 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 signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 24 hereof, countersign and deliver to the Person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The 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.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificates if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of one-tenth of the Purchase Price with respect
to the total number of one-tenths of one share of Common Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
Close of Business on [_______], 2007 (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof or (iii)
the time at which such Rights are exchanged pursuant to Section 24 hereof (the
earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each whole share of Common Stock pursuant to
the exercise of a Right shall initially be $50 (equivalent to $5 for each
one-tenth of one share of Common Stock), and shall be subject to adjustment from
time to time as provided in Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the shares of Common Stock (or
other securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax (as
determined by the Rights Agent) required to be paid by the holder of the Rights
Certificate in accordance with Section 9 hereof, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Common Stock (or make available, if the Rights
Agent is the transfer agent for such shares) certificates for the total number
of shares of Common Stock to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the total number of shares of the Common
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of shares of Common Stock as are to be purchased (in which case
certificates for the shares of Common Stock represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii) requisition
from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in
cash or by certified bank check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue 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 other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of the Common Stock
would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a) (ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person (or
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person (or any Affiliate or Associate thereof) or to any Person with
whom the Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any of its Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement 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 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the 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 canceled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof, except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificates purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued other securities) or any authorized and issued shares of Common Stock
held in its treasury, the number of shares of Common Stock (and, following the
occurrence of a Triggering Event, other securities) that, as provided in this
Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the shares of Common Stock (and, following the
occurrence of a Triggering Event, other securities) issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the 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. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, and a
Section 11(a)(ii) Event has not occurred, the Company may temporarily suspend
the exercisability of Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification or exemption in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such actions
as may be necessary to ensure that all shares of Common Stock (and, following
the occurrence of a Triggering Event, other securities) delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay, when due
and payable, any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any shares of Common Stock (or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of
shares of Common Stock (or other securities, as the case may be) in respect of a
name other than that of, the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates or depositary receipts for shares of Common Stock (or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Common Stock Record Date. Each person in whose name any
certificate for shares of Common Stock (or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such shares of Common Stock (or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and applicable transfer taxes)
was made; provided, however, that if the date of such surrender and payment is a
date upon which the Common Stock (or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Common Stock (or other securities,
as the case may be) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the 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 shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common Stock
payable in shares of Common Stock, (B) subdivide the outstanding Common
Stock, (C) combine the outstanding Common Stock into a smaller number
of shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Common Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Common Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Common Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or
reclassification.
(ii) Subject to Section 24 hereof, in the event any Person
becomes an Acquiring Person, then each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at a price equal to the then
current Purchase Price for a whole share of Common Stock in accordance
with the terms of this Agreement, such number of shares of Common Stock
as shall equal the result obtained by (x) multiplying the then current
Purchase Price for a whole share of Common Stock by the then number of
one-tenths of a share of Common Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event
and (y) dividing that product (which, following such first occurrence
shall thereafter be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by 50% of the current market
price (determined pursuant to Section 11(d) hereof) per share of Common
Stock on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's certificate of incorporation, but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights, is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section 11(a), the Company shall: (A) determine the value of
the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value"), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) other equity securities of the Company which the Board of
Directors of the Company has deemed to have substantially the same
value or economic rights as shares of Common Stock ("common share
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 (less the amount of any reduction in the Purchase
Price), where such aggregate value has been determined by the Board of
Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence of a
Section 11(a)(ii) Event and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the later of (x) and
(y) being referred to herein as the "Section 11(a)(ii) 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, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, the
"Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek such stockholder
approval for such authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any such
suspension, the 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. For purposes of this Section 11(a)(iii), the value of
each Adjustment Share shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of Common Stock on the
Section 11(a)(ii) Trigger Date and the value of any "common share
equivalent" shall be deemed to equal the current market price per share
of Common Stock.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of shares of
Common Stock entitling them to subscribe for or purchase (for a period expiring
within forty-five (45) calendar days after such record date) shares of Common
Stock (or shares having the same rights, privileges and preferences as the
shares of Common Stock ("equivalent common shares")) or securities convertible
into shares of Common Stock or equivalent common shares at a price per share of
Common Stock or per equivalent common share (or having a conversion price per
share, if a security convertible into shares of Common Stock or equivalent
common shares) less than the current market price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date, plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
and/or equivalent common shares 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 Common Stock outstanding on such record date, plus the number of
additional shares of Common Stock and/or equivalent common shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, 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 Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in shares of Common Stock, but including any
dividend payable in stock other than Common Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, 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) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Common Stock and the denominator of which shall be such
current market price (as determined pursuant to Section 11(d) hereof) per share
of Common 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 which would have
been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
Common Stock for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the current market price
per share of Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into such shares of Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common Stock,
and the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification shall not have occurred
prior to the commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such case, the
"current market price" shall be properly adjusted to take into account any
trading during the period prior to such ex-dividend date or record date. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("Nasdaq") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the Company.
If on any such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good faith by the Board
of Directors of the Company shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one ten-thousandth of a share of Common
Stock. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any capital stock of the Company other than Common 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 Common Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Common 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 shares of Common Stock
purchasable 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 shares of Common Stock
(calculated to the nearest one-ten-thousandth) obtained by (i) multiplying (x)
the number of shares of Common 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 shares of Common Stock purchasable upon the exercise of a Right. Each
of the Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of shares of Common Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the 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 so to be
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 shares of Common Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of shares of Common Stock which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common 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
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the shares of Common Stock
and 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 or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors of the Company, in its good faith
judgment, shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Stock, (ii) issuance wholly for cash of any shares of
Common Stock at less than the current market price, (iii) issuance wholly for
cash of shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common 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 Common Stock shall
not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the 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), if (x) at the time of or immediately after
such consolidation, merger, sale or transfer there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
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
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 such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, directly or indirectly, at any time after
a Person has become an Acquiring Person, (x) the Company shall consolidate with,
or merge with and into, any other Person (other than a Subsidiary of the Company
in a transaction which 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 Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof) shall consolidate with, or merge with
or into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed 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), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or one or more of its wholly-owned Subsidiaries in one
or more transactions each of which complies with Section 11(o) hereof), 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 Purchase Price
for a whole share of Common Stock in accordance with the terms of this
Agreement, and in lieu of shares of Common Stock of the Company, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
shares of Common Stock of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (l)
multiplying the then current Purchase Price for a whole share of Common Stock by
the number of one-tenths of a share of Common Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event, and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of Common Stock of such Principal
Party on the date of consummation of such Section 13 Event; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue of such
Section 13 Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall 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
its shares of Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
its authorized shares of Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer of assets mentioned in paragraph (a) of
this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported to the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. 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.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one share of
Common Stock. For purposes of this Section 14(b), the current market value of
one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
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
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in such holder's
own behalf and for such holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his or her 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 holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the 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 owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificates 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 required to 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 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
reasonable efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the shares of Common
Stock or any other securities of the Company which may at any time be issuable
upon 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 to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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 and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
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 be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
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 stock transfer business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto. 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 the time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed,
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case, at
that time, any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations 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.
(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 herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman and Chief Executive Officer, President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recital 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 be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition 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 required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and 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.
(h) The Rights Agent and any stockholder, 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, however, that 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 hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock, by registered or certified
mail, and to the 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 (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
or her 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
corporation organized and doing business in good standing under the laws of the
United States or any state of the United States and which is authorized under
such laws to exercise corporate trust or share transfer powers. 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 reasonable 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 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 or any
defect therein shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company shall,
with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded prior to the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, issue Rights
Certificates representing an appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption and Termination. (a) The Board of Directors of
the Company may, at its option, at any time prior to the earlier of (i) the
Close of Business on the tenth day following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the
Close of Business on the tenth day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any share split, share dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the "current
market price", as defined in Section 11(d) hereof, of the Common Stock at the
time of redemption) or any other form of consideration deemed appropriate by the
Board of Directors. The redemption of the Rights by the Board of Directors may
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to 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 of any Subsidiary of
the Company, or any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of fifty percent (50%)
or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (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 Common 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 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
which 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 Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange will be effected pro rata based on the number of
Rights (other than Rights which have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute common share equivalents (as such term is defined in
Section 11(a)(iii) hereof) for some or all of the shares of Common Stock
exchangeable for Rights.
(d) In the event that there shall not be sufficient shares of Common
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 actions as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the 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 Common Stock or to make any
other distribution to the holders of Common Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company), or
(ii) to offer to the holders of Common Stock rights or warrants to subscribe for
or to purchase any additional shares of Common Stock or stock of any class or
any other securities, rights or options, or (iii) to effect any reclassification
of its Common Stock (other than a reclassification involving only the
subdivision of outstanding Common Stock), or (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 transaction or a series of related 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 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 Common
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 twenty (20) days
prior to the record date for determining holders of the Common Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock,
whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then, in any such case, 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 shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
[ ]
[ ]
[ ]
Attention: [ ]
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.
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Rights Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to the Rights
which 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 which would
adversely affect the interests of the holders of Rights. Prior to the
Distribution Date, the interest of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. 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 a percentage that (subject to exceptions for
specified Persons or groups excepted from the definition of "Acquiring Person")
is not less than the greater of (i) the sum of .001% and the largest percentage
of the outstanding shares of Common 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 of any Subsidiary of the
Company, any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan or, to the extent excepted from the
definition of "Acquiring Person", other specified persons or groups) and (ii)
10.0%.
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. Determination and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(l)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors of the Company
or to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including, but not limited to, a determination to redeem or not redeem the
Rights or to amend 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 Directors of the Company in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board of Directors of the Company 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 the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors of
the Company.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: CENTRAL AND SOUTH WEST CORPORATION
By: By:
Name: Name:
Title: Title:
Attest: [ ]
By: By:
Name: Name:
Title: Title:
<PAGE>
Exhibit A
[Form of Rights Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER ____________, 2007 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]
<PAGE>
Rights Certificate
CENTRAL AND SOUTH WEST CORPORATION
This certifies that , or registered assigns, is the registered owner of
the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of ___________, 1997 (the "Rights Agreement"), between Central and South West
Corporation, a Delaware corporation (the "Company"), and [ ], a [ ] corporation
(the "Rights Agent"), to purchase from the Company at any time prior to 5:00
P.M. (Texas time) on ___________, 2007 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one-tenth
of one fully paid, nonassessable share of Common Stock, $3.50 par value per
share (the "Common Stock"), of the Company, at a purchase price (the "Purchase
Price") of $50 per whole share of Common Stock (equivalent to $5 for each
one-tenth of one share of Common Stock), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related Certificate
duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of __________, 1997, based on the Common Stock as constituted
at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of such Person, such Rights shall
become null and void and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Common Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Rights Agent and
are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may, in each case at the option of the Company, be (i)
redeemed by the Company at its option at a redemption price of $.01 per Right or
(ii) exchanged in whole or in part for shares of Common Stock or other
securities of the Company. Immediately upon the action of the Board of Directors
of the Company authorizing redemption, the Rights will terminate and the only
right of the holders of Rights will be to receive the redemption price.
No fractional shares of Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a 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, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned manually or by facsimile
signature by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of __________, 19__
ATTEST: CENTRAL AND SOUTH WEST CORPORATION
____________________________ By:_______________________________
Secretary Name:
Title:
Countersigned:
[ ]
By:__________________________
Authorized Signature
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________________________
hereby sells, assigns and transfers unto _________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ___________________, ____
______________________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person
(as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: _____________, ____ __________________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
TO: CENTRAL AND SOUTH WEST CORPORATION
The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:
Please insert social security
or other identifying number
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_____________________________________________________________________________
(Please print name and address)
_____________________________________________________________________________
Dated: _____________, ____
_________________________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: ______________, ____ _______________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On ___________, 1997, the Board of Directors of Central and South West
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of the Company's common stock, $3.50 par value per share
("Common Stock"), to stockholders of record at the close of business on
__________, 1997. Each Right entitles the registered holder to purchase from the
Company one-tenth of one share of Common Stock at a purchase price (the
"Purchase Price") of $50 per whole share of Common Stock (equivalent to $5 for
each one-tenth of one share of Common Stock), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") dated as of __________, 1997 between the Company and [ ], as
Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights certificates will
be distributed. The Rights will separate from the Common Stock and the
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group becomes an Acquiring Person) following the commencement of a tender
offer or exchange offer, which, if consummated, would result in a person or
group becoming an Acquiring Person.
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after __________,
1997 will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on __________, 2007, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise provided in
the Rights Agreement, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that, at any time following the Distribution Date, a person
or group becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise, Common Stock at a 50% discount from
the then current market price. If an insufficient number of shares of Common
Stock is authorized for issuance, then the Board would be required to substitute
cash, property or other securities of the Company for the Common Stock.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth in this paragraph until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $50 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $50 worth
of Common Stock (or other consideration, as noted above) at a purchase price per
share equal to 50% of the then current market price of a share of Common Stock.
Assuming that the Common Stock had a per share value of $25 at such time, the
holder of each valid Right would be entitled to purchase four shares of Common
Stock for $50.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation, or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company at a 50% discount from the then current market price of such
common stock. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
The purchase price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of stock
dividend on, or a subdivision, combination or reclassification of, the shares of
Common Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or convertible securities at less than
the current market price of the Common Stock, or (iii) upon the distribution to
holders of the Common Stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Common Stock will be issued. In lieu thereof,
there shall be paid to registered holders of Rights Certificates an amount in
cash based on the market price of the shares of Common Stock on the last trading
day prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which will
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock (or other equity securities of the Company having equivalent
rights, preferences and privileges), per Right (subject to adjustment).
In general, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors) at any time until
ten days following the Stock Acquisition Date. Immediately upon the action of
the Board of Directors authorizing any redemption, the Rights will terminate and
the only right of the holders of Rights will be to receive the redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
result in the recognition of taxable income by stockholders or the Company,
stockholders may, depending upon the circumstances, recognize taxable income
after a Triggering Event.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding shares of Common
Stock then known to the Company to be beneficially owned by any person or group
of affiliated or associated persons and (ii) 10%, except that from and after
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
A copy of the Rights Agreement is available free of charge from the Rights
Agent. This description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
EXHIBIT G-1
Central and South West Corporation (70- )
Notice of Proposal to Adopt a Stockholder Rights Plan.
Central and South West Corporation (the "Company"), 1616
Woodall Rodgers Freeway, Dallas, Texas 75202, 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 Board of Directors of the Company ("Board") proposes to
declare a dividend distribution of one right ("Right") for each outstanding
share of Common Stock to stockholders of record at the close of business on a
record date ("Record Date") yet to be established. As of June 30, 1997 there
were 212,235,310 shares of Common Stock outstanding. The detailed description
and terms of the Rights will be set forth in a Rights Agreement ("Agreement") to
be between the Company and Central and South West Services, Inc., as Rights
Agent ("Agent"). Each Right would entitle the registered holder to purchase from
the Company one-tenth of one share of Common Stock at a price of $50 per whole
share of Common Stock ("Purchase Price"), being $5 per one-tenth of a share,
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
("Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock 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 be evidenced, with respect to
any of the Common Stock certificates outstanding as of the Record Date, by such
Common Stock certificate. Until the Distribution Date, the Rights will be
transferred only with the Common Stock, and new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Agreement by
reference. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights 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.
The Rights are not exercisable until the Distribution Date.
However, a Right may not be exercised following the occurrence of an event
described below under "The 'Flip-In' Feature" prior to the expiration of the
Company's right to redeem the Rights. As in the case with most right plans which
are in place, the Rights will expire at the close of business on the tenth
anniversary of the Record Date, unless earlier redeemed or exchanged by the
Company as described further herein.
"The 'Flip-In' Feature". After the Rights become exercisable
(unless due to the commencement of a tender or exchange offer), each holder of a
Right will thereafter have the right to receive, upon payment of the Purchase
Price for a whole share of Common Stock, the number of shares of Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the Purchase Price then in effect.
However, all Rights that are, or under certain circumstances were, beneficially
owned by any Acquiring Person will be null and void.
"The 'Flip-Over' Feature". In the event that, at any time
following the Stock Acquisition Date, (i) the Company is acquired in a merger or
other business combination transaction, or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right shall
thereafter have the right to receive, upon payment of the Purchase Price for a
whole share of Common Stock, the number of shares of common stock of the
acquiring company having a value equal to two times the Purchase Price then in
effect.
The Purchase Price payable, and the number of shares of Common
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.
At any time prior to 5:00 P.M. Texas time on the tenth day
following the Stock Acquisition Date, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right ("Redemption Price")
payable in cash, stock or other consideration. 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 becomes an Acquiring Person and
before any person (other than the Company and certain related entitites)
together with its affiliates and associates, shall have become beneficial owner
of 50% or more of the outstanding shares of Common Stock, the Board may exchange
the Rights (other than Rights owned by an Acquiring Person, which become void),
in whole or in part, at an exchange ratio of one share of Common Stock per
Right, subject to adjustment.
Until a Right is exercised or exchanged for Common Stock, 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 Common Stock
(or other consideration) of the Company or for the stock 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 adversely affect the interests of holders of Rights.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
INDEX EXHIBIT G-2
TO
FINANCIAL STATEMENTS Page
Number
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets - Per Books and Pro Forma
as of June 30, 1997 2 - 3
Consolidated Statement of Income for the Twelve Months Ended
June 30, 1997 4
Consolidated Statement of Retained Earnings for the Twelve Months Ended
June 30, 1997 5
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
Balance Sheets - Per Books and Pro Forma as of June 30, 1997 6
Statement of Income for the Twelve Months Ended June 30, 1997 7
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS 8
STATEMENT OF CHANGES 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF JUNE 30, 1997
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
--------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $5,800 $5,800
Transmission 1,553 1,553
Distribution 4,321 4,321
General 1,369 1,369
Construction work in progress 185 185
Nuclear fuel 193 193
Other Diversified 171 171
--------------------------------
13,592 13,592
Less - Accumulated depreciation 5,050 5,050
--------------------------------
8,542 8,542
--------------------------------
CURRENT ASSETS
Cash and temporary cash investments 268 268
Accounts receivable 1,004 1,004
Materials and supplies, at average cost 181 181
Electric fuel inventory 83 83
Under-recovered fuel costs 59 59
Prepayments and other 86 86
--------------------------------
1,681 1,681
--------------------------------
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 506 506
Mirror CWIP asset - net 292 292
Other non-utility investments 343 343
Income tax related regulatory assets, net 236 236
Goodwill 1,463 1,463
Other 360 360
--------------------------------
3,200 3,200
--------------------------------
$13,423 $0 $13,423
================================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF JUNE 30, 1997
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
--------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value,
authorized 350,000,000 shares;
issued and outstanding 212,200,000 shares $743 $743
Paid-in capital 1,039 1,039
Retained earnings 1,887 1,887
Foreign currency translation and other 38 38
--------------------------------
Total Common Stock Equity 3,707 3,707
--------------------------------
Preferred stock
Not subject to mandatory redemption 176 176
Subject to mandatory redemption 28 28
Subsidiary obligated, mandatorily
redeemable, trust preferred securities 324 324
Long-term debt 3,979 3,979
--------------------------------
Total Capitalization 8,214 8,214
--------------------------------
CURRENT LIABILITIES
Long-term debt/preferred stock
due within twelve months 204 204
Short-term debt 400 400
Short-term debt - CSW Credit 708 708
Loan Notes 67 67
Accounts payable 494 494
Accrued taxes 245 245
Accrued interest 102 102
Other 249 249
--------------------------------
2,469 2,469
--------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 2,244 2,244
Investment tax credits 284 284
Other 212 212
--------------------------------
2,740 2,740
--------------------------------
$13,423 $0 $13,423
================================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS JUNE 30, 1997
UNAUDITED
(Millions)
OPERATING REVENUES $5,135
-----------
OPERATING EXPENSES AND TAXES
U.S. Electric fuel and purchased power 1,215
United Kingdom Cost of Sales 1,295
Operating and maintenance 1,064
Depreciation and amortization 468
Taxes, other than income 183
Income taxes 178
-----------
4,403
-----------
OPERATING INCOME 732
-----------
OTHER INCOME AND DEDUCTIONS 34
-----------
INCOME BEFORE INTEREST CHARGES 766
-----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 332
Distributions on trust preferred securities 4
Interest on short-term debt and other 75
-----------
411
-----------
INCOME FROM CONTINUING OPERATIONS 355
-----------
DISCONTINUED OPERATIONS
Gain on the sale of discontinued
operations, net of tax of $0.3 8
-----------
NET INCOME 363
Less: preferred stock dividends 16
Gain on reacquired preferred stock 10
-----------
NET INCOME FOR COMMON STOCK $357
===========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS JUNE 30, 1997
UNAUDITED
(Millions)
RETAINED EARNINGS AT JUNE 30, 1996 $1,897
Add: Net income for common stock 357
-----------
2,254
-----------
Deduct: Common stock dividends 367
-----------
RETAINED EARNINGS AT JUNE 30, 1997 $1,887
===========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF JUNE 30, 1997
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
--------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
General $1 $1
Less - Accumulated depreciation (1) (1)
--------------------------------
NET PLANT 0 0
INVESTMENTS IN COMMON STOCK
OF SUBSIDIARY COMPANIES (at equity) 4,044 4,044
--------------------------------
CURRENT ASSETS
Cash and temporary cash investments 15 15
Accounts and interest receivable -
Affiliated 106 106
Prepayments and other 4 4
--------------------------------
125 125
--------------------------------
DEFERRED CHARGES AND OTHER ASSETS 14 14
--------------------------------
$4,183 $0 $4,183
================================
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value;
authorized 350,000,000 shares;
issued and outstanding 212,200,000 shares $743 $743
Paid-in capital 1,039 1,039
Retained earnings 1,887 1,887
Foreign currency translation and other 3 3
--------------------------------
Total Common Stock Equity 3,672 3,672
--------------------------------
Long-term debt 0 0
--------------------------------
Total Capitalization 3,672 3,672
--------------------------------
CURRENT LIABILITIES
Short-term debt 400 400
Accounts payable and other 123 123
--------------------------------
523 523
--------------------------------
DEFERRED CREDITS (12) (12)
--------------------------------
$4,183 $0 $4,183
================================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
STATEMENT OF INCOME
FOR THE TWELVE MONTHS JUNE 30, 1997
UNAUDITED
(Millions)
INCOME
Equity in earnings of subsidiaries
Central Power and Light Company $121
Public Service Company of Oklahoma 69
Southwestern Electric Power Company 86
West Texas Utilities Company 25
SEEBOARD U.S.A. 103
CSW Credit, Inc. 8
CSW Energy, Inc. 6
CSW Leasing, Inc. 1
CSW International, Inc. (1)
CSW Communications, Inc. (6)
Enershop Inc. (2)
Central and South West Services, Inc. 0
Other Income 20
----------
$430
----------
EXPENSES AND TAXES
General and administrative expenses 60
Depreciation and amortization expense 1
Interest expense 42
Taxes, other than income 2
Federal income taxes (24)
----------
81
----------
DISCONTINUED OPERATIONS
Gain on sale of discontinued operations, net
of tax of $0.3 8
----------
NET INCOME $357
==========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS
JUNE 30, 1997
UNAUDITED
(Millions)
DR CR
---------------------
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
None
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
None
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES
There have been no significant changes in the financial statements of
Central and South West Corporation and subsidiary companies subsequent to June
30, 1997, other than in the ordinary course of business.
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes to consolidated financial statements included in Central and
South West Corporation's 1996 Combined Annual Report on Form 10-K are hereby
incorporated by reference and made a part of this report.
Page
Reference
1996 Combined Annual Report on Form 10-K pages 2-39 through 2-71
<TABLE> <S> <C>
<ARTICLE> OPUR1
<SUBSIDIARY>
<NUMBER> 001
<NAME> CENTRAL AND SOUTH WEST CORPORATION & SUBS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> Jun-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,373
<OTHER-PROPERTY-AND-INVEST> 169
<TOTAL-CURRENT-ASSETS> 1,681
<TOTAL-DEFERRED-CHARGES> 506
<OTHER-ASSETS> 2,694
<TOTAL-ASSETS> 13,423
<COMMON> 743
<CAPITAL-SURPLUS-PAID-IN> 1,039
<RETAINED-EARNINGS> 1,925
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,707
28
500
<LONG-TERM-DEBT-NET> 3,932
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 40
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