<PAGE> 1
As filed with the Securities and Exchange Commission on August 1, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report June 25, 1996
(Date of earliest event reported)
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation; I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ---------------------------- ------------------
<C> <C> <C>
1-9130 CENTERIOR ENERGY CORPORATION 34-1479083
(An Ohio Corporation)
6200 Oak Tree Boulevard
Independence, Ohio 44131
Telephone (216) 447-3100
1-2323 THE CLEVELAND ELECTRIC 34-0150020
ILLUMINATING COMPANY
(An Ohio Corporation)
55 Public Square
Cleveland, Ohio 44113
Telephone (216) 622-9800
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
300 Madison Avenue
Toledo, Ohio 43652
Telephone (419) 249-5000
</TABLE>
<PAGE> 2
This combined Form 8-K is separately filed by Centerior Energy Corporation
("Centerior Energy"), The Cleveland Electric Illuminating Company ("Cleveland
Electric") and The Toledo Edison Company ("Toledo Edison"). Centerior Energy,
Cleveland Electric and Toledo Edison are sometimes referred to collectively as
the "Companies". Cleveland Electric and Toledo Edison are sometimes referred to
collectively as the "Operating Companies". Information contained herein relating
to any individual registrant is filed by such registrant on its behalf. No
registrant makes any representation as to information relating to any other
registrant, except that information relating to either or both of the Operating
Companies is also attributed to Centerior Energy.
ITEM 5. OTHER EVENTS.
1. Shareholder Rights Plan. On June 25, 1996, the Board of Directors of
Centerior Energy declared a dividend distribution of one Right for each
outstanding share of Common Stock, without par value, of Centerior Energy to
shareholders of record on July 8, 1996, and authorized Centerior Energy's
management to enter into a Shareholder Rights Agreement in the form of Exhibit 4
hereto ("Rights Agreement"). On June 25, 1996, the Rights Agreement was executed
and delivered by Centerior Energy and KeyBank National Association, as Rights
Agent.
A copy of the Rights Agreement is attached hereto as Exhibit 4 and is
incorporated herein by reference. A copy of the Rights Agreement is available
free of charge from Centerior Energy or the Rights Agent, on behalf of Centerior
Energy. This description of the Rights Agreement does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement.
2. Common Stock Buy-back Program. On June 25, 1996, the Board of
Directors of Centerior Energy extended its existing stock buy-back program for
one year through June 30, 1997. The Board authorized Centerior Energy to
purchase up to 14,802,592 shares (10% of the shares outstanding on June 25,
1996) of its Common Stock in the open market from time-to-time. The number of
shares authorized to be purchased under the program is an increase from
1,500,000. Any shares purchased will be held as treasury stock. The Common Stock
buy-back program was initially authorized in July 1991. Under the program,
Centerior Energy has purchased an aggregate of 225,500 shares. No purchases have
been made since August 1992.
3. Management Changes. For background relating to this topic, see "Item
10. Directors and Executive Officers of the Registrants" in the Companies'
Annual Reports on Form 10-K for the year ended December 31, 1995.
On June 25, 1996, the Board of Directors of Centerior Service Company
("Centerior Service") elected John P. Stetz and John K. Wood to the positions of
Senior Vice President - Nuclear and Vice President Nuclear - Davis-Besse,
respectively, effective July 1, 1996. Previously Mr. Stetz was Vice President -
Nuclear -Davis-Besse. Mr. Wood's business experience over the past five years
included the following positions with Toledo Edison: Manager of Operations of
the Davis-Besse Nuclear Power Station (November 1990 until June 1993) and
General Manager - Davis-Besse (June 1993 until July 1, 1996).
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 4 Rights Agreement, dated June 25, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTERIOR ENERGY CORPORATION
Registrant
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Registrant
THE TOLEDO EDISON COMPANY
Registrant
By: JANIS T. PERCIO
-------------------------------
Janis T. Percio,
Secretary of each Registrant
Dated: August 1, 1996
<PAGE> 1
Exhibit 4
SHAREHOLDER RIGHTS AGREEMENT
SHAREHOLDER RIGHTS AGREEMENT, dated as of June 25, 1996 (the
"Agreement"), between Centerior Energy Corporation, an Ohio corporation (the
"Company"), and KeyBank National Association (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on June 25, 1996 (the "Rights Dividend Declaration Date"),
pursuant to Section 1701.16 of the Ohio Revised Code, the Board of Directors of
the Company authorized and declared a dividend distribution of one Right (as
hereinafter defined) for each common share, without par value, of the Company
(the "Common Shares") outstanding as of the Close of Business on July 8, 1996
(the "Record Date") and authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each Common Share issued between the Record Date (whether originally issued or
delivered from the Company's treasury) and the Distribution Date, each Right
initially representing the right to purchase one five-hundredth of a Series A
Preferred Share of the Company having the rights, powers and preferences set
forth in the Certificate of Amendment to the Amended Articles of Incorporation
of the Company attached as Exhibit A hereto, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean, at the time any
determination is to be made, any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 20%
or more of the Common Shares then outstanding; provided, however, that the term
"Acquiring Person" shall not include the Company, any Subsidiary of the Company,
any employee benefit plan of either the Company or of any Subsidiary of the
Company, any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan, and that no Person shall become
an Acquiring Person solely by virtue of a reduction in the number of Common
Shares outstanding, unless subsequent to such reduction such Person or any
Affiliate or Associate of such Person shall become the Beneficial Owner of any
additional Common Shares other than as a result of a stock dividend, stock split
or similar transaction effected by the Company in which all shareholders are
treated equally.
<PAGE> 2
(b) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors upon a determination by the Board of
Directors, after reasonable inquiry and investigation, including consultation
with such persons as such directors shall deem appropriate, that it is
reasonably likely that (A) any actions taken by such Person which would result
in such Person acquiring beneficial ownership of a substantial amount of the
Common Shares would be taken with the intent (i) to cause the Company to take
action or to enter into a transaction or series of transactions which the Board
of Directors has determined not to be in the best interests of the Company and
its shareholders, (ii) to prevent the Company from taking action or from
entering into or consummating a transaction or series of transactions which the
Board of Directors has determined to be in the best interests of the Company and
its shareholders, (iii) of using such beneficial ownership position directly or
indirectly as a device by which such Person could prevent or hinder the Company
from consummating a transaction or series of transactions which the Board of
Directors has determined to be in the best interests of the Company and its
shareholders, or (iv) to permit such Person to acquire control of (including
both negative and affirmative control) or a controlling influence over the
Company, as a result of such beneficial ownership or as a result of one or more
subsequent actions or transactions, in a manner or pursuant to one or more
actions or transactions which the Board of Directors has determined not to be in
the best interests of the Company and its shareholders, or (B) substantial
beneficial ownership by such Person can reasonably be anticipated to cause a
material adverse impact (including without limitation impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position) on the business, financial condition or prospects of
the Company.
(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 (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, 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,
payment or exchange, or (B) securities issuable upon exercise of Rights
at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution 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; or
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(ii) which, by virtue of Section 1(d)(i), are beneficially
owned, directly or indirectly, by any other Person or any Affiliate or
Associate 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 or
disposing of any voting securities of the Company; or
(iii) 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) with any other Person;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security 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
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the applicable 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).
Notwithstanding the foregoing, nothing contained in this paragraph (d)
shall cause a Person ordinarily engaged in the business of underwriting
securities to be the Beneficial Owner of, or to beneficially own, any securities
acquired through such Person's participation in a bona fide firm commitment
underwriting of such securities pursuant to an underwriting agreement with the
Company for such period of time as shall be determined by the Board of Directors
of the Company.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Ohio 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.,
Cleveland, Ohio time, on such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 p.m., Cleveland, Ohio time, on the next
succeeding Business Day.
(g) "Common Shares" shall mean the common shares, without par value, of
the Company, except that "Common Shares" 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, corporation, partnership
or other entity.
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<PAGE> 4
(i) "Preferred Shares" shall mean Series A Participating
Preferred Shares, without par value, of the Company, and to the extent that
there are not a sufficient number of Series A Participating Preferred Shares
authorized to permit the full exercise of the Rights, any other series of
Preferred Shares of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Participating Preferred
Shares.
(j) "Purchase Price" shall mean the exercise price per one
five-hundredth of a Preferred Share as set forth in Section 7(b) hereof, subject
to adjustment as provided in Sections 11 and 13(a) hereof.
(k) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii)(A), (B), (C) or (D) hereof.
(l) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(m) "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.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation 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 a corporation or entity which is otherwise
controlled by such Person.
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
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 Shares) 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 earliest of (i) the Close of Business on the
tenth day after the Stock Acquisition Date or (ii) the Close of Business on the
tenth Business Day 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 or entity
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 20% or more
of the Common Shares then
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<PAGE> 5
outstanding, or (iii) the Close of Business on the tenth Business Day after the
Board of Directors of the Company determines that a Person is an Adverse Person
(the earliest of (i), (ii) and (iii) 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 Shares registered in the names of the holders of the Common Shares (which
certificates for Common Shares 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
Shares (including a transfer to the Company). As soon as practicable after the
Distribution Date, the Company will prepare and execute, and the Rights Agent
will countersign and, if requested by the Company, send by first-class,
postage-prepaid mail, to each record holder of the Common Shares 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 right certificates, in substantially the
form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for
each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof). Except as otherwise
determined by the Company, Rights Certificates representing only whole numbers
of Rights will be distributed and cash will be paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of the Common Shares 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 Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Shares and the registered
holders of the Common Shares shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing the Common Shares, or the surrender of any
certificates representing the Common Shares for any purpose, including
redemption of the shares represented by such certificates or conversion or
exchange of such shares into or for any security other than the Common Shares,
shall also constitute the transfer or surrender, as appropriate, of the Rights
associated with such Common Shares.
(c) Certificates representing such Common Shares 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 Shareholder Rights Agreement
between Centerior Energy Corporation (the "Company") and KeyBank
National Association (the "Rights Agent") dated as of June 25, 1996
(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 Rights Agent. Under certain circumstances, as set forth
in
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<PAGE> 6
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Rights Agent 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
Adverse Person, or who is an 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 Shares represented by such certificates shall be
evidenced by such certificates alone and registered holders of the Common Shares
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates, or the surrender of any such certificates for
redemption of the shares represented thereby or for conversion or exchange of
such shares into or for any security other than the Common Shares shall also
constitute the transfer or surrender, as appropriate, of the Rights associated
with the Common Shares represented by such certificates.
(d) Except as set forth in Section 22 hereof, nothing in this
Agreement or as this Agreement may be construed with any other agreement,
contract, indenture, instrument, document, or understanding (written or
unwritten) to which the Company or any holder of capital stock of the Company
may be a party, or under the terms of which the Company or any holder of capital
stock may be bound, shall give the holders of the capital stock any right to
receive, after the Distribution Date, any additional Rights, or any rights,
warrants or options with substantially similar terms as the Rights, by virtue of
conversion of any shares of capital stock of the Company into Common Shares of
the Company after the Distribution Date.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the 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 and on their face shall entitle the holders thereof
to purchase such number of one five-hundredths of a Preferred Share as shall be
set forth therein at the price set forth therein (such exercise price per one
five-hundredth of a Preferred Share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
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<PAGE> 7
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or an Associate or Affiliate of an Acquiring Person or
an Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Person's Associate or Affiliate) who becomes a transferee after
the Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Person's Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person or Adverse Person to holders of equity interests in such Acquiring Person
or Adverse Person or to any Person with whom such Acquiring Person or Adverse
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 the 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,
modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
an Adverse Person or an Affiliate or Associate of an Acquiring Person
or Adverse 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 of the Board, its President or any Vice President,
either manually or by facsimile signature. The Rights Certificates shall be
manually countersigned 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
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<PAGE> 8
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 may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of one five-hundredths of a
Preferred Share (or, following a Triggering Event, Common Share, preferred
share, 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) and
Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(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
Certificate 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
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<PAGE> 9
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
five-hundredths of a Preferred Share (or Common Shares, preferred shares, 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 earlier of (i) the
Close of Business on July 7, 2006 (the "Final Expiration Date"), or (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof (the
earlier of (i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one five-hundredth of a
Preferred Share pursuant to the exercise of a Right shall initially be $21 and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one five-hundredth of a Preferred Share (or Common
Shares, preferred shares, other securities, cash or other assets, as the case
may be) to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) either (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one five-hundredths of a Preferred
Share 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 Preferred Shares issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary
agent of depositary receipts representing such number of one five-hundredths of
a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares 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 check drawn on a United
States bank payable to the Company in United States Dollars. 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.
(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.
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<PAGE> 10
(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, an Adverse Person or an
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Person's
Associates or Affiliates) who becomes a transferee after the Acquiring Person or
Adverse Person becomes such, or (iii) a transferee of an Acquiring Person or
Adverse Person (or of any such Person's Associates or Affiliates) who becomes a
transferee prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom the Acquiring Person or Adverse 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
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 provisions of the preceding sentence voiding Rights beneficially
owned by an Acquiring Person or Adverse Person (or either of such Persons'
direct or indirect Affiliates, Associates or transferees) shall operate only in
respect to the Rights held by the Acquiring Person or Adverse Person (and such
Person's Affiliates, Associates and transferees) who has caused the occurrence
of the Section 11(a)(ii) Event referred to therein. 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, an Adverse Person or either
of such Person's 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
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the 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.
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<PAGE> 11
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 Preferred Shares
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares and/or other securities or out of its authorized and
issued shares held in its treasury), the number of Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or 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 Securities Act of
1933 (the "Securities 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 Securities 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, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained or the exercise thereof shall not be permitted under
applicable law.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one five-hundredths of the
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to
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<PAGE> 12
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 certificates for the number of one five-hundredths of a
Preferred Share (or Common Shares and/or other securities, as the case may be)
issuable 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 a number of one five-hundredths of a Preferred Share (or Common
Shares and/or other securities, as the case may be) in respect of a name other
than that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one five-hundredths of a Preferred Share (or Common Shares and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Share Record Date. Each person in whose name any
certificate for a number of one five-hundredths of a Preferred Share (or Common
Shares and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of such fractional amount of Preferred Shares (or Common Shares and/or other
securities, as the case may be) represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Share (or Common Share
and/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 (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Share (or Common Share
and/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 shareholder 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 Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding
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<PAGE> 13
Preferred Shares into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred
Shares (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 Preferred Shares 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 Preferred Shares 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 Preferred Share transfer books of the Company were
open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common
Shares of the Company shall remain outstanding and unchanged, (2)
shall, in one transaction or a series of transactions, transfer any
assets to the Company or to any of its Subsidiaries in exchange (in
whole or in part) for Common Shares, for shares of other equity
securities of the Company, or for securities exercisable for or
convertible into shares of equity securities of the Company (Common
Shares or otherwise) or otherwise obtain from the Company, with or
without consideration, any additional shares of such equity securities
or securities exercisable for or convertible into shares of such equity
securities (other than pursuant to a pro rata distribution to all
holders of Common Shares), (3) shall sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or both (as the case
may be) the Company or any of its Subsidiaries, assets on terms and
conditions less favorable to the Company than the Company would be able
to obtain in arm's-length negotiation with an unaffiliated third party,
other than pursuant to a transaction set forth in Section 13(a) hereof,
(4) shall sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise acquire or dispose of in one transaction or a series of
transactions, to, from or with (as the case may be) the Company or any
of the Company's Subsidiaries (other than incidental to the lines of
business, if any, engaged in as of the date hereof between the Company
and such Acquiring Person or Associate or Affiliate) assets having an
aggregate fair market value of more than $5,000,000, other than
pursuant to a transaction set forth in
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<PAGE> 14
Section 13(a) hereof, (5) shall receive any compensation from the
Company or any of the Company's Subsidiaries other than compensation
for full-time employment as a regular employee at rates in accordance
with the Company's (or its Subsidiaries') past practices, or (6) shall
receive the benefit, directly or indirectly (except proportionately as
a shareholder and except if resulting from a requirement of law or
governmental regulation), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantage
provided by the Company or any of its Subsidiaries, or
(B) 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 or entity organized, appointed or
established by the Company for or pursuant to the terms of any such
plan), alone or together with its Affiliates and Associates, shall, at
any time after the Rights Dividend Declaration Date, become the
Beneficial Owner of more than 20% of the Common Shares then
outstanding, unless the event causing the 20% threshold to be crossed
is a transaction set forth in Section 13(a) hereof, or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of
its Subsidiaries, other than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with or into or
otherwise involving an Acquiring Person) which has the effect, directly
or indirectly, of increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity securities of the Company
or any of its Subsidiaries which is directly or indirectly beneficially
owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, or
(D) an Adverse Person shall, at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner of 10% or more
of the Common Shares then outstanding, unless the event causing the 10%
threshold to be crossed is a transaction set forth in Section 13(a)
hereof;
then, promptly following five (5) days after the date of the occurrence of an
event described in Section 11(a)(ii)(B) hereof and promptly following the
occurrence of any event described in Section 11(a)(ii)(A), (C) or (D) hereof,
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of one five-hundredths of
a Preferred Share, such number of Common Shares of the Company as shall equal
the result obtained by (x) multiplying the then current Purchase Price by the
then number of one five-hundredths of a Preferred Share 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
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<PAGE> 15
current market price (determined pursuant to Section 11(d) hereof) per Common
Share on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
(iii) In the event that the number of Common Shares which are
authorized by the Company's articles of incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit 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 excess of
(1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess,
the "Spread"), 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) Common Shares or other equity securities of the Company
(including, without limitation, preferred shares, or units of preferred
shares, which the Board of Directors of the Company has deemed to have
the same value as the Common Shares (such preferred shares, "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, as determined 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, Common Shares (to the extent available) and then,
if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional
Common Shares 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
shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To the
extent that the Company determines that some action need be taken
pursuant to the first and/or second 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 any
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 the
Common Shares shall be the current market price (as determined pursuant
to Section 11(d) hereof) per Common Share on the Section 11(a)(ii)
Trigger Date and the value of
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<PAGE> 16
any "common share equivalent" shall be deemed to have the same value as
the Common Shares on such date. In order to satisfy the Company's
obligations under this Section 11(a)(iii) and in order to determine
whether or not adequate surplus of the Company is available for
directors to declare a dividend or distribution pursuant to Section
1701.33 of the Ohio Revised Code ("ORC"), if applicable, the Board of
Directors may, in accordance with ORC Section 1701.32(D), order excess
value of any tangible or intangible assets of the Company to be entered
on its books, and thereby create or add to capital surplus.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Shares (or
shares having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per Preferred Share 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 Preferred Shares outstanding on such record date,
plus the number of Preferred Shares which the aggregate offering price of the
total number of Preferred Shares and/or equivalent preferred 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 Preferred Shares outstanding on
such record date, plus the number of additional Preferred 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. Preferred Shares 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 Preferred Shares (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 Preferred Shares, but
including any dividend payable in shares other than Preferred Shares) 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
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<PAGE> 17
market price (as determined pursuant to Section 11(d) hereof) per Preferred
Share 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) 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 Preferred Share and the
denominator of which shall be such current market price (as determined pursuant
to Section 11(d) hereof) per Preferred Share. 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 Preferred Share on any date shall be deemed to be the average of the
daily closing prices per Preferred Share 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 Common Share on any date shall be deemed to be the
average of the daily closing prices per Common Share for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the current market price per Common Share is determined
during a period following the announcement by the issuer of such Common Shares
of (A) a dividend or distribution on such Common Shares payable in Common Shares
or securities convertible into such Common Shares (other than the Rights), or
(B) any subdivision, combination or reclassification of such Common Shares, and
prior to the expiration of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "current market price"
shall be properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares 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 Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, 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 Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a Business Day. If
the Common Shares are not publicly held or not so listed or traded, "current
market price" per share
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<PAGE> 18
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 ten-thousandth of a Common
Share or one-millionth of a Preferred Share, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than the
Preferred Shares, 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 Shares 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 Preferred
Shares 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 one five-hundredths of a
Preferred Share purchasable from time to time 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
one five-hundredths of a Preferred Share (calculated to the nearest
one-millionth, obtained by (i) multiplying (x) the number of one five hundredths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(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 one five-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of one
five-hundredths of a Preferred Share 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
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<PAGE> 19
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 one five-hundredths of a Preferred Share issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one five-hundredth of a
share and the number of one five-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one five-hundredths of a Preferred Share issuable upon exercise of the
Rights, the Company shall take any corporate action which may be necessary in
order that the Company may validly and legally issue such number of one
five-hundredth of a Preferred Share at such adjusted Purchase Price which are
fully paid and nonassessable.
(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 number of one five-hundredths of a Preferred Share and other capital stock
or securities of the Company, if any, issuable upon such exercise over and above
the number of one five-hundredths of a Preferred Share 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
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
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<PAGE> 20
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for
cash of any Preferred Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Shares shall not be
taxable to such shareholders.
(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 or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i)
subdivide the outstanding Common Shares or (ii) combine the outstanding Common
Shares into a smaller number of shares, the Rights associated with each Common
Share then outstanding shall be proportionately adjusted so that the number of
one five-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such event shall equal the result obtained by multiplying
such number by a fraction the numerator which shall be the total number of
Common Shares outstanding immediately prior to the occurrence of such event and
the denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. In the event that at any
time after the Rights Dividend Declaration Date and prior to the Distribution
Date the "conversion rate" of the Common Shares shall be adjusted pursuant to
the express terms of such
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<PAGE> 21
shares, the number of Rights associated with each Common Share then outstanding
shall be proportionately adjusted based upon the new "conversion rate".
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the 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 Shares, 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 Common Shares) in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with or
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 Common Shares shall be changed into or
exchanged for shares or other securities of any other Person or cash or any
other property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), 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 any
Subsidiary of the Company in one or more transactions each of which complies
with Section 11(o) hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable Common Shares of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one five-hundredths
of a Preferred Share for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such one five-hundredths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current market price (determined
pursuant to Section 11(d)(i) hereof) per Common Share of such Principal Party on
the date of
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<PAGE> 22
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 Common Shares) 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 Common Shares 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 Common Shares 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 Shares of such
Person are not at such time and have 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
Shares of which are and have 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 Shares 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 Shares 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 authorized Common Shares 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 or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement
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<PAGE> 23
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 (or any successor form) 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, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company may pay 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 in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the 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
Preferred Shares (other than fractions which are integral multiples of one
five-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one five-hundredth of a Preferred
Share). In lieu of fractional Preferred Shares that are not integral multiples
of one
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<PAGE> 24
five-hundredth of a Preferred Share, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one five-hundredth of a Preferred Share. For purposes of this Section
14(b), the current market value of one five-hundredth of a Preferred Share shall
be one five-hundredth of the closing price of a Preferred Share (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates which evidence fractional Common Shares. In lieu
of fractional Common Shares, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one (1)
Common Share. For purposes of this Section 14(c), the current market value of
one Common Share shall be the closing price of one Common Share (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), 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 Shares), may, in his own behalf and for his 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 right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(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
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<PAGE> 25
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 Share
certificate) is registered as the absolute owner of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Share certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one five-hundredths of
a Preferred Share or any other securities of the Company which may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 24 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. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(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 any certificate for Common Shares 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.
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<PAGE> 26
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
shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations 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 or Adverse
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) shall be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any
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<PAGE> 27
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
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not 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 the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 or any other provision 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 Common Shares, Preferred Shares or other capital stock to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Common Shares, Preferred Shares or other capital stock of the Company 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
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for such instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Rights Agreement and the date on and/or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any such officer of the
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<PAGE> 28
Company actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the 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, 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 Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the 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 Shares and Preferred Shares 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 Right 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
Shares and Preferred Shares 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 Certificates (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights
- 28 -
<PAGE> 29
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws of the
United States or of the State of Ohio (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of Ohio); which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $100,000,000. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and
Preferred Shares 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 , however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the 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 Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to the Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option and with
the concurrence of a majority of the Continuing Directors, at any time prior to
the earliest 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), (ii) the Close of Business on the tenth Business Day following the first
public announcement or disclosure by an Adverse Person or the Company that
- 29 -
<PAGE> 30
the Adverse Person has become the Beneficial Owner of 10% or more of the Common
Shares, or (iii) 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 stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"); provided, however,
that if, following the occurrence of a Stock Acquisition Date and following the
expiration of the right of redemption pursuant to clause (i) of this Section
23(a) but prior to any Triggering Event, (i) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of Common Shares in one
transaction or series of transactions, not directly or indirectly involving the
Company or any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event such that such Person is thereafter a Beneficial Owner of 10%
or less of the outstanding Common Shares, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. For purposes of
this Section 23, the term "Continuing Director" shall mean a member of the Board
of Directors of the Company who either was a member of the Board of Directors of
the Company on the date of this Agreement or who subsequently became a director
of the Company and whose initial appointment, initial election or initial
nomination for election by the Company's shareholders subsequent to such date
was approved by a vote of a majority of the Continuing Directors then on the
Board of Directors of the Company.
(b) Immediately upon the action of the Board of Directors of the
Company (with the concurrence of a majority of the Continuing Directors)
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 Shares. 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.
(c) At any time prior to a Distribution Date, the surrender of any
certificate representing Common Shares for redemption of the shares represented
by such certificate or for conversion or exchange of such shares into or for any
security other than the Common Shares shall also constitute surrender of the
Rights represented by such certificate and immediately, without further action
or notice, the Rights represented by such certificate shall terminate.
- 30 -
<PAGE> 31
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in shares of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular quarterly cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Shares (other than a reclassification involving only the subdivision of
outstanding Preferred Shares), 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 the Rights
Agreement and to each holder of a Rights Certificate, to the extent feasible and
in accordance with Section 25 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
Preferred Shares, 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
Preferred Shares 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
Preferred Shares whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agreement and to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii)
hereof, and (ii) all references in the preceding paragraph to units of Preferred
Shares shall be deemed thereafter to refer to Common Shares and/or, if
appropriate, other securities.
Section 25. 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:
Centerior Energy Corporation
6200 Oak Tree Boulevard
Independence, Ohio 44131
Attention: Corporate Secretary
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<PAGE> 32
Subject to the provisions of Section 21, 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:
KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Attention: Corporate Trust Department
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
Common Shares) 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 26. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the penultimate sentence of this Section 26, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person, an Adverse Person or an
Affiliate or Associate of an Acquiring Person or Adverse Person); provided, this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date or the number of one five-hundredths of a Preferred Share
for which a Right is exercisable or which reduces the Purchase Price. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
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<PAGE> 33
Section 28. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors of
the 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 to any liability to the holders of the Rights.
Section 29. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time and from time to time after the first occurrence of a Section 11(a)(ii)
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include rights that become void pursuant to the provisions of
the Section 7(e) hereof) for shares of Common Stock or common stock equivalents,
or any combination thereof, at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted as determined by the Board to reflect any
stock split, stock combination, stock dividend, or other similar event after the
date hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio").
(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 29 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 and/or
common stock equivalents equal to the number of such rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
shall promptly mail a notice of any such exchange to all of the holders of such
Rights at their latest 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 shares of Common
Stock for Rights will be effected and, in the event of any partial exchange. Any
partial exchange shall 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.
- 33 -
<PAGE> 34
(c) In the event that the number of shares of Common Stock which are
authorized by the Company's Articles of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit any exchange of Rights as contemplated in accordance
with this Section 29, the Company may, at its option, take all such action as
may be necessary to authorize additional shares of Common Stock for issuance
upon exchange of the Rights.
(d) 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, the Company
shall pay to the registered holders of Rights 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 value of a whole share of Common Stock. For
purposes of this Section 29, the value of a whole share of Common Stock shall be
the "current market price" (as determined pursuant to Section 11(d) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 29, and the value of any common stock equivalent shall be deemed to have
the same value as the Common Stock on such date.
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 Shares) 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 Shares).
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.
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 Ohio 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.
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<PAGE> 35
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 as of the day and year first above written.
CENTERIOR ENERGY CORPORATION
By: __________________________ By: ___________________________
KEYBANK NATIONAL ASSOCIATION
By: __________________________
[Assistant] Vice President
- 35 -
<PAGE> 36
EXHIBIT A
CERTIFICATE OF AMENDED
AMENDED ARTICLES OF INCORPORATION
OF
CENTERIOR ENERGY CORPORATION
Creating 335,000 shares of Serial Preferred Stock, Series A Participating
Preferred Shares
(Without Par Value)
We, Robert J. Farling, Chairman of the Board, President and Chief
Executive Officer, and Janis T. Percio, Secretary, of Centerior Energy
Corporation, a corporation organized and existing under the General Corporation
Law of the State of Ohio ("Corporation"), DO HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of
Directors of the Corporation ("Board") by the Amended Articles of the
Incorporation of the Corporation ("Articles"), the Board at a meeting duly
called and held on June 25, 1996, at which a quorum was present, adopted the
following resolution to amend the Articles pursuant to Section 1701.70(B) of the
Ohio Revised Code to create a series of the Corporation's Serial Preferred Stock
designated as Series A Participating Preferred Shares:
RESOLVED, that the Amended Articles of Incorporation of Centerior
Energy Corporation be, and they hereby are, amended by adding after Division B
of Article Fourth a new Division 4C reading as follows:
DIVISION C
EXPRESS TERMS OF THE SERIES A
PARTICIPATING PREFERRED SHARES
Section 1. Designation and Amount. Of the 5,000,000 Preferred
Shares authorized, 335,000 shares are designated as a series entitled "Serial
Preferred Stock, Series A Participating Preferred Shares" (hereinafter called
"Series A Preferred"). The shares of Series A Preferred shall have the express
terms set forth in Division B of this Article Fourth as being applicable to all
the Preferred Shares as a class and, in addition, shall have the express terms
applicable to all shares of the Series A Preferred as a series of the Preferred
Shares as set forth in this Division C.
Section 2. Dividends and Distributions.
(a) Subject to the prior rights of the holders of any series of
Preferred Shares ranking prior to the Series A Participating Preferred Shares
with respect to dividends, the holders of Series A Preferred shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
fifteenth day of February, May, August and November in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a Series A
Preferred or fraction thereof, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $10 or (b) subject to the provision for
<PAGE> 37
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the Common Shares, already defined
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of a Series A Preferred or fraction thereof. In the event the Corporation shall
at any time after June 25, 1996 ("Rights Dividend Declaration Date") (i) declare
any dividend on the Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the amount of dividends to
which holders of Series A Preferred were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
(b) The Corporation shall declare a dividend or distribution on
the Series A Preferred as provided in paragraph (A) above concurrently with its
declaration of a dividend or distribution on the Common Shares (other than a
dividend payable in Common Shares); provided that, in the event no dividend or
distribution shall have been declared on the Common Shares during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10 per share on the Series A Preferred
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding Series A Preferred from the Quarterly Dividend Payment Date next
preceding the date of issue of such Series A Preferred, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of the Series A Preferred entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the Series A Preferred in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
the Series A Preferred entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The Series A participating Preferred
Shares shall have the voting rights provided for in Section 4 of Division B of
this Article Fourth and such other voting rights as are provided by law.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred as provided in Section 2
A-2
<PAGE> 38
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on the Series A Preferred outstanding
shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred, except dividends paid ratably on the
Series A Preferred and all such parity shares on which dividends
are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) purchase or otherwise acquire for consideration any
Series A Preferred, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the annual dividend
rate and other rights and preferences of the series, shall
determine in good faith will result in fair and equitable
treatment to the holders of such series.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired promptly after the acquisition thereof.
Section 6. Liquidation.
Notwitstanding the liquidation provisions contained in Section 3
of Division B of the Article Fourth,
(a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the affairs of the Corporation, no distribution shall be made to
the holders of the Common Shares and any other shares ranking junior to the
Series A Preferred unless, prior thereto, the holders of the Series A Preferred
shall have received $100 per share, plus any amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment ("Series A Liquidation Preference").
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Shares, if any,
which rank on a parity with the Series A Preferred, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
A-3
<PAGE> 39
Section 7. No Redemption. The shares of the Series A Preferred
shall not be redeemable.
Section 8. Ranking. The Series A Participating Preferred Shares
shall rank equal to all other series of the Corporation's Preferred Shares as to
the payment of dividends and the distribution of assets.
Section 9. Amendment. The Amended Articles of Incorporation shall
not be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred so as to affect
them adversely without the affirmative vote of the holders of two-thirds (2/3)
or more of the outstanding shares of the Series A Preferred, voting separately
as a class.
Section 10. Fractional Shares. The Series A Preferred may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional share, to receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
as of this ____ day of ______________ , 1996.
________________________________ ______________________________
Robert J. Farling, Chairman of Janis T. Percio, Secretary
the Board, President and Chief
Executive Officer
A-4
<PAGE> 40
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- ____________ Rights
NOT EXERCISABLE AFTER JULY 7, 2006, OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
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 ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR AN ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.](1)
Rights Certificate
CENTERIOR ENERGY CORPORATION
This certifies that _____________________________________________,
or registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Shareholder Rights Agreement, dated as of June
25, 1996 (the "Rights Agreement"), between Centerior Energy Corporation, an Ohio
corporation (the "Company"), and KeyBank National Association (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 p.m. (Cleveland,
Ohio time) on July 7, 2006, at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
five-hundredth (a "Unit") of a fully paid, non-assessable Series A Preferred
Share (the "Preferred Share") of the Company, at a purchase price of $21 per
Unit (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The Purchase Price shall be paid in cash or by certified bank check or
bank draft payable to the order of the Company. 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
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(1) The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
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share set forth above, are the number and Purchase Price as of June 25, 1996,
based on the Preferred Shares 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, an Adverse 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, an Adverse Person or an Associate or Affiliate of any such Person, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, after such transfer, became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any 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 Preferred Shares 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 above-mentioned 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 designa
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ted for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a Preferred Share as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earliest of the
Close of Business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), (ii) the
tenth Business Day following the first public announcement or disclosure by an
Adverse Person or the Company that the Adverse Person has acquired 10% or more
of the then outstanding Common Shares, and (iii) the Final Expiration Date.
After the expiration of the redemption period, the Company's right of redemption
may be reinstated if an Acquiring Person reduces his beneficial ownership to 10%
or less of the outstanding Common Shares in a transaction or series of
transactions not involving the Company.
No fractional Preferred Shares will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one five-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), 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 Preferred Shares or
Common Shares (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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at
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any meeting thereof, or to give or withhold consent to any corporate action, or,
to receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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WITNESS the facsimile signatures of the proper officers of the
Company.
Dated as of ____________________
CENTERIOR ENERGY CORPORATION
By: _____________________________________
Robert J. Farling, Chairman of the Board,
President and Chief Executive Officer
By: _____________________________________
Janis T. Percio, Secretary
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[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:
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<PAGE> 46
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, an
Adverse Person or an Affiliate or Associate of any such 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, an Adverse
Person or an Affiliate or Associate of any such 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.
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FORM OF ELECTION TO PURCHASE (To be
executed if holder desires to exercise
Rights represented by the Rights
Certificate.)
To: CENTERIOR ENERGY CORPORATION:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the Preferred Shares
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 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:
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<PAGE> 48
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,
an Adverse Person or an Affiliate or Associate of any such 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, an Adverse Person or an
Affiliate or Associate of any such Person.
Dated: __________________ ______________________________
Signature
Signature Guaranteed:
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<PAGE> 49
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.
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EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 25, 1996, the Board of Directors of Centerior Energy
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding common share, without par value, of the Company (the "Common
Shares") to shareholders of record on July 8, 1996 (the "Record Date"). Each
Right entitles the registered holder thereof to purchase from the Company a unit
consisting of one five-hundredth (a "Unit") of a Series A Preferred Share,
without par value, of the Company (the "Preferred Shares") at a Purchase Price
of $21 per Unit, subject to adjustment. The description and terms of the Rights
are set forth in the Shareholder Rights Agreement (the "Rights Agreement")
between the Company and KeyBank National Association, as Rights Agent.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Rights Certificate
will be distributed. The Rights will separate from the Common Shares and a
Distribution Date will occur upon the earliest of (i) ten 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 20% or more of the outstanding Common Shares (the "Stock
Acquisition Date"), (ii) ten Business Days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding Common Shares, and (iii) ten
Business Days after the Board of Directors of the Company shall declare any
Person to be an Adverse Person (as such term is defined in the Rights
Agreement). Until the Distribution Date, (x) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with such Common
Share certificates, (y) the surrender for transfer of any certificate for the
Common Shares to which Rights are attached will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate,
and (z) the surrender of any certificate representing the Common Shares either
for redemption of such shares or for conversion or exchange of such shares into
or for any other security will also constitute the surrender of the Rights
associated with such Common Shares.
The Rights are not exercisable until the Distribution Date and will
expire at the Close of Business on July 7, 2006, 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 Shares as of the
Close of Business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only Common Shares issued on or prior to the
Distribution Date will be issued with Rights.
In the event that, at any time following the Distribution Date, (i)
the Company is the surviving corporation in a merger with an Acquiring Person
and its Common Shares are not
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changed or exchanged, (ii) a Person becomes the beneficial owner of more than
20% of the then outstanding Common Shares, (iii) an Acquiring Person engages in
one or more "self-dealing" transactions as set forth in the Rights Agreement,
(iv) during such time as there is an Acquiring Person, an event occurs which
results in such Acquiring Person's ownership interest being increased by more
than 1% (e.g., a reverse stock split) or (v) an Adverse Person becomes the
Beneficial Owner of 10% or more of the then outstanding Common Shares, then each
holder of a Right will thereafter have the right to receive, upon exercise,
Common Shares (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person or Adverse Person will be null and void. However, Rights are
not exercisable following the occurrence of either of the events set forth above
until such time as the Rights are no longer redeemable by the Company as set
forth below.
For example, at an exercise price of $21 per Right, each Right not
owned by an Acquiring Person or Adverse Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $42 worth of Common Shares (or other consideration, as noted above)
for $21. Assuming that the Common Shares had a per share value of $7 at such
time, the holder of each valid Right would be entitled to purchase 6 Common
Shares for $21.
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 (other than a
merger described in the second preceding paragraph or a merger which follows an
offer described in the second preceding paragraph) 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 shares of the
acquiring company having a value equal to two times the exercise price of the
Right. 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 Units of Preferred
Shares or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) if holders of the Preferred Shares are granted certain
rights or warrants to subscribe for Preferred Shares or convertible securities
at less than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares 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 Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Shares on the last
trading date prior to the date of exercise.
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Until the earliest of (i) ten days following the Stock Acquisition
Date, (ii) the tenth Business Day following the first public announcement or
disclosure by the Adverse Person or the Company that the Adverse Person has
acquired 10% or more of the then outstanding Common Shares, and (iii) the Final
Expiration Date, the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right. After the redemption period has expired by reason of
clause (i) of this paragraph, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to 10% or
less of the outstanding Common Shares in a transaction or series of transactions
not involving the Company. Immediately upon the action of the Board of Directors
(with the concurrence of a majority of Continuing Directors) ordering redemption
of the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Shares (or other consideration) of the Company or
for common shares of the acquiring company as set forth below.
Other than certain provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to the Company's Current Report on Form
8-K. A copy of the Rights Agreement is available free of charge from the Rights
Agent, on behalf of the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
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