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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE COLUMBIA GAS SYSTEM, INC.
20 Montchanin Road
Wilmington, Delaware 19807
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(Name of Company or Companies Filing This Statement
and Addresses of the Principal Executive Offices)
THE COLUMBIA GAS SYSTEM, INC.
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(Name of Top Registered Holding Company Parent of
Each Applicant or Declarant)
L. J. BAINTER, TREASURER
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, Delaware 19807
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(Name and Address of Principal Agent for Service)
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Item 1. Description of Proposed Transaction.
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the
reasons why it is desired to consummate the transaction and the
anticipated effect thereof. If the transaction is part of a
general program, describe the program and its relation to the
proposed transaction.
I. Introduction:
This declaration concerns a proposed amendment to the Certificate of
Incorporation ("Charter") of The Columbia Gas System, Inc. ("Columbia"), a
Delaware corporation, a public utility holding company registered under the
Public Utility Holding Company Act of 1935 (the "HCA") and a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code (the
"Code"), which is required in order for Columbia to implement a Shareholder
Rights Plan, the adoption of which was authorized by Columbia's Board of
Directors at a meeting held on January 18, 1995, subject to the approvals of
this Commission and the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") and the approval of the amendment to the
Charter by holders of Columbia Common Stock. Stockholder approval of the
amendment of the Charter is to be sought at the annual meeting of the
Corporation scheduled for April 28, 1995. The purpose of this application is
to request Commission approval for the solicitation of proxies approving the
amendment of the Charter, for the adoption of the Shareholder Rights Plan as an
addition to shareholder rights under Section 6(a)(2) of the HCA and for the
possible activation of the Rights created thereunder.
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II. Background:
A. The Bankruptcy
Through its subsidiaries, Columbia operates an interconnected
natural gas system that is engaged in all phases of the natural
gas industry from exploration and production, through transmission, to local
distribution. Substantially all outside funding of the System historically has
been implemented through public equity and debt offerings by Columbia and
borrowing by Columbia from banks and the transfer of the proceeds to the
subsidiaries on comparable terms through purchases of debt or equity from the
subsidiaries. In 1991, Columbia Transmission, Columbia's largest interstate
transmission subsidiary, experienced significant financial difficulties related
to the purchase and sale of gas during periods of historically unprecedented
decreased demand and prices.
On June 19, 1991, Columbia announced that the projected exposure
to excess costs under Columbia Transmission's gas supply
purchase contracts had increased to approximately one billion dollars and that
a substantial portion thereof would be nonrecoupable and, therefore, likely be
written off in the second quarter. As a result, the Columbia Board of
Directors suspended the dividend on Columbia Common Stock and directed Columbia
Transmission to attempt to negotiate total relief from the high cost gas
contracts. Under such circumstances, funding was no longer available under the
terms of Columbia's credit lines and Columbia was no longer able to issue new
commercial paper to fund the payment of maturing paper. Columbia and Columbia
Transmission filed for relief under Chapter 11 of the Code on July 31, 1991 and
were granted debtor-in-possession status allowing each company to continue to
operate its business in the normal course.
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Over the last forty-two months, many complex issues have arisen
in the Columbia Transmission bankruptcy proceeding. The rejection
of gas purchase contracts resulted in claims against the Columbia Transmission
estate by producers in excess of $13.5 billion. To provide for a fair and
efficient quantification of the producer claims, the Bankruptcy Court approved
the appointment of a claims mediator who issued his initial report on the
claims estimation procedure in October, 1994.
In addition, in 1992 the Official Unsecured Creditors' Committee
of Columbia Transmission (the "TCO Committee") filed an
Intercompany Complaint which alleged that the Columbia Transmission First
Mortgage Bonds and Inventory Notes (the "Columbia Secured Claim") and the
Columbia Transmission installment promissory notes should be recharacterized as
capital contributions rather than loans and equitably subordinated to the
claims of other Columbia Transmission creditors. The Intercompany Complaint
also challenged certain interest and dividend payments made by Columbia
Transmission to Columbia and the transfer of properties from Columbia
Transmission to Columbia Natural Resources, Inc., another wholly-owned
subsidiary of Columbia. Trial and post-trial briefing of the Intercompany
Complaint is complete and the trial judge has advised the parties that he
expects to issue a decision in the first quarter of 1995. Shortly after that
decision is issued, Columbia expects to file with the Bankruptcy Court and with
this Commission proposed plans of reorganization for both Columbia and
Columbia Transmission that will reflect the judgment in the Intercompany
Complaint. That will initiate an approval process under the Code and the HCA
that will require an estimated six to nine months to complete. The market
price for Columbia Common Stock has been depressed and is expected to remain
depressed prior to Columbia's and Columbia
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Transmission's emergence from bankruptcy due to the uncertainties associated
with the bankruptcy and is expected to continue to be depressed thereafter due
to various securities market phenomena affecting the trading values of shares
of recently bankrupt companies.
Salomon Brothers Inc ("Salomon Brothers"), the investment advisors
to Columbia, and Smith Barney Incorporated, the investment
advisors to the official Committee of Equity Holders, have advised that
Columbia Common Stock holders are vulnerable to takeover attempts at prices
lower than those which would be available following dissipation of the negative
impacts of Columbia's bankruptcy. Based on the recommendation of its
investment advisor, the Board of Directors authorized the adoption and
implementation of the Shareholder Rights Plan, subject to the approvals listed
above.
B. Salomon Brothers Analysis
At the request of Columbia's management, Salomon Brothers analyzed
an unsolicited offer received from a third party for the
purchase of minority control of Columbia. It was concluded that the subject
offer would result in a significant diminution of equity holders' value and was
unacceptable. At that time Salomon Brothers was also asked to consider the
advisability of adoption of a shareholder rights plan to protect the interests
of equity holders. The investment adviser noted that many companies emerging
from bankruptcy are subject to third-party offers. Of 18 companies with assets
of a billion dollars or more which emerged from Chapter 11, one-third of the
companies were affected: five underwent a change of control and a sixth was
the subject of a hostile takeover bid. In Salomon Brothers' view, Columbia may
be a particularly attractive takeover candidate due to the strength of its
operations. Columbia is a
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strong company with profitable operations. The bankruptcy is essentially a
one-issue bankruptcy and once it is resolved, the company should represent an
attractive investment. Its Common Stock price is, and may continue to be
perceived by a potential acquiror to be, undervalued. Salomon Brothers
presented a study demonstrating that common stock market values of companies
emerging from bankruptcy generally are depressed for a period of time as the
market refamiliarizes itself with the reorganized company. For Columbia, this
period of vulnerability potentially commences with the issuance of the order in
the Intercompany Complaint proceeding since that order, once final, will define
the vulnerability of Columbia's assets to the claims of Columbia Transmission
creditors. With that uncertainty eliminated, a potential acquiror could
attempt to take advantage if he perceives the market price of Columbia Common
Stock to be depressed due to the stigma of bankruptcy, as suggested by Salomon
Brothers.
Salomon Brothers stated that "shareholder rights" plans have become
widely accepted means to maximize shareholder value by
reducing the risk of nonrealization of shareholder value due to opportunistic
proposals. Such plans are designed to allow a board to take additional time to
negotiate with potential acquirors and enhance the probability that competing
bids will emerge. In certain cases they may permit a board to thwart an
inadequate offer. A shareholder rights plan also provides a board of directors
with a role (supplemental to the role of the Commission under the HCA) in
discouraging implicitly coercive takeover tactics and enables a board to
provide shareholders adequate time to properly assess a takeover bid without
undue pressure. The plans do not make a company acquisition-proof nor do they
preclude a proxy contest. As is discussed in detail below, the fiduciary
duties of Columbia's Board of Directors under the laws of the State of Delaware
would require the Board to consider an offer that gives
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maximum long-term value to all shareholders and might, in appropriate
circumstances, require the Board to "redeem" the rights and allow the
transaction to proceed.
III. Description of Proposed Charter Amendment and Shareholder Rights Plan
Columbia's Charter provides for the issuance of up to
ten million shares of Preferred Stock fifty dollar ($50) par value pursuant to
Certificates of Designation to be authorized by the Board of Directors from
time to time. Certain provisions in the Charter subject Columbia to various
restrictions on dividends and on amounts of unsecured debt while any preferred
stock is outstanding and define the voting rights and liquidation rights of the
preferred in a manner inconsistent with the voting and liquidation rights
proposed for the Preferred Stock to be issued pursuant to the Rights Plan in
the unlikely event that the Rights become exercisable. The proposed amendment
to the Charter would delete these provisions from the description of preferred
stock and allow the voting rights, liquidation rights, and dividend provisions
to be set forth in the individual Certificates of Designation to be adopted and
filed with respect to each issue of Preferred Stock. The par value of the
Preferred Stock would also be reduced to ten dollars ($10). A draft
Certificate of Amendment is included herewith as Exhibit A-1. The terms of the
Series A Participating Preferred Stock issuable upon exercise of the Rights
would be set forth in a Certificate of Designation to be filed following
approval of the Charter amendment by stockholders and receipt of necessary
approvals. A draft of the Certificate for that Preferred Stock in
substantially final form is an Exhibit to the Draft Rights Agreement (Exhibit
A-2). Thus, the Charter Amendment would allow use of Preferred Stock under the
Proposed Shareholder Rights Plan.
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Shareholder rights plans have become an accepted mechanism to
assist a board of directors in protecting the investment of
existing equityholders by deterring acquirors that do not offer adequate value
and complete financing. Under a rights plan, existing shareholders are
frequently granted a right to purchase a preferred stock that has voting and
dividend rights equivalent to common stock at a substantial discount to common
stock if a triggering event occurs. The triggering event in the Columbia
Rights Plan is the acquisition of 10.0 percent or more of the Company's Common
Stock. If a triggering event were to occur, the rights held by the acquiror
would be void and the exercise of the rights by other stockholders would result
in a dilution of the value and voting power of the potential acquiror. The
board has the option of redeeming the Rights to permit a proposed offer to
proceed and the fiduciary duty of the Board of Directors to act in the best
interest of stockholders protects against abuse of the rights plan by the Board
of Directors.
The Rights Plan is designed to give Columbia's Board of Directors
a means of helping to assure stockholders the highest value for
their Common Stock if a takeover were to occur when Columbia's Common Stock is
undervalued prior to and for a period of time following emergence from
bankruptcy. The Plan's "sunset" feature, with termination of the Plan eighteen
(18) months following Columbia's emergence from Chapter 11 protection, subject
to extension if a proposal with respect to an acquisition of 10.0 percent or
more of the Common Stock or business combination involving Columbia is then
pending, tailors its applicability to the emergence/post-emergence time period.
The following is a more detailed description of the proposed Rights Plan.
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Immediately after the effective date of the Plan, one Right will
be issued and will attach to each share of Common Stock outstanding
and to each new share of Common Stock subsequently issued. The Rights will
separate from the Common Stock and will be exercisable on the earlier of (the
"Distribution Date") (x) such date as Columbia learns that a person (an
"Acquiring Person") has acquired 10.0 percent or more of the outstanding Common
Stock (the "Threshold Acquisition") or (y) such date as may be designated by
Columbia's Board following the commencement or announcement of a tender or
exchange offer for outstanding Common Stock by any person if upon consummation
of such offer, such person would beneficially own 10.0 percent or more of the
outstanding Common Stock. Until a Threshold Acquisition, each Right will be
the Right to acquire 1/1,000th of a share of Series A Preferred Stock for $100,
subject to adjustment (the "Purchase Price").
When a Threshold Acquisition occurs, each Right (except for
Rights beneficially owned by an Acquiring Person) becomes a right
to purchase from Columbia, upon exercise thereof in accordance with the terms
of the Rights Plan Agreement, for the Purchase Price, that number of 1/1,000ths
of a share of Series A Participating Preferred Stock (the "Preferred Stock")
which is equal in number to the number of shares of Common Stock outstanding
which, at the time of such transaction, will have a market value equal to twice
the Purchase Price. For example, based on a Purchase Price of $100 and assuming
the market price of the Common Stock was $25 per share at the time of the
transaction, each Right (other than a Right held by the Acquiring Person) would
entitle the holder to purchase, for $100, eight one-thousandths of a share of
Preferred Stock, which would be equivalent to eight shares of Common Stock
(having a market value of
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$200). Any Rights held by an Acquiring Person (or by any purported transferee
of an Acquiring Person) will be void and non- transferable.
The Columbia Board of Directors may, at its option, at any time
after a person becomes an Acquiring Person, mandatorily exchange
all or part of the Rights (other than the Rights of an Acquiring Person) for
consideration per Right consisting of one-half of the securities that would be
issuable at such time upon the exercise of one Right. The Board also may, at
its option, issue, in substitution for Preferred Stock, Common Stock in an
amount per share of Preferred Stock equal to the Formula Number then in effect.
Since each one-one thousandth of a share of Preferred Stock is designed to be
equivalent to one share of Common, the "Formula Number" is 1,000, subject to
adjustment in the event of stock dividends, stock splits or similar events.
The Columbia Board of Directors may, at its option, at any time
prior to the earlier of (i) such time as a person becomes an
Acquiring Person and (ii) the Expiration Date (defined below), order the
redemption of all, but not fewer than all, the then outstanding Rights at a
redemption price of $0.01, subject to adjustment, and Columbia, at its option,
may pay such redemption price either in cash or Common Stock or other
securities of Columbia deemed by the Board to be at least equivalent in value
to such redemption price.
The Rights Plan Agreement and the Rights will expire on the
date (the "Expiration Date") that is eighteen months after the date on
which Columbia's confirmed Plan of Reorganization is effective, provided that,
if on such date there is pending any proposal for an acquisition of 10.0
percent or more of the Common Stock or a business combination involving
Columbia, the
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Expiration Date shall be extended to the date that is 30 days after the date on
which no such proposal is pending.
Any offer other than an offer that is approved by the Board of
Directors will be significantly more expensive for the Acquiring
Person than it would be absent the Rights Plan. The Rights Plan is therefore
designed to require any person interested in acquiring 10.0 percent or more of
the Common Stock to make an offer which the Board of Directors considers to
represent the full value of the Common Stock. Prior to the Rights being
separated from the Common Stock, the Rights will have no value in and of
themselves and will have no dilutive effect on the Common Stock.
The Preferred Stock issuable upon the exercise of the Rights will
have a par value of $10 per share and will have terms so that each
1/1,000th share of Preferred Stock will be entitled to vote and participate in
dividends and certain other distributions on an equivalent basis with one share
of Common Stock. Dividends on the Preferred Stock will consist of (1)
dividends payable quarterly (each a "Quarterly Dividend Payment Date") in the
amount of $10.00 per whole share less the amount of all cash dividends declared
on the Preferred Stock pursuant to the following clause (2) since the
immediately preceding Quarterly Dividend Payment Date (the total of which shall
not be less than zero) and (3) dividends payable in cash on the payment date
for each cash dividend declared on the Common Stock in an amount per whole
share equal to the Formula Number then in effect times the cash dividends then
to be paid on each share of Common Stock. In addition, if Columbia shall pay
any dividend or make any distribution on Common Stock payable in assets,
securities or other forms of noncash consideration (other than dividends or
distributions solely in shares of Columbia Common Stock), then Columbia shall
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simultaneously pay or make on each outstanding whole share of Preferred Stock a
dividend or distribution in like kind equal to the Formula Number then in
effect, times such dividend or distribution on each share of Common Stock.
Each holder of Preferred Stock shall be entitled to a number of votes equal to
the Formula Number then in effect, for each share of Preferred Stock held of
record on each matter which holders of Common Stock or stockholders generally
are entitled to vote, multiplied by the maximum number of votes per share which
any holder of Common Stock or stockholders generally have with respect to such
matter (assuming any requirement to vote a greater number of shares is
satisfied).
Except as otherwise provided in the Certificate of Designation or
by applicable law, the holders of shares of Preferred Stock and
the holders of shares of Common Stock shall vote together as one class for the
election of directors of Columbia and on all other matters submitted to a vote
of stockholders of Columbia.
If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends
(whether or not consecutive) payable on any share of Preferred Stock are in
default, the number of directors constituting the Board shall be increased by
two. In addition to voting together with the holders of Common Stock for the
election of other directors of Columbia, the holders of Preferred Stock (and of
any other stock on a parity with the Preferred Stock and also entitled to vote
due to a default), voting separately as a class to the exclusion of the holders
of Common Stock, shall be entitled at said meeting of stockholders (and at each
subsequent annual meeting of stockholders), unless all dividends in arrears
have been paid or declared and set apart for payment prior thereto, to vote for
the election of two directors of Columbia. If and when such default shall
cease to exist, the holders
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of Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been elected directors
pursuant to said special voting rights shall terminate and the number of
directors constituting the Board shall be decreased by two. Except as provided
in the Certificate of Designation or by applicable law, holders of Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as described above) for authorizing or taking any corporate action.
Upon the liquidation, dissolution or winding up of Columbia, whether
voluntary or involuntary, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Preferred Stock unless,
prior thereto, the holders of shares of Preferred Stock shall have received an
amount equal to the accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, plus an amount equal to
the greater of (x) $10.00 per whole share or (y) an aggregate amount per share
equal to the Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Stock or (2) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Preferred Stock, except distributions made ratably on the
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
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The Preferred Stock will rank junior to all other series of
preferred stock of Columbia unless the Board shall specifically
determine otherwise in fixing the special rights of such series and the
limitations thereof.
(b) Describe briefly, and where practicable state the approximate
amount of, any material interest in the proposed transaction, direct or
indirect, of any associate company or affiliate of the applicant or declarant
or any affiliate of any such associate company.
Not applicable.
(c) If the proposed transaction involves the acquisition of
securities not issued by a registered holding company or subsidiary thereof,
describe briefly the business and property, present or proposed, of the issuer
of such securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or
disposition of assets, describe briefly such assets, setting forth original
cost, vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
Not applicable.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
(a) State (1) the fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by applicant or
declarant to act for the successful bidder.
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There are set forth below the estimated fees and expenses expected to
be incurred in connection with the proposed transaction. All payments for
professional services are subject to the approval of the Bankruptcy Court
pursuant to the Code.
<TABLE>
<S> <C>
Securities and Exchange Commission
Filing Fee .................................... $ 2,000.00
Services of Columbia Gas System Service
Corporation ................................... ********
Services of Cravath Swaine & Moore, special
counsel for Columbia .......................... *********
Services of Stroock & Stroock & Lavan bank-
ruptcy counsel for Columbia ................... *********
Services of Salomon Brothers, Investment Advisor
to Columbia(1)................................. *********
Services of Smith Barney Incorporated, Investment
Advisor to the Official Committee of Equityholders(1) *********
Miscellaneous, including filing and
recording fees, postage, travel, telephone
and other incidental expenses ................. *********
------------
Total ................ $ *********
===========
</TABLE>
********** To be filed by amendment.
(1) The Investment Advisors receive no additional or separate compensation
with respect to advice concerning the Rights Plan. Pursuant to Order of
the Bankruptcy Court, Salomon Brothers receives a monthly retainer of
$150,000 and Smith Barney Incorporated receives a monthly retainer of
$100,000.
(b) If any person to whom fees or commissions have been or are to be
paid in connection with the proposed transaction is an associate company or an
affiliate of any applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
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Columbia Gas System Service Corporation, a wholly-owned subsidiary of
Columbia, is providing certain services at cost, as set forth in Item 2. (a)
above.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
(a) State the sections of the Act and the rules thereunder believed
to be applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of
exemption.
Rules 62 and 65 are applicable to the solicitation of proxies for
approval of the amendment of the Charter to permit implementation
of the Rights Plan. To permit that solicitation to proceed beginning in early
March prior to the Annual Meeting scheduled for April 28, 1995, the Commission
is requested to issue an order authorizing the solicitation together with the
Notice of Proposed Transaction as permitted by Rule 62(d). If the amendment of
the Charter is approved by Stockholders, adoption of the Rights Plan would be
subject to approval of this Commission and the Bankruptcy Court.
While the Rights are technically a dividend on common stock for
corporate law purposes, in and of themselves they have no economic
value and, therefore, are not a "dividend" out of capital or capital surplus
for purposes of HCA Section 12(c). There is also no intent that the Rights
will ever become exercisable. More than a thousand rights plans have come into
existence over the last 10 years, and yet none have ever been triggered so that
the rights under the plans have become exercisable. Instead the plans operate
as intended to protect equity holders by forcing potential acquirors to
negotiate with the Board and allowing time for an examination of all available
alternatives to a "takeover" effort at a share tender price below that which
shareholders should be able to command. The Plan is therefore more
appropriately
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analyzed as an addition to the rights of shareholders (Sections 6(a)(2) and
7(e)) rather than as an issuance of securities under Sections 6(a)(1) and 7(c)
and (d). Even if the rights became exercisable and were exercised, Section
6(a)(1) should not apply as the substantive effect would be to shift a portion
of the ownership of the company and the attendant voting rights from the person
making an inadequate offer to other shareholders. As noted above, the
shareholder rights plan is a means of protecting the interests of all existing
shareholders and will not result in an inequitable distribution of voting
power. State courts have specifically upheld the adoption of shareholder
rights plans.
Should the Commission determine that analysis of the possible issuance
of the preferred stock pursuant to the rights under Sections
6(a)(1) and 7(c)) and (d) are required, the preferred stock should be deemed to
meet the requirements of Section 7(c)(2)(D) and none of the negative findings
required under Section 7(d) can be made. The pro forma financials included
herein reflect the exercise of the rights by 90% of the outstanding stock
following the occurrence of a Threshold Acquisition and demonstrate the lack of
detrimental effect of the exercise of rights at such a time on the balance
sheet of the company and on existing shareholders. However, as noted above,
that analysis is essentially academic since the intent is that the rights never
become exercisable.
To the extent that the transactions which are the subject matter
of this Declaration are considered by the Commission to require
authorization, approval or exemption under any section of the Act or provision
of the rules and regulations other than those specifically referred to herein,
request for such authorization, approval or exemption is hereby made.
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ITEM 4. REGULATORY APPROVAL.
(a) State the nature and extent of the jurisdiction of any State
Commission or any Federal Commission (other than the Securities and Exchange
Commission) over the proposed transaction.
Not Applicable. The United States Bankruptcy Court for the District
of Delaware has jurisdiction over Columbia and must approve
the adoption and implementation of the Shareholder Rights Plan. A concurrent
filing has been made in the Bankruptcy Court and will be pursued a) after the
Commission has issued its order authorizing solicitation of shareholder
approval for the amendment of the Charter, b) after the shareholders have
approved the Charter Amendment and c) after this Commission has issued its
order authorizing adoption of the Plan and possible "activation" of the Rights.
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
Not applicable.
ITEM 5. PROCEDURE.
(a) State the date when Commission action is requested. If the date
is less than 40 days from the date of the original filing, set forth the
reasons for acceleration.
It is respectfully requested that the Commission issue its notice
with respect to the transaction proposed herein no later than March 1, 1995 and
that an Order authorizing the solicitation of proxies be issued simultaneously.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division of
Investment Management may assist in the preparation of the Commission's
decision, and (iv) whether there should be a 30-day waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
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The applicants hereby specify that with reference to the procedures
considered necessary or appropriate in the proceedings (i) there should not be
a recommended decision by a hearing officer; (ii) there should not be a
recommended decision by any other responsible officer of the Commission; (iii)
the Division of Investment Management may assist in the preparation of the
Commission's decision; and (iv) there should not be a 30-day waiting period
between the issuance of the Commission's order and the date on which it is to
become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
A-1 Certificate of Amendment to the Certificate
of Incorporation
A-2 Draft Rights Agreement with Certificate of
Designation (Exhibit A) and Form of
Rights Certificate (Exhibit B)
A-3 Preliminary Proxy Statement (to be filed
by amendment)
F Opinion of Counsel (to be filed by amendment)
G Financial Data Schedules
H Proposed Notice
(b) Financial Statements
The Columbia Gas System, Inc. and Subsidiaries
1(a) Consolidated Balance Sheet as
of November 30, 1994 Actual
and Pro Forma
1(b) Consolidated Statement of
Capitalization as of November
30, 1994 Actual and Pro Forma
1(c) Statement of Consolidated
Income Twelve Months Ended
November 30, 1994 Actual and
Pro Forma
1(d) Consolidated Statements of
Common Stock Equity Twelve
Months Ended November 30,
1994 Actual and Pro Forma
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1(e) Pro Forma Entries
The Columbia Gas System, Inc.
2(a) Balance Sheet as of November 30, 1994
Actual and Pro Forma
2(b) Statement of Capitalization as
of November 30, 1994 Actual
and Pro Forma
2(c) Statement of Income Twelve
Months Ended November 30,
1994 Actual and Pro Forma
2(d) Statements of Common Stock
Equity Twelve Months Ended
November 30, 1994 Actual and
Pro Forma
2(e) Pro Forma Entries
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(C) of the
National Environmental Policy Act (42 U.S.C. 4232(2)(C)). If the response to
this term is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons for
that response.
The proposed transaction subject to the jurisdiction of this
Commission involves no major Federal action significantly affecting the human
environment.
(b) State whether any other federal agency has prepared or is
preparing an environmental impact statement ("EIS") with respect to the
proposed transaction. If any other federal agency has prepared or is preparing
an EIS, state which agency or agencies and indicate the status of that EIS
preparation.
Not applicable.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned has duly caused this statement to be signed on its
behalf by the undersigned thereunto duly authorized.
THE COLUMBIA GAS SYSTEM, INC.
Dated: February 1, 1995 By: /s/ JOYCE KORIA HAYES
---------------------------------
Joyce Koria Hayes
Attorney-in-fact
and Assistant Secretary
21
<PAGE> 22
UNAUDITED
(b)(1)(a)
(1 of 2)
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Property, Plant and Equipment
Gas utility and other plant, at original cost .... 6,590,415 - 6,590,415
Accumulated depreciation and depletion ........... (3,164,222) - (3,164,222)
----------- ----------- -----------
Net Gas Utility and Other Plant .................. 3,426,193 - 3,426,193
----------- ----------- -----------
Oil and gas producing properties, full cost method 1,245,723 - 1,245,723
Accumulated depletion ............................ (637,676) - (637,676)
----------- ----------- -----------
Net Oil and Gas Producing Properties ............. 608,047 - 608,047
----------- ----------- -----------
Net Property, Plant, and Equipment ................. 4,034,240 - 4,034,240
----------- ----------- -----------
Investments and Other Assets
Accounts receivable - noncurrent ................. 206,057 - 206,057
Unconsolidated affiliates ........................ 73,191 - 73,191
Investment in Columbia LNG Corporation ........... 13,457 - 13,457
Other ............................................ 14,529 - 14,529
----------- ----------- -----------
Total Investments and Other Assets ................. 307,234 - 307,234
----------- ----------- -----------
Current Assets
Cash and temporary cash investments .............. 1,474,541 4,550,700 6,025,241
Accounts receivable, net ......................... 454,024 - 454,024
Gas inventories .................................. 268,353 - 268,353
Other inventories at average cost ................ 40,664 - 40,664
Prepayments ...................................... 80,543 - 80,543
Other ............................................ 28,584 - 28,584
----------- ----------- -----------
Total Current Assets ............................... 2,346,709 4,550,700 6,897,409
----------- ----------- -----------
Deferred Charges ................................... 281,488 - 281,488
----------- ----------- -----------
Total Assets ....................................... 6,969,671 4,550,700 11,520,371
=========== =========== ===========
</TABLE>
<PAGE> 23
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
(2 of 2)
CONSOLIDATED BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
CAPITALIZATION AND LIABILITIES
<S> <C> <C> <C>
Capitalization
Stockholder's equity ............................. 1,444,820 4,550,700 5,995,520
Long-term debt ................................... 4,268 - 4,268
----------- ----------- -----------
Total Capitalization ............................... 1,449,088 4,550,700 5,999,788
----------- ----------- -----------
Current Liabilities
Debt obligations ................................. 1,209 - 1,209
Debtor in possession financing ................... - - -
Accounts and drafts payable ...................... 117,142 - 117,142
Accrued taxes .................................... 92,915 - 92,915
Accrued interest ................................. (3,393) - (3,393)
Estimated rate refunds ........................... 129,325 - 129,325
Estimated supplier obligations ................... 74,372 - 74,372
Deferred income taxes - current .................. - - -
Other ............................................ 338,883 - 338,883
----------- ----------- -----------
Total Current Liabilities .......................... 750,453 - 750,453
----------- ----------- -----------
Liabilities Subject to Chapter 11 Proceedings ..... 3,954,182 - 3,954,182
----------- ----------- -----------
Other Liabilities and Deferred Credits
Deferred income taxes, noncurrent ................ 353,071 - 353,071
Deferred investment tax credits .................. 38,685 - 38,685
Postretirement benefits other than pensions ...... 236,000 - 236,000
Other ............................................ 188,192 - 188,192
----------- ----------- -----------
Total Other Liabilities and Deferred Credits ....... 815,948 - 815,948
----------- ----------- -----------
Total Capitalization and Liabilities ............... 6,969,671 4,550,700 11,520,371
=========== =========== ===========
</TABLE>
<PAGE> 24
UNAUDITED
(b)(1)(b)
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITALIZATION
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
Stockholder's Equity
<S> <C> <C> <C>
Common Stock, The Columbia Gas System, Inc.,
$10 par value, authorized 100,000,000 shares,
outstanding 50,563,335 shares ................... 505,633 - 505,633
Preferred Stock, $10 par value, authorized
10,000,000 shares, outstanding 364,056 shares ... - 3,641 3,641
Additional paid in capital ....................... 601,828 4,547,059 5,148,887
Retained earnings ................................ 407,325 - 407,325
Unearned employee compensation ................... (69,966) - (69,966)
----------- ----------- -----------
Total Stockholder's Equity ......................... 1,444,820 4,550,700 5,995,520
----------- ----------- -----------
Long-Term Debt
Miscellaneous debt of subsidiaries ............... 1,765 - 1,765
Capitalized lease obligations .................... 2,503 - 2,503
----------- ----------- -----------
Total Long-Term Debt ............................... 4,268 - 4,268
----------- ----------- -----------
Total Capitalization ............................... 1,449,088 4,550,700 5,999,788
=========== =========== ===========
</TABLE>
<PAGE> 25
UNAUDITED
(b)(1)(c)
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1994
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues
Gas sales......................................... 1,938,075 - 1,938,075
Transportation ................................... 760,384 - 760,384
Other ............................................ 221,808 - 221,808
----------- ----------- -----------
Total Operating Revenues ........................... 2,920,267 - 2,920,267
----------- ----------- -----------
Operating Expenses
Products purchased .............................. 1,009,748 - 1,009,748
Operation ........................................ 885,594 - 885,594
Maintenance ...................................... 166,389 - 166,389
Depreciation and depletion ....................... 261,757 - 261,757
Other taxes ...................................... 202,998 - 202,998
----------- ----------- -----------
Total Operating Expenses ........................... 2,526,486 - 2,526,486
----------- ----------- -----------
Operating Income ................................... 393,781 - 393,781
----------- ----------- -----------
Other Income (Deductions)
Interest income and other, net ................... 20,506 - 20,506
Interest expense and related charges.............. (15,379) - (15,379)
Reorganization items, net ........................ (13,653) - (13,653)
----------- ----------- -----------
Total Other Income (Deductions) .................... (8,526) - (8,526)
----------- ----------- -----------
Income before Income Taxes and Cumulative Effect
of Accounting Change ............................. 385,255 - 385,255
Income taxes ....................................... 155,162 - 155,162
----------- ----------- -----------
Income before Cumulative Effect of Accounting
Change ........................................... 230,093 - 230,093
Cumulative Effect of Change in Accounting for
Postemployment Benefits .......................... (5,566) - (5,566)
----------- ----------- -----------
Net Income ......................................... 224,527 - 224,527
=========== =========== ===========
</TABLE>
<PAGE> 26
UNAUDITED
(b)(1)(d)
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1994
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at December 1, 1993 ........................ 505,592 - 505,592
Common stock issued -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 41 - 41
Public offering .................................. - - -
----------- ----------- -----------
Balance at November 30, 1994 ....................... 505,633 - 505,633
----------- ----------- -----------
PREFERRED STOCK
Balance at December 1, 1993 ........................ - - -
Preferred stock issued ............................. - 3,641 3,641
----------- ----------- -----------
Balance at November 30, 1994 ....................... - 3,641 3,641
----------- ----------- -----------
ADDITIONAL PAID IN CAPITAL
Balance at December 1, 1993 ........................ 601,759 - 601,759
Common stock issued -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 69 - 69
Public offering .................................. - - -
Preferred stock issued ............................. - 4,547,059 4,547,059
----------- ----------- -----------
Balance at November 30, 1994 ....................... 601,828 4,547,059 5,148,887
----------- ----------- -----------
RETAINED EARNINGS
Balance at December 1, 1993 ........................ 182,798 - 182,798
Net income ......................................... 224,527 - 224,527
Common stock dividends ............................. - - -
Other .............................................. - - -
----------- ----------- -----------
Balance at November 30, 1994 ....................... 407,325 - 407,325
----------- ----------- -----------
UNEARNED EMPLOYEE COMPENSATION
Balance at December 1, 1993 ........................ (69,966) - (69,966)
Adjustment ......................................... - - -
----------- ----------- -----------
Balance at November 30, 1994 ....................... (69,966) - (69,966)
----------- ----------- -----------
TOTAL COMMON STOCK EQUITY .......................... 1,444,820 4,550,700 5,995,520
=========== =========== ===========
</TABLE>
<PAGE> 27
UNAUDITED
(b)(1)(e)
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
PRO FORMA ENTRIES
($000)
<TABLE>
<S> <C> <C>
1. Cash 4,550,700
Preferred Stock, $10 par value 3,641
Additional Paid-in Capital in Excess of Par:
Preferred Stock 4,547,059
To record the issuance of 364,056 shares of $10 par
value preferred stock at a purchase price of $12,500
per share upon the exercise of 90% of the rights.
</TABLE>
<PAGE> 28
UNAUDITED
(b)(2)(a)
THE COLUMBIA GAS SYSTEM, INC. (1 of 2)
BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
Investments and Other Assets
Accounts receivable - noncurrent ................. 25,591 - 25,591
Unconsolidated affiliates ........................ - - -
Investment in Columbia LNG Corporation ........... 15,536 - 15,536
---------- ---------- ----------
Total Investments and Other Assets ................. 41,127 - 41,127
---------- ---------- ----------
Investments in Subsidiaries
Capital stock .................................... 1,160,907 - 1,160,907
Equity in undistributed retained earnings ........ (444,147) - (444,147)
Installment promissory notes receivable .......... 792,294 - 792,294
Other investments ................................ 437,833 - 437,833
Other receivables - TCO .......................... 1,592,777 - 1,592,777
---------- ---------- ----------
Total Investments in Subsidiaries .................. 3,539,664 - 3,539,664
---------- ---------- ----------
Current Assets
Cash and temporary cash investments .............. 237,181 4,550,700 4,787,881
Accounts receivable, net
Customers ...................................... - - -
Affiliated ..................................... 229,527 - 229,527
Other .......................................... 10,514 - 10,514
Prepayments ...................................... 28 - 28
Other ............................................ 906 - 906
---------- ---------- ----------
Total Current Assets ............................... 478,156 4,550,700 5,028,856
---------- ---------- ----------
Deferred Charges ................................... 2,823 - 2,823
---------- ---------- ----------
Total Assets ....................................... 4,061,770 4,550,700 8,612,470
========== ========== ==========
</TABLE>
<PAGE> 29
THE COLUMBIA GAS SYSTEM, INC. (2 of 2)
BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
---------- ---------- ----------
CAPITALIZATION AND LIABILITIES
<S> <C> <C> <C>
Capitalization
Stockholder's equity ............................. 1,444,820 4,550,700 5,995,520
Long-term debt ................................... - - -
---------- ---------- ----------
Total Capitalization ............................... 1,444,820 4,550,700 5,995,520
---------- ---------- ----------
Current Liabilities
Debt obligations ................................. - - -
Debtor in possession financing ................... - - -
Accounts and drafts payable ...................... 1,369 - 1,369
Affiliated accounts payable ...................... 2,489 - 2,489
Accrued taxes .................................... (556) - (556)
Accrued interest ................................. 1,254 - 1,254
Deferred income taxes - current .................. - - -
Other ............................................ 8,410 - 8,410
---------- ---------- ----------
Total Current Liabilities .......................... 12,966 - 12,966
---------- ---------- ----------
Liabilities Subject to Chapter 11 Proceedings ...... 2,382,243 - 2,382,243
---------- ---------- ----------
Other Liabilities and Deferred Credits
Deferred income taxes, noncurrent ................ 215,649 - 215,649
Postretirement benefits other than pensions ...... 6,043 - 6,043
Other ............................................ 49 - 49
---------- ---------- ----------
Total Other Liabilities and Deferred Credits ....... 221,741 - 221,741
---------- ---------- ----------
Total Capitalization and Liabilities ............... 4,061,770 4,550,700 8,612,470
========== ========== ==========
</TABLE>
<PAGE> 30
UNAUDITED
(b)(2)(b)
THE COLUMBIA GAS SYSTEM, INC.
STATEMENT OF CAPITALIZATION
ACTUAL and PRO FORMA
As of November 30, 1994
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
---------- ---------- ----------
Stockholder's Equity
<S> <C> <C> <C>
Common Stock, $10 par value, authorized
100,000,000 shares, outstanding 50,563,335
shares .......................................... 505,633 - 505,633
Preferred Stock, $10 par value, authorized
10,000,000 shares, outstanding 364,056 shares..... - 3,641 3,641
Additional paid in capital ....................... 601,828 4,547,059 5,148,887
Retained earnings ................................ 407,325 - 407,325
Unearned employee compensation ................... (69,966) - (69,966)
---------- ---------- ----------
Total Stockholder's Equity ......................... 1,444,820 4,550,700 5,995,520
---------- ---------- ----------
Long-Term Debt
Debentures, net of unamortized discount less
premium ......................................... - - -
---------- ---------- ----------
Total Long-Term Debt ............................... - - -
---------- ---------- ----------
Total Capitalization ............................... 1,444,820 4,550,700 5,995,520
========== ========== ==========
</TABLE>
<PAGE> 31
UNAUDITED
(b)(2)(c)
THE COLUMBIA GAS SYSTEM, INC.
STATEMENT OF INCOME
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1994
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues
Gas Sales ........................................ - - -
Transportation ................................... - - -
Other ............................................ - - -
---------- ---------- ----------
Total Operating Revenues ........................... - - -
---------- ---------- ----------
Operating Expenses
Products purchased ............................... - - -
Operation ........................................ 7,722 - 7,722
Maintenance ...................................... - - -
Depreciation and depletion ....................... - - -
Other taxes ...................................... 162 - 162
---------- ---------- ----------
Total Operating Expenses ........................... 7,884 - 7,884
---------- ---------- ----------
Operating Income (Loss) ............................ (7,884) - (7,884)
---------- ---------- ----------
Other Income (Deductions)
Interest income and other, net ................... 303,806 - 303,806
Interest expense and related charges ............. (502) - (502)
Reorganization items, net ........................ 293 - 293
---------- ---------- ----------
Total Other Income (Deductions) .................... 303,597 - 303,597
---------- ---------- ----------
Income before Income Taxes and Cumulative Effect
of Accounting Change ............................. 295,713 - 295,713
Income taxes ....................................... 71,142 - 71,142
---------- ---------- ----------
Income before Cumulative Effect of Accounting
Change ........................................... 224,571 - 224,571
Cumulative Effect of Accounting for Postemployment
Benefits ......................................... (44) - (44)
---------- ---------- ----------
Net Income ......................................... 224,527 - 224,527
========== ========== ==========
</TABLE>
<PAGE> 32
UNAUDITED
(b)(2)(d)
THE COLUMBIA GAS SYSTEM, INC.
STATEMENTS OF COMMON STOCK EQUITY
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1994
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
---------- ---------- ----------
COMMON STOCK
<S> <C> <C> <C>
Balance at December 1, 1993 ........................ 505,592 - 505,592
Common stock issued -
Subsidiaries ..................................... - - -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 41 - 41
Public offering .................................. - - -
---------- ---------- ----------
Balance at November 30, 1994 ....................... 505,633 - 505,633
---------- ---------- ----------
PREFERRED STOCK
Balance at December 1, 1993 ........................ - - -
Preferred stock issued ............................. - 3,641 3,641
---------- ---------- ----------
Balance at November 30, 1994 ....................... - 3,641 3,641
---------- ---------- ----------
ADDITIONAL PAID IN CAPITAL
Balance at December 1, 1993 ........................ 601,759 - 601,759
Common stock issued -
Subsidiaries ..................................... - - -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 69 - 69
Public offering .................................. - - -
Preferred stock issued ............................. - 4,547,059 4,547,059
---------- ---------- ----------
Balance at November 30, 1994 ....................... 601,828 4,547,059 5,148,887
---------- ---------- ----------
RETAINED EARNINGS
Balance at December 1, 1993 ........................ 182,798 - 182,798
Net income ......................................... 224,527 - 224,527
Common stock dividends -
CG ............................................... - - -
Subsidiaries (to CG) ............................. - - -
Other .............................................. - - -
---------- ---------- ----------
Balance at November 30, 1994 ....................... 407,325 - 407,325
---------- ---------- ----------
UNEARNED EMPLOYEE COMPENSATION
Balance at December 1, 1993 ........................ (69,966) - (69,966)
Adjustment ......................................... - - -
---------- ---------- ----------
Balance at November 30, 1994 ....................... (69,966) - (69,966)
---------- ---------- ----------
TOTAL COMMON STOCK EQUITY .......................... 1,444,820 4,550,700 5,995,520
========== ========== ==========
</TABLE>
<PAGE> 33
UNAUDITED
(b)(2)(e)
THE COLUMBIA GAS SYSTEM, INC.
PRO FORMA ENTRIES
($000)
<TABLE>
<S> <C> <C>
1. Cash 4,550,700
Preferred Stock, $10 par value 3,641
Additional Paid-in Capital in Excess of Par:
Preferred Stock 4,547,059
To record the issuance of 364,056 shares of $10 par
value preferred stock at a purchase price of $12,500
per share upon the exercise of 90% of the rights.
</TABLE>
<PAGE> 34
Exhibit Index
(a) Exhibits
A-1 Certificate of Amendment to the Certificate of Incorporation
A-2 Draft Rights Agreement with Certificate of Designation (Exhibit
A) and Form of Rights Certificate (Exhibit B)
A-3 Preliminary Proxy Statement (to be filed by amendment)
F Opinion of Counsel (to be filed by amendment)
G Financial Data Schedules
H Proposed Notice
22
<PAGE> 1
Exhibit A-1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE COLUMBIA GAS SYSTEM, INC.
The Columbia Gas System, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at meeting of the Board of Directors of The Columbia
Gas System, Inc., held January 18, 1995, resolutions were duly adopted setting
forth proposed amendments to the Certificate of Incorporation of said
corporation, declaring said amendments to be advisable and directing that said
amendments be considered at the next annual meeting of stockholders. The
resolution setting forth the proposed amendment is as follows:
RESOLVED that the Board of Directors deems it advisable
and recommends to shareholders an amendment to ARTICLE FOURTH and
Paragraphs 2 and 3 of ARTICLE EIGHTH of the Corporation's
Certificate of Incorporation to set the par value of the
Corporation's Preferred Stock to be Ten Dollars ($10.00) and to
delete certain provisions therefrom, in order to facilitate the
issuance of the Corporation's Preferred Stock, with the relative
rights, preferences and limitations thereof, to be fixed in the
Certificate of Designation--and that, therefore, the Restated
Certificate of Incorporation shall be amended to delete ARTICLE
FOURTH and Paragraphs 2 and 3 of ARTICLE EIGHTH and substitute
the following therefor:
FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is One
hundred and Ten Million (110,000,000), of which Ten Million
(10,000,000) shares of the par value of Ten Dollars ($10.00) each
are to be of a class designated Preferred Stock
<PAGE> 2
and One Hundred Million (100,000,000) shares of the par value of
Ten Dollars ($10.00) each are to be of a class designated Common
Stock.
The designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, of
the classes of stock of the Corporation which are fixed by the
Certificate of Incorporation, and the express grant of authority
to the Board of Directors of the Corporation to fix by resolution
or resolutions the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions
thereof, of the shares of Preferred Stock, which are not fixed by
the Certificate of Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in
any amount, not exceeding in the aggregate the total number of
shares of Preferred Stock hereinabove authorized, as Preferred
Stock of one or more series, as hereinafter provided. All shares
of any one series of Preferred Stock shall be alike in every
particular, each series thereof shall be distinctively designated
by letter or descriptive words, and all series of Preferred Stock
shall rank equally and be identical in all respects except as
permitted by the provisions of Section 2 of this Article Fourth.
2. Authority is hereby expressly granted to and vested in
the Board of Directors from time to time to issue the Preferred
Stock as Preferred Stock of any series and in connection with the
creation of each such series to fix, by the resolution or
resolutions providing for the issue of shares thereof, the voting
powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications,
limitations or restrictions thereof, if any, of such series, to
the full extent now or hereafter permitted by the laws of the
State of Delaware. Pursuant to the foregoing general authority
vested in the Board of Directors, but not in limitation of the
powers conferred on the Board of Directors thereby and by the
laws of the State of Delaware, the Board of Directors is
expressly authorized to determine with respect to each series of
Preferred Stock:
(a) the designation of such series and number of shares
constituting such series;
(b) the dividend rate or amount of such series, the
payment dates for dividends on shares of such
series, the status of such dividends as cumulative
or non-cumulative, the date from which dividends on
shares of such series, if cumulative, shall be
cumulative, and the
-2-
<PAGE> 3
status of such as participating or
non-participating after the payment of dividends as
to which such shares are entitled to any
preference;
(c) the price or prices (which amount may vary under
different conditions or at different dates) at
which, and the times, terms and conditions on
which, the shares of such series may be redeemed at
the option of the Corporation;
(d) whether or not the shares of such series shall be
made optionally or mandatorily convertible into, or
exchangeable for, shares of any other class or
classes or of any other series of the same or any
other class or classes of stock of the Corporation
or other securities and, if made so convertible or
exchangeable, the conversion price or prices, or
the rates of exchange, and the adjustments thereof,
if any, at which such conversion or exchange may be
made and any other terms and conditions of such
conversion or exchange;
(e) whether or not the shares of such series shall be
entitled to the benefit of a retirement or sinking
fund to be applied to the purchase or redemption of
shares of such series, and if so entitled, the
amount of such fund and the manner of its
application, including the price or prices at which
shares of such series may be redeemed or purchased
through the application of such fund;
(f) whether or not the issue of any additional shares
of such series or any future series in addition to
such series or of any shares of any other class of
stock of the Corporation shall be subject to
restrictions and, if so, the nature thereof;
(g) the rights and preferences, if any, of the holders
of such series of Preferred Stock upon the
voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, and the status of
the shares of such series as participating or
non-participating after the satisfaction of any
such rights and preferences;
(h) the full or limited voting rights, if any, to be
provided for shares of such series, in addition to
the voting rights provided by law; and
-3-
<PAGE> 4
(i) any other relative powers, preferences and
participating, optional or other special rights and
the qualifications, limitations or restrictions
thereof, of shares of such series;
in each case, so far as not inconsistent with the provisions of
this Certificate of Incorporation or the Delaware General
Corporation Law then in effect.
3. Out of any net profits or net assets of the
Corporation legally available for dividends remaining after full
dividends upon the outstanding Preferred Stock of all series, to
the extent required in the resolutions adopted with respect to
such series under this Article Fourth, shall have been paid or
declared and set apart for payment then and not otherwise, the
holders of the Common Stock shall be entitled to receive such
dividends as may from time to time be declared by the Board of
Directors.
4. Except as otherwise required by the statutes of the
State of Delaware and as otherwise provided in any resolution
adopted pursuant to this Article Fourth, and subject to the
provisions of the ByLaws of the Corporation, as from time to time
amended, with respect to the closing of the transfer books and
the fixing of a record date for the determination of stockholders
entitled to vote, the holders of the Common Stock shall
exclusively possess voting power for the election of directors
and for all other purposes.
5. At all elections of directors by stockholders of the
Corporation, each holder of Common Stock shall be entitled to as
many votes as shall equal the number of his shares of Common
Stock, multiplied by the number of directors for whom he as such
holder shall then be entitled to vote, and he may cast all of
such votes for one of such directors or may distribute them among
any two or more of them as he may see fit.
[ARTICLE EIGHTH]
2. Notwithstanding the foregoing and except as otherwise
provided by law, whenever the holders of any series of the
Preferred Stock shall have the right (to the exclusion of holders
of Common Stock) to elect directors of the Corporation pursuant
to the provisions of Article Fourth and any resolution adopted
pursuant thereto, the election of such directors of the
Corporation shall be governed by the terms and provisions of said
resolutions and such directors so elected shall not be divided
into classes pursuant to this Section 2 of Article Eighth and
shall be elected to hold
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<PAGE> 5
office for a term expiring at the annual meeting of stockholders
held in the first year following their election or, if such right
of the holders of the Preferred Stock is terminated, for a term
expiring in accordance with the provisions of such resolutions.
3. Newly-created directorships resulting from any
increase in the authorized number of directors or any vacancies
in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the directors then in
office, even though less than a quorum of the Board of Directors,
acting at a regular or special meeting. If any applicable
provision of the Delaware General Corporation Law expressly
confers power on stockholders to fill such a directorship at a
special meeting of stockholders, such a directorship may be
filled at such a meeting only by the affirmative vote of at least
80 percent of the combined voting powers of the outstanding
shares of stock of the Corporation entitled to vote generally;
provided, however, that when (a) pursuant to the provisions of
Article Fourth or any resolutions adopted pursuant thereto, the
holders of any series of Preferred Stock have the right (to the
exclusion of holder of the Common Stock), and have exercised such
right, to elect directors and (b) Delaware General Corporation
Law expressly confers on stockholders voting rights as aforesaid,
if the directorship to be filled had been occupied by a director
elected by the holders of Common Stock, then such directorship
shall be filled by an 80 percent vote as aforesaid, but if such
directorship to be filled had been elected by holders of
Preferred Stock, then such directorship shall be filled in
accordance with the applicable resolutions adopted under Article
Fourth. Any director elected in accordance with the two
preceding sentences shall hold office for the remainder of the
full term of the class of directors in which the new directorship
was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. Unless such
director was elected by holders of Preferred Stock (acting to the
exclusion of the holders of Common Stock), in which case such
director's term shall expire in accordance with the applicable
resolutions adopted pursuant to Article Fourth. No decrease in
the number of authorized directors constituting the entire Board
of Directors shall shorten the term of any incumbent director.
SECOND: That thereafter, pursuant to duly adopted resolution of
its Board of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on April 28, 1995, upon notice given in
accordance with Section 222 of the General Corporation Law of the State of
Delaware, at which meeting the
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<PAGE> 6
necessary number of shares as required by statute were voted in favor of the
amendments.
THIRD: That said amendments were duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, The Columbia Gas System, Inc. has caused this
certificate to be signed by John H. Croom, its Chairman of the Board and
President and attested by Daniel L. Bell, Jr., its Secretary, as of the ___ day
of ____________, 1995.
THE COLUMBIA GAS SYSTEM, INC.
By
--------------------------------
John H. Croom
Chairman of the Board
and President
ATTEST:
By
----------------------------
Daniel L. Bell, Jr.
Secretary
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<PAGE> 1
Exhibit A-2
RIGHTS AGREEMENT dated as of
[ ], between THE COLUMBIA GAS
SYSTEM, INC., a Delaware corporation (the
"Company"), and [ ], a [ ]
corporation, as Rights Agent (the "Rights
Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one Right (as hereinafter defined) for each share of
Common Stock, par value $[ ] per share, of the Company (the "Common Stock")
outstanding at the Close of Business (as hereinafter defined) on [
] (the "Record Date"), and has authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of this Rights
Agreement) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date or the Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to shares
of Common Stock that shall become outstanding after the Distribution Date and
prior to the earlier of the Redemption Date or the Expiration Date in
accordance with the provisions of Section 23. Each Right shall initially
represent the right to purchase one one-thousandth (1/1,000th) of a share of
Series A Participating Preferred Shares, par value $10.00 per share, of the
Company (the "Preferred Shares"), having the powers, rights and preferences set
forth in the Certificate of Designation attached as Exhibit A.
Accordingly, 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 Rights
Agreement, the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone
or together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 10.0% or more of the Common Shares then outstanding, but
shall not include (a) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any of its Subsidiaries, or any Person
holding Common Shares for or pursuant to the terms of any such employee benefit
plan or (b) any such Person who has become and is such a Beneficial Owner
solely because (i) of a change in the aggregate number of Common Shares
outstanding since the last date on which such Person acquired Beneficial
Ownership of any Common
<PAGE> 2
Shares, (ii) it acquired such Beneficial Ownership in the good faith belief
that such acquisition would not (x) cause such Beneficial Ownership to equal or
exceed 10.0% of the Common Shares then outstanding and such Person relied in
good faith in computing the percentage of its Beneficial Ownership on
publicly-filed reports or documents of the Company which are inaccurate or
out-of-date or (y) otherwise cause a Distribution Date or the adjustment
provided for in Section 11(a) to occur or (iii) of shares acquired directly
from the Company in connection with the Company's acquisition of a business or
pursuant to an agreement with the Company stating such Person is not intended
to become an Acquiring Person as a result of such acquisition. Notwithstanding
clause (b)(ii) of the prior sentence, if any Person that is not an Acquiring
Person due to such clause (b)(ii) does not reduce its percentage of Beneficial
Ownership of Common Shares to less than 10.0% by the Close of Business on the
fifth Business Day after notice from the Company (the date of notice being the
first day) that such Person's Beneficial Ownership of Common Shares so equals
or exceeds 10.0%, such Person shall, at the end of such five Business Day
period, become an Acquiring Person (and such clause (b)(ii) shall no longer
apply to such Person). For purposes of this definition, the determination
whether any Person acted in "good faith" shall be conclusively determined by
the Board of Directors of the Company, acting by a vote of those directors of
the Company whose approval would be required to redeem the Rights under Section
24.
"Affiliate" and "Associate", when used with reference to any
Person, shall have the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on
the date of this Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own", and shall be deemed to have "Beneficial
Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule
13d-3 of the General Rules and Regulations under the Exchange Act, as
in effect on the date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (written or oral), or upon
the exercise of conversion rights, exchange rights, rights (other than
the Rights), warrants or options, or
2
<PAGE> 3
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, or to have Beneficial
Ownership of, securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange thereunder, or (B) the right to vote pursuant
to any agreement, arrangement or understanding (written or
oral);provided, howeve, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if (1) the
agreement, arrangement or understanding (written or oral) to vote such
security arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act and (2) the beneficial ownership of
such security is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (written or oral) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in clause
(ii)(B) of this definition) or disposing of any securities of the
Company.
Notwithstanding the foregoing, nothing contained in this definition shall cause
a Person ordinarily engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own", any securities acquired in
a bona fide firm commitment underwriting pursuant to an underwriting agreement
with the Company.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the
Borough of Manhattan, The City of New York, are authorized or obligated by law
or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation of Preferred Shares setting forth the powers, preferences, rights,
qualifications, limitations and restrictions of such series of Preferred Stock
of the Company, a copy of which is attached as Exhibit A.
3
<PAGE> 4
"Close of Business" on any given date shall mean 5:00 p.m.,
New York City time, on such date; provided, however, that, if such date is not
a Business Day, "Close of Business" shall mean 5:00 p.m., New York City time,
on the next succeeding Business Day.
"Common Shares", when used with reference to the Company,
shall mean the shares of Common Stock of the Company or any other shares of
capital stock of the Company into which the Common Stock shall be reclassified
or changed.
"Common Stock" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of
this Rights Agreement.
The term "control" with respect to any Person shall mean the
power to direct the management and policies of such Person, directly or
indirectly, by or through stock ownership, agency or otherwise, or pursuant to
or in connection with an agreement, arrangement or understanding (written or
oral) with one or more other Persons by or through stock ownership, agency or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Distribution Date" shall have the meaning set forth in
Section 3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as in effect on the date in question, unless otherwise specifically provided.
"Exchange Consideration" shall have the meaning set forth in
Section 11(b)(I).
"Expiration Date" shall have the meaning set forth in Section
7(a).
"Market Value", when used with reference to Common Shares on
any date, shall be deemed to be the average of the daily closing prices, per
share, of the Common Shares for the period which is the shorter of (1) 30
consecutive Trading Days immediately prior to the date in question or (2) the
number of consecutive Trading Days beginning on the Trading Day immediately
after the date of the first public announcement of the event requiring a
determination of the Market Value and ending on the Trading Day immediately
prior to the record date of such event; provided, however, that, in the event
that the Market Value of the Common Shares is
4
<PAGE> 5
to be determined in whole or in part during a period following the announcement
by the Company of any action of the type described in Section 12(a) that would
require an adjustment thereunder, then, and in each such case, the Market Value
of the Common Shares shall be appropriately adjusted to reflect the effect of
such action on the market price of the Common Shares. The closing price for
each Trading Day shall be the closing price quoted on the principal United
States securities exchange registered under the Exchange Act (or any recognized
foreign stock exchange) on which such securities are listed, or, if such
securities are not listed on any such exchange, the closing price quoted on The
Nasdaq Stock Market or, if such securities are not so quoted, the average of
the closing bid and asked quotations with respect to a share of such securities
on any National Association of Securities Dealers, Inc. quotations system, or
if no such quotations are available, the average of the closing bid and asked
prices as furnished by a professional marketmaker making a market in such
securities selected by the Board of Directors of the Company. If on any such
Trading Day no marketmaker is making a market in such securities, the closing
price of such securities on such Trading Day shall be deemed to be the fair
value of such securities 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, the holders of
Rights and all other Persons); provided, however, that for the purpose of
determining the closing price of the Preferred Shares for any Trading Day on
which there is no such market maker for the Preferred Shares the closing price
on such Trading Day shall be deemed to be the Formula Number (as defined in the
Certificate of Designation) times the closing price of the Common Shares of the
Company on such Trading Day.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Preferred Shares" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement. Any reference in this Rights
Agreement to Preferred Shares shall be deemed to include any authorized
fraction of a Preferred Share, unless the context otherwise requires.
"Purchase Price" with respect to each Right shall mean $100,
as such amount may from time to time be adjusted as provided herein, and shall
be payable in lawful money of the United States of America. All references
herein to the
5
<PAGE> 6
Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section
24(a).
"Redemption Price" with respect to each Right shall mean
$0.01, as such amount may from time to time be adjusted in accordance with
Section 12. All references herein to the Redemption Price shall mean the
Redemption Price as in effect at the time in question.
"Right Certificate" shall mean a certificate evidencing a
Right in substantially the form attached as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares
(or other securities) as provided in this Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in
effect on the date in question, unless otherwise specifically provided.
"Subsidiary" shall mean a Person, at least a majority of the
total outstanding voting power (being the power under ordinary circumstances
(and not merely upon the happening of a contingency) to vote in the election of
directors of such Person (if such Person is a corporation) or to participate in
the management and control of such Person (if such Person is not a
corporation)) of which is owned, directly or indirectly, by another Person or
by one or more other Subsidiaries of such other Person or by such other Person
and one or more other Subsidiaries of such other Person.
"Trading Day" shall mean a day on which the principal national
securities exchange (or principal recognized foreign stock exchange, as the
case may be) on which any securities or Rights, as the case may be, are listed
or admitted to trading is open for the transaction of business or, if the
securities or Rights in question are not listed or admitted to trading on any
national securities exchange (or recognized foreign stock exchange, as the case
may be), a Business Day.
SECTION 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions
6
<PAGE> 7
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint one or more co-Rights Agents as it may deem necessary
or desirable (the term "Rights Agent" being used herein to refer, collectively,
to the Rights Agent together with any such co-Rights Agents). In the event the
Company appoints one or more co-Rights Agents, the respective duties of the
Rights Agent and any co-Rights Agents shall be as the Company shall determine.
SECTION 3. Issue of Rights and Right Certificates. (a) One
Right shall be associated with each Common Share outstanding on the Record
Date, each additional Common Share that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Expiration Date and each additional Common Share with which Rights are
issued after the Distribution Date but prior to the earlier of the Redemption
Date or the Expiration Date as provided in Section 23; provided, however, that,
if the number of outstanding Rights are combined into a smaller number of
outstanding Rights pursuant to Section 12(a), the appropriate fractional Right
determined pursuant to such Section shall thereafter be associated with each
such Common Share.
(b) Until the earlier of (i) such time as the Company learns
that a Person has become an Acquiring Person or (ii) the Close of Business on
such date, if any, as may be designated by the Board of Directors of the
Company following the commencement of, or first public disclosure of an intent
to commence, 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 of its Subsidiaries, or any Person holding Common Shares for or pursuant to
the terms of any such employee benefit plan) for outstanding Common Shares, if
upon consummation of such tender or exchange offer such Person could be the
Beneficial Owner of 10.0% or more the outstanding Common Shares (the Close of
Business on the earlier of such dates being the "Distribution Date"), (x) the
Rights will be evidenced by the certificates for Common Shares registered in
the names of the holders thereof and not by separate Right Certificates and (y)
the Rights, including the right to receive Right Certificates, will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Rights Agent will send, by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate evidencing one whole Right for each Common
Share (or for the number of Common Shares with which one whole Right is then
associated if the number of
7
<PAGE> 8
Rights per Common Share held by such record holder has been adjusted in
accordance with the proviso in Section 3(a)). If the number of Rights
associated with each Common Share has been adjusted in accordance with the
proviso in Section 3(a), at the time of distribution of the Right Certificates
the Company may make any necessary and appropriate rounding adjustments so that
Right Certificates representing only whole numbers of Rights are distributed
and cash is paid in lieu of any fractional Right in accordance with Section
15(a). As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(c) With respect to any certificate for Common Shares, until
the earliest of the Distribution Date, the Redemption Date or the Expiration
Date, the Rights associated with the Common Shares represented by any such
certificate shall be evidenced by such certificate alone, the registered
holders of the Common Shares shall also be the registered holders of the
associated Rights and the surrender for transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(d) Certificates issued for Common Shares after the Record
Date (including, without limitation, upon transfer or exchange of outstanding
Common Shares), but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date, shall have printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement dated as of
[ ], as it may be amended from time to time (the "Rights
Agreement"), between The Columbia Gas System, Inc. (the "Company")
and [ ], as Rights Agent (the "Rights Agent"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Rights Agent will mail to the
holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. Rights
beneficially owned by Acquiring Persons or their Affiliates or
Associates (as such terms are defined in the Rights Agreement) and by
any subsequent holder of such Rights are null and void and
nontransferable.
8
<PAGE> 9
Notwithstanding this paragraph (d), the omission of a legend
shall not affect the enforceability of any part of this Rights Agreement or the
rights of any holder of Rights.
SECTION 4. Form of Right Certificates. The Right
Certificates (and the form of election to purchase and form of assignment to be
printed on the reverse side thereof) shall be in substantially the form set
forth as Exhibit B 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 Rights
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 Sections 7, 11 and 23, the
Right Certificates, whenever issued, shall be dated as of the Distribution
Date, and on their face shall entitle the holders thereof to purchase such
number of Preferred Shares as shall be set forth therein for the Purchase Price
set forth therein, subject to adjustment from time to time as herein provided.
SECTION 5. Execution, Countersignature and Registration. (a)
The Right Certificates shall be executed on behalf of the Company by the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Treasurer or a Vice President (whether preceded by any
additional title) of the Company, either manually or by facsimile signature,
and have affixed thereto the Company's seal or a facsimile thereof which shall
be attested by the Secretary, an Assistant Secretary or a Vice President
(whether preceded by any additional title, provided that such Vice President
shall not have also executed the Right Certificates) of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid or obligatory for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such an officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates may nevertheless 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 Right
Certificates had not ceased to be such an officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of execution of such Right Certificate, shall be a proper officer
of the Company to sign such Right
9
<PAGE> 10
Certificate, although at the date of execution of this Rights Agreement any
such person was not such an officer of the Company.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office in [ , ], books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced by each of the Right Certificates,
the certificate number of each of the Right Certificates and the date of each
of the Right Certificates.
SECTION 6. Transfer, Split-Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates;
Uncertificated Rights. (a) Subject to the provisions of Sections 7(e) and 15,
at any time after the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date or the Expiration Date, any
Right Certificate or Right Certificates may be transferred, split-up, combined
or exchanged for another Right Certificate or Right Certificates representing,
in the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. Any registered holder desiring to
transfer, split-up, combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent and shall surrender the Right
Certificate or Right Certificates to be transferred, split- up, combined or
exchanged at the principal office of the Rights Agent; provided, however, that
neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any Right Certificate surrendered
for transfer until the registered holder shall have completed and signed the
certification contained in the form of assignment on the reverse side of such
Right 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 Sections 7(e) and 15, countersign and deliver to
the Person entitled thereto a Right Certificate or Right 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 Right
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 valid Right
10
<PAGE> 11
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
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 Right Certificate if mutilated, the Company will make a new Right
Certificate of like tenor and deliver such new Right Certificate to the Rights
Agent for delivery to the registered owner in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company
and the Rights Agent may amend this Rights Agreement to provide for
uncertificated Rights in addition to or in place of Rights evidenced by Right
Certificates.
SECTION 7. Exercise of Rights; Expiration Date of Rights. (a)
Subject to Section 7(e) and except as otherwise provided herein (including
Section 11), each Right shall entitle the registered holder thereof, upon
exercise thereof as provided herein, to purchase for the Purchase Price, at any
time after the Distribution Date and at or prior to the earlier of (i) the
Close of Business on the day that is 18 months after the confirmation of the
Plan of Reorganization of the Company pursuant to Chapter 11 of the United
States Bankruptcy Code, provided that, if on such date there is pending a
proposal for an acquisition of 10.0% or more of the Common Stock or a merger
or consolidation involving the Company or a sale, lease, exchange or other
transfer or disposition of all or substantially all the assets of the Company,
the Expiration Date shall be extended to the date that is 30 days after the
date that no such proposal is pending (the Close of Business on such date being
the "Expiration Date"), or (ii) the Redemption Date, one one-thousandth
(1/1,000th) of a Preferred Share, subject to adjustment from time to time as
provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date, upon surrender of the
Right Certificate, with the form of election to purchase on
11
<PAGE> 12
the reverse side thereof duly executed, to the Rights Agent at the principal
office of the Rights Agent in New York, New York, together with payment of the
Purchase Price for each one one-thousandth (1/1,000th) of a Preferred Share as
to which the Rights are exercised, at or prior to the earlier of (i) the
Expiration Date or (ii) the Redemption Date.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares to be
purchased together with an amount equal to any applicable transfer tax, in
lawful money of the United States of America, in cash or by certified check or
money order payable to the order of the Company, the Rights Agent shall
thereupon (i) either (A) promptly requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent)
certificates for the number of Preferred Shares 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 Preferred
Shares with a depositary agent under a depositary arrangement, promptly
requisition from the depositary agent depositary receipts representing the
number of one one-thousandths (1/1,000ths) of a Preferred Share to be purchased
(in which case certificates for the Preferred Shares to be 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 all such
requests, (ii) when appropriate, promptly requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 15, (iii) promptly 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 Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise fewer than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 15.
(e) Notwithstanding anything in this Rights Agreement to the
contrary, any Rights that are at any time beneficially owned by an Acquiring
Person or any Affiliate or Associate of an Acquiring Person shall be null and
void
12
<PAGE> 13
and nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of any Right
Certificates 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 Right 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.
(g) The Company may temporarily suspend, for a period of time
not to exceed 90 calendar days after the Distribution Date, the exercisability
of the Rights in order to prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such registration statement
to become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such registration statement. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision
herein to the contrary, the Rights shall not be exercisable in any jurisdiction
if the requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
SECTION 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered or presented for the purpose
of exercise, transfer, split-up, combination or exchange shall, and any Right
Certificate representing Rights that have become null and void and
nontransferable pursuant to Section 7(e) surrendered or presented for any
purpose shall, if surrendered or presented to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered or presented to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in
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lieu thereof except as expressly permitted by this Rights Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any Right Certificate purchased or
acquired by the Company. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares or any
authorized and issued Preferred Shares held in its treasury, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred
Shares issued but not outstanding or authorized but unissued to permit the
exercise or exchange of Rights in accordance with Section 11, the Company
covenants and agrees that it will take all such action as may be necessary to
authorize additional Preferred Shares for issuance upon the exercise or
exchange of Rights pursuant to Section 11; provided, however, that if the
Company is unable to cause the authorization of additional Preferred Shares,
then the Company shall, or in lieu of seeking any such authorization, the
Company may, to the extent necessary and permitted by applicable law and any
agreements or instruments in effect prior to the Distribution Date to which it
is a party, (A) upon surrender of a Right, pay cash equal to the Purchase Price
in lieu of issuing Preferred Shares and requiring payment therefor, (B) upon
due exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, issue equity securities having a
value equal to the value of the Preferred Shares which otherwise would have
been issuable pursuant to Section 11, which value shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors of the Company or (C) upon due exercise of a Right and payment of the
Purchase Price for each Preferred Share as to which such Right is exercised,
distribute a combination of Preferred Shares, cash and/or other equity and/or
debt securities having an aggregate value equal to the value of the Preferred
Shares which otherwise would have been issuable pursuant to Section 11, which
value shall be determined by a nationally recognized investment banking firm
selected by the Board of Directors of the Company. To the extent that any
legal or contractual restrictions (pursuant to agreements or
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<PAGE> 15
instruments in effect prior to the Distribution Date to which it is party)
prevent the Company from paying the full amount payable in accordance with the
foregoing sentence, the Company shall pay to holders of the Rights as to which
such payments are being made all amounts which are not then restricted on a pro
rata basis as such payments become permissible under such legal or contractual
restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Preferred Shares delivered
upon exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) So long as the Preferred Shares issuable upon the
exercise or exchange of Rights are to be listed on any national securities
exchange, the Company covenants and agrees to use its best efforts to cause,
from and after such time as the Rights become exercisable or exchangeable, all
Preferred Shares reserved for such issuance to be listed on such securities
exchange upon official notice of issuance upon such exercise or exchange.
(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 Right
Certificates or of any Preferred Shares or Common Shares or other securities
upon the exercise or exchange of the 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 Right Certificates to a Person other than, or in
respect of the issuance or delivery of certificates for the Preferred Shares or
Common Shares or other securities, as the case may be, in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or exchange or to issue or deliver any certificates
for Preferred Shares or Common Shares or other securities, as the case may be,
upon the exercise or exchange of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right 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 Shares Record Date. Each Person in
whose name any certificate for Preferred Shares or Common Shares or other
securities is issued upon the exercise or exchange of Rights shall for all
purposes be
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<PAGE> 16
deemed to have become the holder of record of the Preferred Shares or Common
Shares or other securities, as the case may be, represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of any Purchase Price
(and any applicable transfer taxes) was made; provided, however, that, if the
date of such surrender and payment is a date upon which the transfer books of
the Company for the Preferred Shares or Common Shares or other securities, as
the case may be, are closed, such Person shall be deemed to have become the
record holder of such Preferred Shares or Common Shares or other securities, as
the case may be, on, and such certificate shall be dated, the next succeeding
Business Day on which the transfer books of the Company for the Preferred
Shares or Common Shares or other securities, as the case may be, are open.
SECTION 11. Adjustments in Rights After There Is an Acquiring
Person; Exchange of Rights for Shares. (a) Upon a Person becoming an
Acquiring Person, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of one one-thousandths (1/1,000ths)
of a Preferred Share as shall equal the result obtained by multiplying the
Purchase Price by a fraction, the numerator of which is the number of one
one-thousandths (1/1,000ths) of a Preferred Share for which a Right is then
exercisable and the denominator of which is 50% of the Market Value of the
Common Shares on the date on which a Person becomes an Acquiring Person. As
soon as practicable after a Person becomes an Acquiring Person (provided the
Company shall not have elected to make the exchange permitted by Section
11(b)(I) for all outstanding Rights), the Company covenants and agrees to use
its best efforts to:
(I) prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred
Shares purchasable upon exercise of the Rights;
(II) cause such registration statement to become effective as
soon as practicable after such filing;
(III) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date; and
(IV) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue
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<PAGE> 17
sky or securities laws of such jurisdictions as may be necessary or
appropriate.
(b)(I) The Board of Directors of the Company may, at its
option, at any time after a Person becomes an Acquiring Person, mandatorily
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that shall have become null and void and
nontransferable pursuant to the provisions of Section 7(e)) for consideration
per Right consisting of one-half of the securities that would be issuable at
such time upon the exercise of one Right in accordance with Section 11(a) or
Section 9(b)(B) or (C) (the consideration issuable per Right pursuant to this
Section 11(b)(I) being the "Exchange Consideration"). The Board of Directors
of the Company may, at its option, issue, in substitution for Preferred Shares,
Common Shares in an amount per Preferred Share equal to the Formula Number (as
defined in the Certificate of Designation) if there are sufficient Common
Shares issued but not outstanding or authorized but unissued. If the Board of
Directors of the Company elects to exchange all the Rights for Exchange
Consideration pursuant to this Section 11(b)(I) prior to the physical
distribution of the Rights Certificates, the Company may distribute the
Exchange Consideration in lieu of distributing Right Certificates, in which
case for purposes of this Rights Agreement holders of Rights shall be deemed to
have simultaneously received and surrendered for exchange Right Certificates on
the date of such distribution. (II) Any action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to Section 11(b)(I)
shall be irrevocable and, immediately upon the taking of such action and
without any further action and without any notice, the right to exercise any
such Right pursuant to Section 11(a) shall terminate and the only right
thereafter of a holder of such Right shall be to receive the Exchange
Consideration in exchange for each such Right held by such holder. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any
such exchange to all holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Rights for the Exchange Consideration will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which shall have become null and void
and nontransferable pursuant to
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<PAGE> 18
the provisions of Section 7(e)) held by each holder of Rights.
SECTION 12. Certain Adjustments. (a) To preserve the actual
or potential economic value of the Rights, if at any time after the date of
this Rights Agreement there shall be any change in the Common Shares or the
Preferred Shares, whether by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of
securities, split- ups, split-offs, spin-offs, liquidations, other similar
changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to
holders of Common Shares or Preferred Shares, as the case may be (other than
distribution of the Rights or regular quarterly cash dividends) or otherwise,
then, in each such event the Board of Directors of the Company shall make such
appropriate adjustments in the number of Preferred Shares (or the number and
kind of other securities) issuable upon exercise of each Right, the Purchase
Price and Redemption Price in effect at such time and the number of Rights
outstanding at such time (including the number of Rights or fractional Rights
associated with each Common Share) such that following such adjustment such
event shall not have had the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such event.
(b) If, as a result of an adjustment made pursuant to Section
12(a), the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Preferred Shares, thereafter the number of
such securities so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12 and the provisions of
Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as
nearly as reasonably may be, on like terms to any such other securities.
(c) All Rights originally issued by the Company subsequent to
any adjustment made to the amount of Preferred Shares or other securities
relating to a Right shall evidence the right to purchase, for the Purchase
Price, the adjusted number and kind of securities purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(d) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares or number or kind of other securities
issuable upon the exercise of the Rights, the Right Certificates theretofore
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<PAGE> 19
and thereafter issued may continue to express the terms which were expressed in
the initial Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section
12(a) requires that an adjustment 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 issuing to the holder of any Right exercised after such record date
the Preferred Shares and/or other securities, if any, issuable upon such
exercise over and above the Preferred Shares and/or other securities, if any,
issuable before giving effect 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 securities upon the
occurrence of the event requiring such adjustment.
SECTION 13. Certificate of Adjustment. Whenever an
adjustment is made as provided in Section 11 or 12, 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 Preferred Shares a copy
of such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares) in
accordance with Section 25. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
SECTION 14. Additional Covenants. (a) Notwithstanding any
other provision of this Rights Agreement, no adjustment to the number of
Preferred Shares (or fractions of a share) or other securities for which a
Right is exercisable or the number of Rights outstanding or associated with
each Common Share or any similar or other adjustment shall be made or be
effective if such adjustment would have the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such adjustment,
including, without limitation, the benefits under Sections 11 and 12, unless
the terms of this Rights Agreement are amended so as to preserve such benefits.
(b) The Company covenants and agrees that, after the
Distribution Date, except as permitted by Section 26, it will not take (or
permit any Subsidiary of the Company to take) any action if at the time such
action is taken it is intended or reasonably foreseeable that such action will
reduce or otherwise limit the benefits the holders of the Rights would have had
absent such action, including, without limitation, the benefits under Sections
11 and 12. Any
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<PAGE> 20
action taken by the Company during any period after any Person becomes an
Acquiring Person but prior to the Distribution Date shall be null and void
unless such action could be taken under this Section 14(b) from and after the
Distribution Date.
SECTION 15. Fractional Rights and Fractional Shares. (a)
The Company may, but shall not be required to, issue fractions of Rights or
distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, the Company may pay to the registered holders of the
Right 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 15(a), the current market
value of a whole Right shall be the closing price of the Rights (as determined
pursuant to the second and third sentences of the definition of Market Value
contained in Section 1) for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue
fractions of Preferred Shares upon exercise of the Rights or distribute
certificates which evidence fractional Preferred Shares. In lieu of fractional
Preferred Shares, the Company may elect to (i) utilize a depository arrangement
as provided by the terms of the Preferred Shares or (ii) in the case of a
fraction of a Preferred Share (other than one one-thousandth (1/1,000th) of a
Preferred Share or any integral multiple thereof), pay to the registered
holders of Right 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 Preferred Share, if any are outstanding and publicly traded (or
the Formula Number times the current market value of one Common Share if the
Preferred Shares are not outstanding and publicly traded). For purposes of
this Section 15(b), the current market value of a Preferred Share (or Common
Share) shall be the closing price of a Preferred Share (or Common Share) (as
determined pursuant to the second and third sentences of the definition of
Market Value contained in Section 1) for the Trading Day immediately prior to
the date of such exercise. If, as a result of an adjustment made pursuant to
Section 12(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Shares, the provisions
of this Section 15(b) shall apply, as nearly as reasonably may be, on like
terms to such other securities.
(c) The Company may, but shall not be required to, issue
fractions of Common Shares upon exchange of Rights
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<PAGE> 21
pursuant to Section 11(b), or to distribute certificates which evidence
fractional Common Shares. In lieu of such fractional Common Shares, the
Company may pay to the registered holders of the Right Certificates with regard
to which such fractional Common Shares would otherwise be issuable an amount in
cash equal to the same fraction of the current Market Value of one Common Share
as of the date on which a Person became an Acquiring Person.
(d) The holder of Rights 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 provided in this Section 15.
SECTION 16. Rights of Action. (a) All rights of action in
respect of this Rights Agreement are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any
Right 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 Right
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 Right
Certificate in the manner provided in such Right Certificate and in this Rights
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 Rights
Agreement and shall be entitled to specific performance of the obligations of
any Person under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce
the provisions of this Rights Agreement shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred in such
action.
SECTION 17. Transfer and Ownership of Rights and Right
Certificates. (a) Prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares and the
Rights associated with the Common Shares shall be automatically transferred
upon the transfer of the Common Shares.
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<PAGE> 22
(b) After the Distribution Date, the Right Certificates will
be transferable, subject to Section 7(e), only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the
Person in whose name a Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated certificate
for Common Shares made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary.
SECTION 18. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate shall be entitled to
vote or receive dividends or be deemed, for any purpose, the holder of the
Preferred Shares or of 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 Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company, including, without limitation, any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders, or to
receive dividends or other distributions or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
SECTION 19. 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 other disbursements incurred in
the administration and execution of this Rights Agreement and the exercise and
performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon
any Right Certificate or certificate for the Common Shares or for other
securities of the Company, instrument of
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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.
SECTION 20. Merger or Consolidation or Change 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 stock transfer or corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 22. In case, at the time such successor Rights Agent
shall succeed to the agency created by this Rights Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and, in case at
that time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and, in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
SECTION 21. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Rights Agreement upon the
following terms and conditions, by
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all of which the Company and the holders of Right Certificates (or, prior to
the Distribution Date, of the Common Shares), 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, suffered or omitted by it in good faith and in accordance with
such opinion.
(b) Whenever in the performance of its duties under this
Rights Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person) be proved or established by the Company prior to taking, refraining
from taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer, the Chief Legal
Officer, a Vice President (whether preceded by any additional title), the
Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or wilful 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 Rights Agreement or
in the Right Certificates (except as to its countersignature thereof) or be
required to verify the same, 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 Rights 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 Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or 12 or
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<PAGE> 25
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 Right 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 Preferred Shares or Common Shares to be issued pursuant to
this Rights Agreement or any Right Certificate or as to whether any Preferred
Shares or Common Shares 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 Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Legal Officer, a Vice
President (whether preceded by any additional title), the Secretary or the
Treasurer of the Company, in connection with its duties and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Rights 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
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provided reasonable care was exercised in the selection and continued
employment thereof.
(j) The Company agrees to indemnify and to hold the Rights
Agent harmless against any loss, liability, damage or expense (including
reasonable fees and expenses of legal counsel) which the Rights Agent may incur
resulting from its actions as Rights Agent pursuant to this Rights Agreement;
provided, however, that the Rights Agent shall not be indemnified or held
harmless with respect to any such loss, liability, damage or expense incurred
by the Rights Agent as a result of, or arising out of, its own negligence, bad
faith or wilful misconduct. In no case shall the Company be liable with
respect to any action, proceeding, suit or claim against the Rights Agent
unless the Rights Agent shall have notified the Company, by letter or by
facsimile confirmed by letter, of the assertion of any action, proceeding, suit
or claim against the Rights Agent, promptly after the Rights Agent shall have
notice of any such assertion of an action, proceeding, suit or claim or have
been served with the summons or other first legal process giving information as
to the nature and basis of the action, proceeding, suit or claim. The Company
shall be entitled to participate at its own expense in the defense of any such
action, proceeding, suit or claim, and, if the Company so elects, the Company
shall assume the defense of any such action, proceeding, suit or claim. In the
event that the Company assumes such defense, the Company shall not thereafter
be liable for the fees and expenses of any additional counsel retained by the
Rights Agent, so long as the Company shall retain counsel satisfactory to the
Rights Agent, in the exercise of its reasonable judgment, to defend such
action, proceeding, suit or claim. The Rights Agent agrees not to settle any
litigation in connection with any action, proceeding, suit or claim with
respect to which it may seek indemnification from the Company without the prior
written consent of the Company.
SECTION 22. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares and the Preferred Shares by registered
or certified mail, and to the holders of the Right Certificates (or, prior to
the Distribution Date, of the Common Shares) by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent upon 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 the Preferred
Shares by registered or certified mail, and to the holders of the Right
Certificates (or, prior to the Distribution Date, of
26
<PAGE> 27
the Common Shares) 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 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 Right
Certificate (or, prior to the Distribution Date, of the Common Shares) (who
shall, with such notice, submit his Right Certificate or, prior to the
Distribution Date, the certificate representing his Common Shares, for
inspection by the Company), then the registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares) may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the United
States so long as such corporation is authorized to conduct a stock transfer or
corporate trust business in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise stock transfer or 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 $50,000,000; provided that the principal transfer agent for the Common
Shares shall in any event be qualified to be the Rights Agent. 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 the Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares). Failure to give any notice provided for in this
Section 22, 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 23. Issuance of Additional Rights and Right
Certificates. Notwithstanding any of the provisions
27
<PAGE> 28
of this Rights Agreement or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing Rights in such form as may
be approved by its Board of Directors to reflect any adjustment or change made
in accordance with the provisions of this Rights Agreement. In addition, in
connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the earlier of the Redemption Date and the
Expiration Date, the Company (a) shall, with respect to 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, notes
or debentures 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 Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Right 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 Right Certificate
would be issued, and (ii) no such Right Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
SECTION 24. Redemption and Termination. (a) The Board of
Directors of the Company may, at its option, at any time prior to the earlier
of (i) such time as a Person becomes an Acquiring Person and (ii) the
Expiration Date, order the redemption of all, but not fewer than all, the then
outstanding Rights at the Redemption Price (the date of such redemption being
the "Redemption Date"), and the Company, at its option, may pay the Redemption
Price either in cash or Common Shares or other securities of the Company deemed
by the Board of Directors of the Company, in the exercise of its sole
discretion, to be at least equivalent in value to the Redemption Price;
provided, however, that, in addition to any other limitations contained herein
on the right to redeem outstanding Rights (including the occurrence of any
event or the expiration of any period after which the Rights may no longer be
redeemed), for the 120-day period after any date of a change (resulting from a
proxy or consent solicitation) in a majority of the Board of Directors of the
Company in office at the commencement of such solicitation, the Rights may only
be redeemed if (A) there are directors then in office who were in office at the
commencement of such solicitation and (B) the Board of Directors of the
Company, with the concurrence of a majority of such directors then in office,
determines that such redemption is, in their judgment, in the best interests of
the Company and its stockholders.
28
<PAGE> 29
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, 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. Within 10 Business Days after the action of the Board of
Directors of the Company ordering the redemption of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Each such notice of redemption will state the method by which payment
of the Redemption Price will be made. The notice, if mailed in the manner
herein provided, shall be conclusively presumed to have been duly given,
whether or not the holder of Rights receives such notice. In any case, failure
to give such notice by mail, or any defect in the notice, to any particular
holder of Rights shall not affect the sufficiency of the notice to other
holders of Rights.
SECTION 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) 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:
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, DE 19807
Attention: Chief Legal Officer
Subject to the provisions of Section 22, any notice or demand authorized by
this Rights Agreement to be given or made by the Company or by the holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares) to
or on the Rights Agent shall be sufficiently given or
29
<PAGE> 30
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
[Bank Name]
[ ]
[ ]
[ ]
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate (or, prior
to the Distribution Date, of the 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 Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares.
SECTION 26. Supplements and Amendments. At any time prior to
the Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs, supplement
or amend any provision of this Rights Agreement (including, without limitation,
the date on which the Distribution Date shall occur, the time during which the
Rights may be redeemed pursuant to Section 24 or any provision of the
Certificate of Designation) without the approval of any holder of the Rights.
From and after the Distribution Date and subject to applicable law, the Company
may, and the Rights Agent shall if the Company so directs, amend this Rights
Agreement without the approval of any holders of Right Certificates (i) to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision of this Rights
Agreement or (ii) to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person). Any supplement or amendment adopted during any period after
any Person has become an Acquiring Person but prior to the Distribution Date
shall be null and void unless such supplement or amendment could have been
adopted under the prior sentence from and after the Distribution Date. Any
supplement or amendment to this Rights Agreement duly approved by the Company
that does not amend Sections 19, 20, 21 or 22 in a manner adverse to the Rights
Agent shall become effective immediately upon execution by the Company, whether
or not also executed by the Rights Agent. Notwithstanding anything contained
in this Rights Agreement to the contrary, during the 120-day
30
<PAGE> 31
period after any date of a change (resulting from a proxy or consent
solicitation) in a majority of the Board of Directors of the Company in office
at the commencement of such solicitation, this Rights Agreement may be
supplemented or amended only if (A) there are directors then in office who were
in office at the commencement of such solicitation and (B) the Board of
Directors of the Company, with the concurrence of a majority of such directors
then in office, determines that such supplement or amendment is, in their
judgment, in the best interests of the Company and its stockholders and, after
the Distribution Date, the holders of the Right Certificates. In addition,
notwithstanding anything to the contrary contained in this Rights Agreement, no
supplement or amendment to this Rights Agreement shall be made which (a)
reduces the Redemption Price (except as required by Section 12(a)) or (b)
provides for an earlier Expiration Date.
SECTION 27. Successors. All the covenants and provisions of
this Rights Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. Benefits of Rights Agreement; Determinations and
Actions by the Board of Directors, etc. (a) Nothing in this Rights Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, of the Common Shares) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for
the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, of the Common Shares).
(b) Except as explicitly otherwise provided in this Rights
Agreement, the Board of Directors of the Company shall have the exclusive power
and authority to administer this Rights Agreement and to exercise all rights
and powers specifically granted to the Board of Directors of the Company or to
the Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Rights Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including, without limitation, a determination to redeem or
not redeem the Rights or to amend this Rights Agreement and a determination of
whether there is an Acquiring Person).
31
<PAGE> 32
(c) Nothing contained in this Rights Agreement shall be
deemed to be in derogation of the obligation of the Board of Directors of the
Company to exercise its fiduciary duty. Without limiting the foregoing,
nothing contained herein shall be construed to suggest or imply that the Board
of Directors shall not be entitled to reject any tender offer, or to recommend
that holders of Common Shares reject any tender offer, or to take any other
action (including, without limitation, the commencement, prosecution, defense
pr settlement of any litigation and the submission of additional or alternative
offers or other proposals) with respect to any tender offer that the Board of
Directors believes is necessary or appropriate in the exercise of such
fiduciary duty.
SECTION 29. Severability. If any term, provision, covenant
or restriction of this Rights 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 Rights
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 30. Governing Law. This Rights Agreement and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the law of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the law of such State applicable to contracts to
be made and performed entirely within such State.
SECTION 31. Counterparts; Effectiveness. This Rights
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. This
Rights Agreement shall be effective as of the Close of Business on the date
hereof.
SECTION 32. Descriptive Headings. Descriptive headings of
the several Sections of this Rights Agreement are inserted for convenience only
and shall not control or
32
<PAGE> 33
affect the meaning or construction of any of the provisions of this Rights
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
THE COLUMBIA GAS SYSTEM, INC.
by
-----------------------------
Name:
Title:
[ ], as Rights
Agent,
by
-----------------------------
Name:
Title:
33
<PAGE> 34
EXHIBIT A
TO EXHIBIT A-2
CERTIFICATE OF THE VOTING POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES A
PARTICIPATING PREFERRED STOCK OF
THE COLUMBIA GAS SYSTEM, INC.
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware, The Columbia Gas System, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That, pursuant to the authority conferred upon the Board of
Directors of the Company (the "Board") by Article Fourth of the Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), the Board on
________ __, 1995, adopted the following resolution creating a series of
Preferred Stock designated as Series A Participating Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board
in accordance with the provisions of the Certificate of Incorporation
of the Company, a series of Preferred Stock of the Company is hereby
created and that the designation and number of shares thereof and the
voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
SECTION 1. Designation and Number of Shares. The shares of
such series shall be designated as "Series A Participating Preferred Stock"
(the "Preferred Shares"), par value $10.00 per share. The number of shares
initially constituting the Preferred Shares shall be [ ]; provided,
however, that, if more than a total of [ ] shares of Preferred Shares
shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to
the Rights Agreement dated as of [ ], 1995 between the Company and [
] , a [ ] banking corporation, as Rights Agent (the "Rights Agreement"),
the Board, pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, shall direct by resolution or resolutions that a certificate
be properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 103 thereof, providing for the total
<PAGE> 35
2
number of shares of Preferred Shares authorized to be issued to be increased
(to the extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.
SECTION 2. Dividends or Distributions. (a) Subject to the
prior and superior rights of the holders of shares of any other series of
Preferred Stock or other class of capital stock of the Company ranking prior
and superior to the shares of Preferred Shares with respect to dividends, the
holders of shares of the Preferred Shares shall be entitled to receive, when,
as and if declared by the Board, out of the assets of the Company legally
available therefor, (1) quarterly dividends payable in cash on the last day of
each fiscal quarter in each year, or such other dates as the Board shall
approve (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or a fraction of a share of Preferred Shares, in
the amount of $10.00 per whole share (rounded to the nearest cent) less the
amount of all cash dividends declared on the Preferred Shares pursuant to the
following clause (2) since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Preferred Shares (the
total of which shall not, in any event, be less than zero) and (2) dividends
payable in cash on the payment date for each cash dividend declared on the
Common Stock in an amount per whole share (rounded to the nearest cent) equal
to the Formula Number (as hereinafter defined) then in effect times the cash
dividends then to be paid on each share of Common Stock. In addition, if the
Company shall pay any dividend or make any distribution on the Common Stock
payable in assets, securities or other forms of noncash consideration (other
than dividends or distributions solely in shares of Common Stock), then, in
each such case, the Company shall simultaneously pay or make on each
outstanding whole share of Preferred Shares a dividend or distribution in like
kind equal to the Formula Number then in effect times such dividend or
distribution on each share of the Common Stock. As used herein, the "Formula
Number" shall be 1,000; provided, however, that, if at any time after [
], 1995, the Company shall (i) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or make any distribution on the Common Stock
in shares
<PAGE> 36
3
of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding
shares of Common Stock into a larger number of shares of Common Stock or (iii)
combine (by a reverse stock split or otherwise) the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then in each such
event the Formula Number shall be adjusted to a number determined by
multiplying the Formula Number in effect immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock that
are outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event (and rounding the result to the nearest whole number); and provided
further, that, if at any time after [ ], 1995, the Company shall issue
any shares of its capital stock in a merger, reclassification, or change of the
outstanding shares of Common Stock, then in each such event the Formula Number
shall be appropriately adjusted to reflect such merger, reclassification or
change so that each share of Preferred Shares continues to be the economic
equivalent of a Formula Number of shares of Common Stock prior to such merger,
reclassification or change.
(b) The Company shall declare a dividend or distribution on
the Preferred Shares as provided in Section 2(a) immediately prior to or at the
same time it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution solely in shares of Common Stock); provided,
however, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Common Stock) shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per
whole share on the Preferred Shares shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of may fix a record date
for the determination of holders of shares of Preferred Shares entitled to
receive a dividend or distribution declared thereon, which record date shall be
the same as the record date for any corresponding dividend or distribution on
the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Preferred Shares from and after the Quarterly Dividend
Payment Date next preceding the date of original issue of such shares of
Preferred Shares; provided, however, that dividends on such shares
<PAGE> 37
4
which are originally issued after the record date for the determination of
holders of shares of Preferred Shares entitled to receive a quarterly dividend
and on or prior to the next succeeding Quarterly Dividend Payment Date shall
begin to accrue and be cumulative from and after such Quarterly Dividend
Payment Date. Notwithstanding the foregoing, dividends on shares of Preferred
Shares which are originally issued prior to the record date for the
determination of holders of shares of Preferred Shares entitled to receive a
quarterly dividend on the first Quarterly Dividend Payment Date shall be
calculated as if cumulative from and after the last day of the fiscal quarter
next preceding the date of original issuance of such shares. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Preferred Shares 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.
(d) So long as any shares of the Preferred Shares are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Preferred Shares shall have been declared.
(e) The holders of the shares of Preferred Shares shall not
be entitled to receive any dividends or other distributions except as provided
herein.
SECTION 3. Voting Rights. The holders of shares of Preferred
Shares shall have the following voting rights:
(a) Each holder of Preferred Shares shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Preferred Shares held of record on each matter on which holders of the Common
Stock or stockholders generally are entitled to vote, multiplied by the maximum
number of votes per share which any holder of the Common Stock or stockholders
generally then have with respect to such matter (assuming any holding period or
other requirement to vote a greater number of shares is satisfied).
(b) Except as otherwise provided herein or by applicable law,
the holders of shares of Preferred Shares
<PAGE> 38
5
and the holders of shares of Common Stock shall vote together as one class for
the election of directors of the Company and on all other matters submitted to
a vote of stockholders of the Company.
(c) If, at the time of any annual meeting of stockholders for
the election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Preferred Shares are in
default, the number of directors constituting the Board shall be increased by
two. In addition to voting together with the holders of Common Stock for the
election of other directors of the Company, the holders of record of the
Preferred Shares, voting separately as a single class or as a class with the
holders of shares of any capital stock of the Company ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Preferred Shares, if such holders are then entitled to elect additional
directors pursuant to any provision of the Certificate of Designation of such
stock that is similar to this Section 3(c) ("Defaulted Parity Stock"), to the
exclusion of the holders of Common Stock, shall be entitled at said meeting of
stockholders (and at each subsequent annual meeting of stockholders), unless
all dividends on the Preferred Shares in arrears have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Company, the holders of any Preferred Shares being entitled to cast a
number of votes per share of Preferred Shares equal to the Formula Number.
Until the default in payments of all dividends on the Preferred Shares which
permitted the election of said directors shall cease to exist, any director who
shall have been so elected pursuant to the next preceding sentence may be
removed at any time, either with or without cause, only by the affirmative vote
of the holders of the shares of Preferred Shares and Defaulted Parity Stock at
the time entitled to cast a majority of the votes entitled to be cast for the
election of any such director at a special meeting of such holders called for
that purpose, and any vacancy thereby created may be filled by the vote of such
holders. If and when such default shall cease to exist, the holders of the
Preferred Shares shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been elected directors
pursuant to said special voting
<PAGE> 39
6
rights shall forthwith terminate, and the number of directors constituting the
Board shall be reduced by two. The voting rights granted by this Section 3(c)
shall be in addition to any other voting rights granted to the holders of the
Preferred Shares in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable
law, holders of Preferred Shares shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for authorizing or taking any
corporate action.
SECTION 4. Certain Restrictions. (a) Whenever quarterly
dividends or other dividends or distributions payable on the Preferred Shares
as provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Preferred Shares outstanding shall have been paid in full, the Company shall
not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Preferred Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Preferred Shares, except dividends paid ratably on the Preferred
Shares and all such parity stock 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) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Preferred Shares; provided that the Company may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Company ranking junior (either
as to dividends or upon dissolution, liquidation or winding up) to the
Preferred Shares; or
<PAGE> 40
7
(iv) purchase or otherwise acquire for consideration any
shares of Preferred Shares, or any shares of stock ranking on a parity
with the Preferred Shares, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Preferred Shares unless, prior thereto, the holders of shares of Preferred
Shares shall have received an amount equal to the accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such
payment, plus an amount equal to the greater of (x) $10.00 per whole share or
(y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Preferred
Shares, except distributions made ratably on the Preferred Shares and all other
such parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or winding up.
SECTION 6. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash or any other property, then in any such case the then
outstanding shares of Preferred Shares shall
<PAGE> 41
8
at the same time be similarly exchanged or changed into an amount per share
equal to the Formula Number then in effect times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is exchanged or changed. In
the event both this Section 6 and Section 2 appear to apply to a transaction,
this Section 6 will control.
Section 7. No Redemption; No Sinking Fund. (a) The
Preferred Shares shall not be subject to redemption by the Company or at the
option of any holder of Preferred Shares; provided, however, that the Company
may purchase or otherwise acquire outstanding Preferred Shares in the open
market or by offer to any holder or holders of Preferred Shares.
(b) The Preferred Shares shall not be subject to or entitled
to the operation of a retirement or sinking fund.
SECTION 8. Ranking. The Preferred Shares shall rank junior
to all other series of Preferred Stock of the Company, unless the Board shall
specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of
such series and the qualifications, limitations and restrictions thereof.
SECTION 9. Fractional Shares. The Preferred Shares shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction which shall
entitle the holder, in proportion to such holder's fractional shares, to
receive dividends, exercise voting rights, participate in distributions and to
have the benefit of all other rights of holders of Preferred Shares. In lieu
of fractional shares, the Company, prior to the first issuance of a share or a
fraction of a share of Preferred Shares, may elect (1) to make a cash payment
as provided in the Rights Agreement for fractions of a share other than one one
one-thousandth (1/1,000th) of a share or any integral multiple thereof or (2)
to issue depository receipts evidencing such authorized fraction of a share of
Preferred Shares pursuant to an appropriate agreement between the Company and a
depository selected by the Company; provided
<PAGE> 42
9
that such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are
entitled as holders of the Preferred Shares.
SECTION 10. Reacquired Shares. Any shares of Preferred
Shares purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board pursuant to the
provisions of the Certificate of Incorporation.
SECTION 11. Amendment. None of the powers, preferences and
relative, participating, optional and other special rights of the Preferred
Shares as provided herein or in the Certificate of Incorporation shall be
amended in any manner which would alter or change the powers, preferences,
rights or privileges of the holders of Preferred Shares so as to affect them
adversely without the affirmative vote of the holders of at least 66-2/3% of
the outstanding shares of Preferred Shares, voting as a separate class;
provided, however, that no such amendment approved by the holders of at least
66-2/3% of the outstanding shares of Preferred Shares shall be deemed to apply
to the powers, preferences, rights or privileges of any holder of Preferred
Shares
<PAGE> 43
10
originally issued upon exercise of a Right after the time of such approval
without the approval of such holder.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed in its corporate name on this day of 1995.
THE COLUMBIA GAS SYSTEM, INC.,
by
--------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
<PAGE> 44
EXHIBIT B
TO EXHIBIT A-2
[Form of Right Certificate]
Certificate No. [R]-
___________ Rights
NOT EXERCISABLE AFTER [ ], OR EARLIER IF REDEEMED
BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $0.01 PER RIGHT, ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE
NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
THE COLUMBIA GAS SYSTEM, INC.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of [ ] (the "Rights
Agreement"), between The Columbia Gas System, Inc., a Delaware corporation (the
"Company"), and [ ], a [ ] corporation, as Rights Agent
(the "Rights Agent"), unless the Rights evidenced hereby shall have been
previously redeemed by the Company, to purchase from the Company at any time
after the Distribution Date (as defined in the Rights Agreement) and prior to
5:00 p.m., New York City time, eighteen months after the confirmation of the
Plan of Reorganization of the Company pursuant to Chapter 11 of the United
States Bankruptcy Code, provided that, if on such date there is pending a
proposal for an acquisition of 10.0% or more of the Common Stock or a merger or
consolidation involving the Company or a sale, lease or other disposition of
all or substantially all the assets of the Company, the Expiration Date shall
be extended to the date that is 30 days after the date that no such proposal is
pending
<PAGE> 45
(the close of business on such date being the "Expiration Date"), at the
principal office of the Rights Agent, or its successors as Rights Agent, in
[ ] one one-thousandths (1/1,000ths) of a fully paid, nonassessable
share of Series A Participating Preferred Stock, par value $10.00 per share, of
the Company (the "Preferred Shares"), at a purchase price per one
one-thousandth (1/1,000th) of a share equal to $100 (the "Purchase Price")
payable in cash, upon presentation and surrender of this Right Certificate with
the Form of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may
be purchased upon exercise of each Right evidenced by this Right Certificate,
as set forth above, are the Purchase Price and the number and kind of shares
which may be so purchased as of [ ]. As provided in the Rights
Agreement, the Purchase Price and the number and kind of shares which may be
purchased upon the exercise of each Right evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain
events.
If the Rights evidenced by this Right Certificate are at any
time beneficially owned by an Acquiring Person or an Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all 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
reference to the Rights Agreement 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 Right Certificates.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal stock transfer or corporate trust
office of the Rights Agent, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number and
2
<PAGE> 46
kind of shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate may be redeemed by the Company at its
option at a redemption price (in cash or shares of Common Stock or other
securities of the Company deemed by the Board of Directors to be at least
equivalent in value) of $0.01 per Right (which amount shall be subject to
adjustment as provided in the Rights Agreement) at any time prior to the
earlier of (i) such time as a Person becomes an Acquiring Person and (ii) the
Expiration Date; provided, however, that, for the 120-day period after any date
of a change (resulting from a proxy or consent solicitation) in a majority of
the Board of Directors of the Company in office at the commencement of such
solicitation, the Rights may only be redeemed if (A) there are directors then
in office who were in office at the commencement of such solicitation and (B)
the Board of Directors of the Company, with the concurrence of a majority of
such directors then in office, determines that such redemption is, in their
judgment, in the best interests of the Company and its stockholders.
The Company may, but shall not be required to, issue fractions
of Preferred Shares or distribute certificates which evidence fractions of
Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In
lieu of issuing fractional shares, the Company may elect to make a cash payment
as provided in the Rights Agreement for fractions of a share other than one
one-thousandth (1/1,000th) of a share or any integral multiple thereof or to
issue certificates or utilize a depository arrangement as provided in the terms
of the Rights Agreement and the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
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 stockholder of the Company, including, without limitation,
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive
3
<PAGE> 47
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or other distributions or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in accordance with the
provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of:
THE COLUMBIA GAS SYSTEM, INC.
by
---------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
Countersigned:
[ ],
as Rights Agent,
by
---------------------
Authorized Officer
4
<PAGE> 48
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Right Certificate to purchase the Series
A Participating Preferred Stock (or other shares) issuable upon the exercise of
such Rights and requests that certificates for such shares be issued in the
name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
5
<PAGE> 49
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, a new Right Certificate for the balance remaining 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: ___________, 19__
------------------------------
Signature
Signature Guaranteed:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby
sells, assigns and transfer unto ______________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________, 19__
------------------------------
Signature
Signature Guaranteed:
6
<PAGE> 50
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being sold, assigned or transferred by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), (2) this
Rights Certificate is not being sold, assigned or transferred to or on behalf
of any such Acquiring Person, Affiliate or Associate, and (3) after inquiry and
to the best knowledge of the undersigned, the undersigned did not acquire the
Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
------------------------------
Signature
NOTICE
The signature on the foregoing Form of Election to Purchase or
Form of Assignment must correspond to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
7
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000022099
<NAME> THE COLUMBIA GAS SYSTEM
<SUBSIDIARY>
<NUMBER> 1
<NAME> THE COLUMBIA GAS SYSTEM & SUBSIDIARIES
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> DEC-01-1993 DEC-01-1993
<PERIOD-END> NOV-30-1994 NOV-30-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,426,193 3,426,193
<OTHER-PROPERTY-AND-INVEST> 915,281 915,281
<TOTAL-CURRENT-ASSETS> 2,346,709 6,897,409
<TOTAL-DEFERRED-CHARGES> 281,488 281,488
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 6,969,671 11,520,371
<COMMON> 505,633 505,633
<CAPITAL-SURPLUS-PAID-IN> 601,828 601,828
<RETAINED-EARNINGS> 407,325 407,325
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,444,820 1,444,820
0 0
0 4,550,700
<LONG-TERM-DEBT-NET> 4,268 4,268
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 2,503 2,503
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,520,583 5,520,583
<TOT-CAPITALIZATION-AND-LIAB> 6,969,671 11,520,371
<GROSS-OPERATING-REVENUE> 2,920,267 2,920,267
<INCOME-TAX-EXPENSE> 155,162 155,162
<OTHER-OPERATING-EXPENSES> 2,526,486 2,526,486
<TOTAL-OPERATING-EXPENSES> 2,526,486 2,526,486
<OPERATING-INCOME-LOSS> 393,781 393,781
<OTHER-INCOME-NET> 6,853 6,853
<INCOME-BEFORE-INTEREST-EXPEN> 400,634 400,634
<TOTAL-INTEREST-EXPENSE> 15,379 15,379
<NET-INCOME> 224,527 224,527
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 224,527 224,527
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 4.44 4.44
<EPS-DILUTED> 4.44 4.44
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000022099
<NAME> THE COLUMBIA GAS SYSTEM
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> DEC-01-1993 DEC-01-1993
<PERIOD-END> NOV-30-1994 NOV-30-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 3,580,791 3,580,791
<TOTAL-CURRENT-ASSETS> 478,156 5,028,856
<TOTAL-DEFERRED-CHARGES> 2,823 2,823
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 4,061,770 8,612,470
<COMMON> 505,633 505,633
<CAPITAL-SURPLUS-PAID-IN> 601,828 601,828
<RETAINED-EARNINGS> 407,325 407,325
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,444,820 1,444,820
0 0
0 4,550,700
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,616,950 2,616,950
<TOT-CAPITALIZATION-AND-LIAB> 4,061,770 8,612,470
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> 71,142 71,142
<OTHER-OPERATING-EXPENSES> 7,884 7,884
<TOTAL-OPERATING-EXPENSES> 7,884 7,884
<OPERATING-INCOME-LOSS> (7,884) (7,884)
<OTHER-INCOME-NET> 304,099 304,099
<INCOME-BEFORE-INTEREST-EXPEN> 296,215 296,215
<TOTAL-INTEREST-EXPENSE> 502 502
<NET-INCOME> 224,527 224,527
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 224,527 224,527
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 4.44 4.44
<EPS-DILUTED> 4.44 4.44
</TABLE>
<PAGE> 1
Exhibit H
SECURITIES AND EXCHANGE COMMISSION
Release No. 35- ; 70- )
The Columbia Gas System
Notice of Proposal to Amend Certificate of Incorporation and Adopt and
Potentially Implement Shareholder Rights Plan; Order Authorizing Solicitation
of Proxies
March 1, 1995
The Columbia Gas System, Inc. ("Columbia"), 20 Montchanin Road,
Wilmington, Delaware 19807, a registered holding company, has filed a
declaration with this Commission pursuant to Sections 6(a), 7 and 12(e) of the
Public Utility Holding Company Act of 1935 (the "Act") and Rules 62 and 65
thereunder.
Columbia proposes, subject to shareholder approval and to approval of
the United States Bankruptcy Court for the District of Delaware, to amend its
Certificate of Incorporation ("Charter") to change the description of preferred
stock, as presently authorized, in order to permit the use of preferred stock
pursuant to a proposed shareholder rights plan. The adoption and
implementation of the shareholder rights plan is subject to the approval of the
United States Bankruptcy Court and this Commission. The amendment to the
Charter for which shareholder approval will be sought at the Annual Meeting
scheduled for April 28, 1995 would change the par value from $50 to $10 per
share and delete provisions in the Charter which subject the Company to certain
restrictions on dividends and on unsecured debt while any preferred stock is
outstanding and which define the voting rights and liquidation rights of the
preferred stock in a manner inconsistent with the voting and liquidation rights
proposed for the Preferred Stock to be utilized in the Rights Plan should the
Rights become exercisable. Instead of being set forth in the Charter, voting
rights, liquidation rights, and dividend and other terms of each series of
Preferred Stock would be set forth in the individual Certificates of
Designation to be authorized by the Board of Directors and filed with the
Secretary of State of Delaware.
Under the proposed Rights Plan, existing shareholders would be granted
a right to purchase multiple fractions of Preferred Stock that would have
voting and dividend rights equivalent to Common Stock but would be purchased at
a substantial discount to the then current market value of Common Stock if a
person acquires 10% or more of the Corporation's Common Stock. The Right might
also be exercisable as a right to purchase a single fraction at the purchase
price without a discount if so determined by the Board following announcement
of an offer to acquire 10% or more of the Corporation's Common Stock. In
either event, the Rights held by the potential acquiror would be void and the
exercise of the rights by other stockholders would result in a dilution of the
value and voting power of shares held by the potential acquiror. The
Corporation's Board of Directors would have the discretion to redeem the
Rights. Declarants state that the fiduciary duty of the Board of Directors to
act in the best interest of stockholders protects against abuse of the Rights
Plan by the Board of Directors.
<PAGE> 2
The Proposed Rights Plan would become effective following 1) approval
of the Charter Amendment by stockholders, 2) approval by this Commission of
adoption and implementation of the Plan and 3) approval by the Bankruptcy Court
of the adoption and implementation of the Plan. The Plan would terminate
eighteen months after the effective date of Columbia's Plan of Reorganization
under the Bankruptcy Code subject to extension if an offer to purchase 10% or
more of the Corporation's Common Stock is pending.
Columbia states that its investment advisor, Salomon Brothers Inc
recommends the adoption of the Rights Plan as a protection against attempts to
takeover the ownership of the company at a time when the market value of the
company's Common Stock may be depressed due to uncertainties or other
bankruptcy-related effects. The Official Committee of Equity Security Holders
also reviewed the Proposed Plan and based on advice from their advisor, Smith
Barney Incorporated, the Official Committee of Equity Security Holders also
recommends adoption of the Rights Plan as a means of shareholder protection.
Columbia believes that the Rights Plan is desirable notwithstanding the
protections afforded by the Act which requires approval by this Commission of
the fairness of the price, as well as other terms and conditions of certain
stock and asset acquisitions involving registered holding companies such as
Columbia. The Act as now constituted does not preclude a tender offer or other
unnegotiated business combination for consideration that is less than the Board
considers desirable, or that the Board feels is otherwise not in the best
interests of shareholders (e.g., the market price of the Corporation's stock
may be depressed by circumstances not directly affecting its business.) The
only condition imposed by the Act on such business combinations is that the
offered consideration is reasonably related to the value of the underlying
utility assets. This standard is different than the Board's obligation under
state law governing fiduciaries to obtain maximum shareholder value if a sale
of the Company is going to occur.
As noted above, the Preferred Stock to be issued pursuant to the
exercise of a Right would be a new Series A Participating Preferred and would
be designed so that each fraction (one-one thousandths of a share) would be
equivalent to one share of common stock for dividend, voting and liquidation
purposes. Once a person has acquired 10% or more of the Company's Common
Stock, each shareholder would be entitled to purchase for $100 that number of
fractions which is equal to the number of shares of common stock with a market
value totalling $200 at the time of purchase.
The Board of Directors may at its option satisfy the Rights by issuing
one half the securities that would be issuable for the purchase price or by
issuing sufficient common stock to be equivalent to the preferred stock that
would be issuable, (each one one-thousandths of a share of preferred stock
being the equivalent of one share of common stock). If six quarterly dividends
on the preferred stock are in arrears, the preferred stockholders (together
with holders of defaulted parity stock if entitled to vote) will have the right
to elect two additional directors to the Board of Directors. Declarants state,
however, that there is no expectation that the Rights would become exercisable
and the above described Preferred Stock issued.
2
<PAGE> 3
Columbia has filed its proxy solicitation material and requests that
the effectiveness of its declaration with respect to the solicitation be
accelerated pursuant to Rule 62(d). Fees and expenses estimated at $ ,
are expected to be incurred in connection with the proposed transaction,
including $ to be expended for proxy solicitation services.
The declaration and any further amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by March 27, 1995 to the Secretary, Securities and Exchange
Commission, Washington D.C. 20549 and serve a copy on the declarant at the
address specified above. Proof of service (by affidavit, or, in the case of an
attorney at law, by certificate) should be filed with the request. Any request
for a hearing shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any hearing, if
ordered, and will receive a copy of any notice or order issued in this matter.
After said date, the Commission may permit the declaration. as filed or as it
may be further amended to become effective.
It appearing to the Commission that Columbia's declaration regarding
the proposed solicitation of proxies should be permitted to become effective
forthwith pursuant to Rule 62(d):
IT IS ORDERED that the declaration regarding the proposed solicitation
of proxies be, and it hereby is, permitted to become effective forthwith
pursuant to Rule 62(d) and subject to the terms and conditions prescribed in
Rule 24 under the Act.
3
