SEC File No. 70-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC. ("GPU")
300 Madison Avenue
Morristown, New Jersey 07962
(Name of company filing this statement
and address of principal office)
GPU, INC.
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(Name of top registered holding company
parent of the applicant)
M. A. Nalewako, Secretary Douglas E. Davidson, Esq.
M. J. Connolly, Esq., Berlack, Israels & Liberman LLP
Assistant General Counsel 120 West 45th Street
GPU Service, Inc. New York, New York 10036
300 Madison Avenue
Morristown, New Jersey 07962
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(Names and addresses of agents for service)
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Item 1. Description of Proposed Transactions.
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A. Introduction. GPU proposes to adopt and implement a stockholder rights
plan (the "Plan"). Pursuant to the Plan the Board of Directors (the "Board") of
GPU has, subject to receipt of the authorization herein requested, declared a
dividend of one right (a "Right") for each outstanding share of GPU Common
Stock, par value $2.50 per share (the "Common Stock"), payable to stockholders
of record on the tenth business day after receipt of the Commission
authorization herein requested (the "Record Date"). As of June 30, 1998, there
were approximately 128 million shares of Common Stock outstanding. The Rights
will be created by and issued pursuant to a Rights Agreement (the "Rights
Agreement"), between GPU and Chase Mellon Shareholder Services, Inc. ("Rights
Agent"), as Rights Agent.
B. Background. Unsolicited attempts to acquire public companies have
required boards of directors and their stockholders to make difficult decisions
affecting the value, and on occasion, the existence, of companies within
extremely short time periods. Such takeover attempts often occur when a company
is particularly vulnerable and when the board has determined that the company's
inherent long-term value is inadequately recognized by the marketplace.
C. The electric utility industry is undergoing dramatic technological and
regulatory changes, transforming from a highly regulated to a competitive
industry. State initiatives to introduce competition for retail customers, and
possible federal initiatives regarding retail competition, are compelling a
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restructuring of the industry. Uncertainty regarding the future and state
regulators' focus on reducing retail rates has resulted in depressed market
values for certain utilities and increased takeover activity, including hostile
or other unwanted takeover bids, further indicating that GPU's stockholders may
be at risk of losing the long-term value of GPU.
D. Because GPU is a public utility holding company registered under the
Act, acquisitions of more than 5% of its Common Stock, a merger or consolidation
of GPU, and certain other transactions (such as sales of assets as part of any
takeover attempt) would require Commission approval. Nonetheless, the changing
regulatory environment suggests that public utility holding companies, including
GPU, and their stockholders are losing, to some degree, the regulatory
protection against hostile acquisitions that they had formerly. Proposals have
been introduced in Congress for repeal or amendment of the Act, some of which
have been supported by the Commission. Further, in response to state or federal
legislation or regulatory requirements or in order to continue to compete in a
dynamic utility industry, GPU may in the future pursue possible strategies that
would, among other things, have the effect of de-registration or terminating
regulation of GPU by the Commission under the Act.
E. Stockholder rights plans have become a widely accepted means to
maximize shareholder value by reducing the risk of nonrealization of shareholder
value due to opportunistic proposals. Such a plan would encourage potential
acquirors to
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negotiate with the Board. A stockholder rights plan may enhance the probability
that a competing offer will emerge. Over 1,700 public companies have adopted
rights plans, including about half of the Fortune 500 companies and an
increasing number of publicly traded utility companies. In addition, to date,
the Commission has authorized four registered holding companies to adopt rights
plans. See HCAR No. 35-26797 (Central & South West); 35-26751 (New Century
Energies); 35-26832 (Conectiv); and 35-26532 (National Fuel Gas).
F. The Board believes that the Rights Agreement is appropriate and
necessary to preserve, in the event of an attempted takeover, GPU's value for
its stockholders. In this regard, the Rights Agreement is designed to deter
attempts to acquire GPU in a manner or on terms which the Board determines are
not in the best interests of all stockholders. Specifically, the Rights
Agreement is intended to:
(i) reduce the risk of two-tiered, front-end loaded tender offers or
partial tender offers which may not offer fair and equal value to all
stockholders of GPU;
(ii) deter potential accumulators of GPU's shares who (through open
market and/or private purchases) may achieve a position of substantial
influence, or even control, without paying to the selling or remaining
stockholders of GPU an appropriate control premium for their shares;
(iii) deter potential accumulators of GPU's shares who are only
interested in putting GPU into "play"; and
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(iv) preserve for GPU's Board maximum bargaining power and
flexibility to deal with hostile acquirors in order to be in a position to
maximize value for all stockholders.
G. The Rights Agreement attempts to achieve these goals by confronting a
potential acquiror of more than 10% of GPU's outstanding Common Stock with the
possibility that GPU's stockholders, by exercising their Rights, will be able to
increase substantially such acquiror's cost of acquiring GPU.
H. The Plan may in certain circumstances permit the Board to thwart an
inadequate offer. The Plan would also provide the Board a role (supplemental to
the role of the Commission under the Act) in discouraging implicitly coercive
takeover tactics and would enable the Board to provide stockholders adequate
time to properly assess a takeover bid without undue pressure.
I. For all of these reasons, the Board believes that the Plan, including
the adoption of the Rights Agreement and the distribution of the Rights to GPU's
stockholders, would provide appropriate protections for such stockholders from
the takeover abuses discussed above.
J. Description of Rights.
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1. Exercise Price. The Rights created under the proposed Rights
Agreement would entitle the holders thereof to purchase one-tenth of a share of
Common Stock at a price of $120 per whole share of Common Stock (the "Purchase
Price"), subject to adjustment. This is equivalent to $12 per one-tenth of one
share of Common Stock. Initially, the Rights would not be exercisable and would
trade with the outstanding shares of Common
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Stock. Upon the occurrence of the triggering events described below, the Rights
would become exercisable and Rights Certificates representing the Rights would
be distributed and would trade independently of such outstanding shares.
However, the Rights would not entitle the holders thereof to make a discounted
purchase of shares of GPU's Common Stock or of the common stock of the person
acquiring GPU until the occurrence of one of the events of transactions
described below under "Discount Purchase Right."
2. Triggering Events. The Rights would become exercisable (i.e.,
Common Stock could be purchased at the Purchase Price pursuant to the Rights)
upon the earlier to occur of (i) 10 days after the first public announcement
that any person or group (an "Acquiring Person") has without the Board's prior
consent acquired beneficial ownership of 10% or more of GPU's outstanding Common
Stock ("Acquisition Event") and (ii) 10 business days (unless extended by the
Board) after any person or group has commenced a tender or exchange offer which
would, upon its consummation, result in such person or group becoming an
Acquiring Person ("Offer Event") (the earlier of (i) and (ii) being referred to
as the "Distribution Date").
3. Discount Purchase Right. When the Triggering Event is an
Acquisition Event, the holders of the Rights (other than an Acquiring Person and
certain transferees thereof, whose Rights will become void) would immediately
have the right to receive for a 60 day period or such longer period set by the
Board (subject to the effectiveness of an appropriate registration statement
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under the Securities Act of 1933), for each Right exercised, Common Stock having
a market value equal to two times the Purchase Price then in effect ("Discount
Purchase Right"). When the Triggering Event is an Offer Event, the holders of
the Rights (other than an Acquiring Person and certain transferees thereof,
whose Rights will become void) would be entitled to the Discount Purchase Right
once a person or group commencing the tender or exchange offer becomes an
Acquiring Person.
In the event that, on or after the Acquisition Event, (i) GPU is acquired
by another person or entity not controlled by GPU ("Acquiror") in a merger or
other business combination transaction in which the Common Stock is exchanged
for securities or other property, or (ii) 50% or more of GPU's consolidated
assets or earnings power is sold or transferred to an Acquiror, each holder of a
Right (except Rights which previously have been voided as set forth above) will
thereafter be entitled to receive, for each Right exercised, common stock of the
Acquiror having a market value equal to two times the Purchase Price then in
effect.
4. Redemption of Rights. The Rights may be redeemed, as a whole, at a
Redemption Price of $.001 per Right, subject to adjustment, at the direction of
the Board, at any time prior to the earlier of (i) the close of business on the
date that any person has become an Acquiring Person and (ii) the date of final
expiration of the Rights. The Rights will expire at the close of business on
August 6, 2008, unless earlier redeemed or exchanged by GPU as described below.
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5. Exchange of Shares for Rights. At any time after any person or
group becomes an Acquiring Person and before any person (other than GPU and
certain related entities), together with its affiliates and associates, becomes
the beneficial owner of 50% or more of the outstanding shares of Common Stock,
the Board may direct the exchange of shares of Common Stock for all or any part
of the Rights (other than Rights which have become void) at the exchange rate of
the lesser of (i) three shares of Common Stock per Right, as adjusted, and (ii)
a pro rata portion of the total number of shares then available for issuance.
6. Adjustments to Purchase Price. The Purchase Price payable, and the
number of shares of Common Stock (or other securities, as the case may be)
issuable upon exercise of the Rights are subject to adjustment from time to time
to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Stock, (ii) upon the grant to
holders of the Common Stock of certain rights or warrants to subscribe for or
purchase shares of Common Stock or convertible securities at less than the then
current market price of Common Stock or (iii) upon the distribution to holders
of the Common Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Common Stock) or of subscription
rights or warrants. Prior to the date on which the Rights become exercisable,
the Board may make such equitable adjustments as it deems appropriate in the
circumstances in lieu of any adjustment otherwise required by the foregoing.
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With certain exceptions, no adjustment in the Purchase Price will be
required until the time at which cumulative adjustments require an adjustment of
at least 1% in such Purchase Price. No fractional shares of Common Stock will be
issued and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Common Stock on the last trading date prior to the date of
exercise.
7. Amendments. The terms of the Rights may be amended by the Board
(i) prior to the Distribution Date in any manner, and (ii) on or after the
Distribution Date to cure any ambiguity, to correct or supplement any provision
of the Rights Agreement which may be defective or inconsistent with any other
provisions, or in any manner not adversely affecting the interests of the
holders of the Rights (including the interests of any Acquiring Person), or,
subject to certain limitations, to shorten or lengthen any time period under the
Rights Agreement.
L. Authorizations Sought.
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In summary, GPU herein seeks authorization to implement the Plan and the
Rights Agreement, including, among other actions permitted by the Rights
Agreement, the following transactions:
(1) The dividend distribution of the Rights.
(2) The making of adjustments to the Purchase Price, and the
issuance and sale of Common Stock, or the transfer of other
assets, upon exercise of the Rights.
(3) The redemption of Rights, and the issuance of Common Stock in
exchange for Rights.
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(4) Amending of the Agreement as permitted by the terms hereof.
M. Rule 54 Analysis.
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The proposed transactions contemplate, among other things, the issuance or
acquisition of securities by GPU which do not relate to exempt wholesale
generators ("EWGs") and foreign utility companies ("FUCOs") (the
"Transactions"). Accordingly, the Transactions are subject to Rule 54, which
provides that, in determining whether to approve an application which does not
relate to any EWG or FUCO, the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53 (a), (b) and (c) are
satisfied.
(a) As described below, GPU meets all of the conditions of Rule 53, except
for Rule 53(a)(1). By Order dated November 5, 1997 (HCAR No. 35-26773) (the
"November 5 Order"), the Commission authorized GPU to increase to 100% of its
"average consolidated retained earnings," as defined in Rule 53, the aggregate
amount which it may invest in EWGs and FUCOs. At June 30, 1998, GPU's average
consolidated retained earnings was approximately $2,135 million. Accordingly,
under the November 5 Order, GPU may invest up to an additional $856 million in
EWGs and FUCOs as of June 30, 1998.
(i) GPU maintains books and records to identify investments in, and
earnings from, each EWG and FUCO in which it directly or indirectly
holds an interest.
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(A) For each United States EWG in which GPU directly or indirectly
holds an interest:
(1) the books and records for such EWG will be kept in
conformity with United States generally accepted
accounting principles ("GAAP");
(2) the financial statements will be prepared in accordance
with GAAP; and
(3) GPU directly or through its subsidiaries undertakes to
provide the Commission access to such books and records
and financial statements as the Commission may request.
(B) For each FUCO or foreign EWG which is a majority owned
subsidiary of GPU:
(1) the books and records for such subsidiary will be kept
in accordance with GAAP;
(2) the financial statements for such subsidiary will be
prepared in accordance with GAAP; and
(3) GPU directly or through its subsidiaries undertakes to
provide the Commission access to such books and records
and financial statements, or copies thereof in English,
as the Commission may request.
(C) For each FUCO or foreign EWG in which GPU owns 50% or less of
the voting securities, GPU directly or through its subsidiaries will
proceed in good faith, to the extent reasonable under the
circumstances, to cause
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(1) such entity to maintain books and records in
accordance with GAAP;
(2) the financial statements of such entity to be prepared
in accordance with GAAP; and
(3) access by the Commission to such books and records and
financial statements (or copies thereof) in English as
the Commission may request and, in any event, GPU will
provide the Commission on request copies of such
materials as are made available to GPU and its
subsidiaries. If and to the extent that such entity's
books, records or financial statements are not
maintained in accordance with GAAP, GPU will, upon
request of the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and (a) (2)
(iii) (B) of Rule 53.
(iii) No more than 2% of GPU's domestic public utility subsidiary
employees will render any services, directly or indirectly, to any
EWG and FUCO in which GPU directly or indirectly holds an interest.
(iv) Copies of this Application on Form U-1 are being provided to the
New Jersey Board of Public Utilities and the Pennsylvania Public
Utility Commission, the only federal, state or local regulatory
agencies having jurisdiction over the retail rates of GPU's electric
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utility subsidiaries.(1) In addition, GPU will submit to each such
commission copies of any Rule 24 certificates required hereunder, as
well as a copy of Item 9 of GPU's Form U5S and Exhibits H and I
thereof (commencing with the Form U5S to be filed for the calendar
year in which the authorization herein requested is granted).
(v) None of the provisions of paragraph (b) of Rule 53 render
paragraph (a) of that Rule unavailable for the proposed
transactions.
(A) Neither GPU nor any subsidiary of GPU having a book value
exceeding 10% of GPU's consolidated retained earnings is the
subject of any pending bankruptcy or similar proceeding.
(B) GPU's average consolidated retained earnings for the four
most recent quarterly periods (approximately $2.135 billion)
represented a decrease of approximately $52.8 million (or
approximately 2.5%) compared to the average consolidated retained
earnings for the previous four quarterly periods (approximately
$2.187 million)(2).
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(1) Penelec is also subject to retail rate regulation by the New York Public
Service Commission with respect to retail service to approximately 13,700
customers in Waverly, New York served by Waverly Electric Power & Light
Company, a Penelec subsidiary. Waverly Electric's revenues are immaterial,
accounting for less than 1% of Penelec's total operating revenues.
(2) As discussed in GPU's June 30, 1998 Quarterly Report on Form 10-Q, the
decrease is attributable to an extraordinary charge of $275.1 million
(after tax) as a result of the Pennsylvania Public Utility Commission's
June 30, 1998 restructuring orders on Met-Ed's and Penelec's restructuring
plans.
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(C) GPU did not incur operating losses from direct or indirect
investments in EWGs and FUCOs in 1997 in excess of 5% of GPU's
December 31, 1997 consolidated retained earnings.
As described above, GPU meets all the conditions of Rule 53(a), except for
clause (1). With respect to clause (1), the Commission determined in the
November 5 Order that GPU's financing of investments in EWGs and FUCOs in an
amount greater than 50% of GPU's average consolidated retained earnings as
otherwise permitted by Rule 53(a)(1) would not have either of the adverse
effects set forth in Rule 53(c).
Moreover, even if the effect of the capitalization and earnings of
subsidiary EWGs and FUCOs were considered, there is no basis for the Commission
to withhold or deny approval for the transactions proposed in this Application.
The transactions would not, by themselves, or even considered in conjunction
with the effect of the capitalization and earnings of GPU's subsidiary EWGs and
FUCOs, have a material adverse effect on the financial integrity of the GPU
system, or an adverse impact on GPU's public utility subsidiaries, their
customers, or the ability of State commissions to protect such public utility
customers.
The November 5 Order was predicated, in part, upon the assessment of GPU's
overall financial condition which took into account, among other factors, GPU's
consolidated capitalization ratio and the recent growth trend in GPU's retained
earnings. As of June 30, 1997, the most recent quarterly period for which
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financial statement information was evaluated in the November 5 Order, GPU's
consolidated capitalization consisted of 49.2% equity and 50.8% debt. As stated
in the November 5 Order, GPU's June 30, 1997 pro forma capitalization,
reflecting the November 6, 1997 acquisition of PowerNet Victoria, was 39.3%
equity and 61.7% debt.
GPU's June 30, 1998 consolidated capitalization consists of 42.9% equity
and 57.1% debt. Thus, since the date of the November 5 Order, there has been no
material adverse change in GPU's consolidated capitalization ratio, which
remains within acceptable ranges and limits as evidenced by the credit ratings
of GPU's electric utility subsidiaries. Moreover, on February 12, 1998, GPU sold
an additional 7 million shares of common stock and applied approximately $229
million of the net proceeds to reduce outstanding indebtedness.(3)
GPU's consolidated retained earnings grew on average approximately 4.5%
per year from 1991 through 1997. Earnings attributable to GPU's investments in
EWGs and FUCOs have contributed positively to consolidated earnings, excluding
the impact of the windfall profits tax on the Midlands Electricity plc
investment.(4)
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(3) The debt ratings of GPU's electric utility subsidiaries have not changed
since the issuance of the November 5 Order. Moreover, on February 27,
1998, Standard and Poor's Corporation assigned an "A-" credit rating to
the A$1,925 million senior bank debt of GPU PowerNet.
(4) As discussed in the November 5 Order, GPU incurred a loss for 1997 from
its investments in EWGs and Focus as a result of the 1997 windfall profits
tax imposed on Midlands Electricity, plc.
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Accordingly, since the date of the November 5 Order, the capitalization
and earnings attributable to GPU's investments in EWGs and FUCOs have not had
any adverse impact on GPU's financial integrity.
Reference is made to Exhibit G filed herewith which sets forth GPU's
consolidated capitalization and earnings at June 30, 1998 and after giving
effect to the transactions proposed herein.
Item 2. Fees, Commissions and Expenses.
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The estimated fees, commissions and expenses to be incurred in connection
with the proposed transactions will be filed by amendment.
Item 3. Applicable Statutory Provisions.
--------------------------------
Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rules 42 and 46
thereunder are believed to be applicable to the proposed dividend distribution
of Rights, and any subsequent exercise or redemption of the Rights.(5)
While the Rights are technically a dividend on the Common Stock for
corporate law purposes, in and of themselves the Rights have no economic
value and, therefore, are not a "dividend" out of GPU's capital or capital
surplus for the purpose of Section 12(c) of the Act.
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(5) GPU shareholder approval is not required for the adoption of the Plan
inasmuch as GPU does not plan to increase the number of shares of Common
Stock authorized by its certificate of incorporation. Accordingly,
Commission authorization to solicit proxies under Section 12(e) is not
being requested.
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Because there is no intent that the Rights ever become exercisable, they
are regarded more appropriately as being in the nature of an addition to the
rights of stockholders under Sections 6(a)(2) and 7(e) rather than as an
issuance of securities under Section 6(a)(1) and 7(c) and (d). However, if such
letter sections were to be regarded as applicable, then any issuance of Common
Stock pursuant to the Rights is deemed to meet the requirements of Section
7(c)(2)(D) and none of the negative findings required under Section 7(d) can be
made.
Item 4. Regulatory Approval.
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No state or federal commission (other than your Commission) has
jurisdiction with respect to the proposed transactions.
Item 5. Procedure.
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It is requested that the Commission issue an order with respect to the
transactions proposed herein at the earliest practicable date, but in any event,
not later than November 1, 1998. It is further requested that (i) there not be a
recommended decision by an Administrative Law Judge or other responsible officer
of the Commission, (ii) the Office of Public Utility Regulation be permitted to
assist in the preparation of the Commission's decision, and (iii) there be no
waiting period between the issuance of the Commission's order and the date on
which it is to become effective.
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Item 6. Exhibits and Financial Statements.
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1. Exhibits:
A-1 Articles of Incorporation of GPU, as amended through
March 27, 1990 (Incorporated by reference to Exhibit
3-A, 1989 Annual Report on Form 10-K, SEC File No.
I-6047)
A-2 Articles of Amendment to Articles of Incorporation of
GPU dated May 5, 1995 (Incorporated by reference to
Exhibit A-4, Certificate Pursuant to Rule 24, SEC
File No. 70-8569)
A-3 Articles of Incorporation of GPU as amended August 1,
1996 (Incorporated by reference to Exhibit 3-A-2,
1996 Annual Report on Form 10-K, SEC File No. 1-6047)
A-4 Bylaws of GPU as amended December 4, 1997
(Incorporated by reference to Exhibit 3-A-2 to Form
10-K, for the fiscal year ended December 31, 1997,
SEC File No. 001-06047)
A-5 Rights Agreement between GPU and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent
D Not Applicable
E Not Applicable
F-1 Opinion of Berlack, Israels & Liberman LLP -- to
be filed by amendment
F-2 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
-- to be filed by amendment
G GPU Actual and Pro form Capitalization -- to be
filed by amendment
2. Financial Statements:
1 None
Note: GPU Corporate and consolidated actual and pro forma
financial statements are omitted since the
proposed transactions will not have a material
impact thereon.
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2 None.
4 None.
Item 7. Information as to Environmental Effects.
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The proposed transactions are designed to assist GPU's Board in
responding to an unsolicited takeover. Consequently, the issuance of an order by
your Commission with respect to the subject transactions is not a major Federal
action significantly affecting the quality of the human environment.
No Federal agency has prepared or is preparing an environmental impact
statement with respect to the subject transactions. Reference is made to Item 4
hereof regarding regulatory approvals with respect to the proposed transactions.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING COMPANY
ACT OF 1935, THE UNDERSIGNED COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By:
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T.G. Howson
Vice President and Treasurer
Date: August 27, 1998
EXHIBITS TO BE FILED BY EDGAR
Exhibit:
A-5 - Rights Agreement between GPU and Chase
Mellon Shareholder Services, L.L.C., as
Rights Agent
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Exhibit A-5
GPU, INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
----------------------------------------
Rights Agreement
Dated as of August , 1998
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Table of Contents
Page
Section 1. Certain Definitions. . . . . . . . . . . . . . . . 2
Section 2. Appointment of Rights Agent. . . . . . . . . . . . 6
Section 3. Issue of Rights Certificates . . . . . . . . . . . 6
Section 4. Form of Rights Certificates. . . . . . . . . . . . 10
Section 5. Countersignature and Registration. . . . . . . . . 11
Section 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates . . . . . . . 12
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights . . . . . . . . . . . . . . . . . 13
Section 8. Cancellation and Destruction of Rights
Certificates. . . . . . . . . . . . . . . . . . 18
Section 9. Reservation and Availability of Common Stock. . . . 19
Section 10. Common Stock Record Date . . . . . . . . . . . . 21
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights . . . . . . . . . . 22
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares . . . . . . . . . . . . . . . . 40
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. . . . . . . . . . . . . 41
Section 14. Additional Covenant. . . . . . . . . . . . . . . 45
Section 15. Fractional Rights and Fractional Shares. . . . . 46
Section 16. Rights of Action . . . . . . . . . . . . . . . . 48
Section 17. Agreement of Rights Holders. . . . . . . . . . . 49
Section 18. Rights Certificate Holder Not Deemed a
Stockholder . . .. . . . . . . . . . . . . . . . 50
Section 19. Concerning the Rights Agent. . . . . . . . . . . 51
Section 20. Merger or Consolidation or Change of Name of
Rights Agent . . . . . . . . . . . . . . . . . . 52
Section 21. Duties of Rights Agent . . . . . . . . . . . . . 53
Section 22. Change of Rights Agent . . . . . . . . . . . . . 58
Section 23. Issuance of New Rights Certificates. . . . . . . 60
Section 24. Exchange. . . . .. . . . . . . . . . . . . . . . 61
Section 25. Redemption and Termination . . . . . . . . . . . 62
Section 26. Notice of Certain Events . . . . . . . . . . . . 65
Section 27. Notices. . . . . . . . . . . . . . . . . . . . . 66
Section 28. Supplements and Amendments . . . . . . . . . . . 67
Section 29. Determination and Actions by the Board of
Directors, etc. . . . . . . . . . . . . . . . . 68
Section 30. Successors . . . . . . . . . . . . . . . . . . . 69
Section 31. Benefits of this Agreement . . . . . . . . . . . 69
Section 32. Severability . . . . . . . . . . . . . . . . . . 70
Section 33. Governing Law . . . . . . . . . . . . . . . . . . 70
Section 34. Counterparts . . . . . . . . . . . . . . . . . . 70
Section 35. Descriptive Headings . . . . . . . . . . . . . . 71
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Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
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RIGHTS AGREEMENT
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This Agreement, dated as of August , 1998, between GPU, Inc., a
Pennsylvania corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agent").
W I T N E S S E T H
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WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend distribution of one common stock purchase right (a "Right")
for each outstanding share of Common Stock, par value $2.50 per share, of the
Company (the "Common Stock") outstanding at the close of business on the tenth
business day following the first public announcement by the Company of receipt
of approval of the dividend by the Securities and Exchange Commission pursuant
to the Public Utility Holding Company Act of 1935 (the "Record Date"), each
Right representing the right to purchase one tenth of a share of Common Stock,
upon the terms and subject to the conditions set forth herein, and has further
authorized and directed the issuance of one Right 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 and
the Expiration Date in accordance with the provisions of Section 23 of this
Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
------------------------
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, without the prior approval of the Board of Directors of the
Company, shall be the Beneficial Owner of 10% or more of the shares of Common
Stock then outstanding or who was such a Beneficial Owner at any time after the
date hereof, whether or not such Person continues to be the Beneficial Owner of
10% or more of the outstanding shares of Common Stock, but shall not include the
Company, any subsidiary of the Company (as such term is hereinafter defined),
any employee benefit plan of the Company or any of its subsidiaries or any
entity holding shares of Common Stock organized, appointed or established by the
Company or any of its subsidiaries for or pursuant to the terms of any such plan
or any trustee or administrator of any such plan; provided, however, that no
Person shall be an Acquiring Person if such Person became the Beneficial Owner
of shares of Common Stock or otherwise became an Acquiring Person (but for the
operation of this proviso) inadvertently (or in the good faith belief that an
acquisition of Common Shares would not cause it to become an Acquiring Person or
was unaware of this Rights Agreement) if both (i) within three Business Days
2
<PAGE>
after such Person discovers that it would otherwise have become an Acquiring
Person such Person notifies the Board of Directors of the Company that such
Person would (absent the operation of this proviso) have become an Acquiring
Person inadvertently and (ii) within ten Business Days after such notification
(or such greater time period as the Board of Directors of the Company may set by
a duly adopted resolution prior to such tenth Business Day), such Person divests
itself of a sufficient number of shares of Common Stock so that such Person is
no longer the Beneficial Owner of 10% or more of the outstanding shares of
Common Stock.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right or obligation to acquire
(whether such right or obligation is exercisable or effective
immediately or only after the passage of time) pursuant to any
agreement,
3
<PAGE>
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall be not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this clause (B) if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable by such person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding
(whether or not
4
<PAGE>
in writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in clause (B) of
subparagraph (ii) of this paragraph (c)) or disposing of any
securities of the Company.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New Jersey are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., Massachusetts time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New Jersey time, on the next
succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock, par value
$2.50 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person or, if such
Person is a subsidiary of another Person, the Person which ultimately controls
such first-mentioned Person and which has issued and outstanding such capital
stock, equity securities or equity interests.
(g) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(h) "Rights Agreement" shall mean this Agreement, including as
it may hereafter be amended.
5
<PAGE>
(i) "Stock Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such. However, a Stock Acquisition Date shall not occur if a
Person does not become an Acquiring Person by reason of the proviso in the
definition of "Acquiring Person".
(j) A "subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or voting interests is owned, directly or indirectly, by such Person,
or which is otherwise controlled by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints
----------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and in no event be
liable for, the acts or omissions of any such co-Rights Agent. In the event the
Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agents and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Rights Certificates.
-----------------------------
(a) Until the earlier of (i) the Stock Acquisition Date, (ii)
the tenth Business Day after the date of the commencement of, or first public
announcement of the intent
6
<PAGE>
of any Person (other than the Company, any subsidiary of the Company, or any
employee benefit plan of the Company or any of its subsidiaries or any trustee
or administrator of any such plan in its capacity as such) to commence (which
intention to commence remains in effect for five business days after such
announcement), a tender or exchange offer which would result in such Person
becoming an Acquiring Person or, if such event occurs before the Record Date,
the Record Date (or such later date determined by the Board of Directors of the
Company which date shall not be later than the date specified in (i)) (the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for Common Stock registered in the names of the
holders of the Common Stock (which certificates for Common Stock shall be deemed
also to be certificates for Rights) and not by separate certificates, and (y)
the Rights (and the right to receive certificates therefor) will be transferable
only in connection with the transfer of the underlying shares of Common Stock
(including a transfer to the Company); provided, however, that if a tender or
exchange offer is terminated prior to the occurrence of the Distribution Date,
then no Distribution Date shall occur as a result of that tender or exchange
offer. As soon as practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the
7
<PAGE>
records of the Company, a certificate for Rights, in substantially the form of
Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each
share of Common Stock so held. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the date of this Agreement, until the Distribution Date (or
earlier redemption, expiration or termination of the Rights), the Rights will be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights. Until the Distribution Date (or earlier redemption, expiration or
termination of the Rights), the surrender for transfer of any of the
certificates for the Common Stock outstanding on the Record Date shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. Upon the request of the holder of any shares of
Common Stock or, after the Distribution Date, the holder of any Rights, the
Company shall, at its expense, provide a copy of the Summary of Rights in the
form attached hereto as Exhibit C.
(c) Certificates for the Common Stock issued (or which become
outstanding) after the Effective Date (or as soon thereafter as is reasonably
practicable), but prior to the earlier of the Distribution Date or the
Expiration Date (as such term is hereinafter defined), shall be deemed also to
be certificates for Rights, and shall have impressed, printed,
8
<PAGE>
stamped, written or otherwise affixed onto them the following legend:
This certificate also evidences and entitles
the holder hereof to certain Rights as set forth in a
Rights Agreement between GPU, Inc. and ChaseMellon
Shareholder Services, L.L.C. (the "Rights Agent")
dated as of August , 1998 (the "Rights
Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which
is on file at the principal offices of GPU, Inc..
Under certain circumstances, as set forth in the
Rights Agreement, such Rights may be redeemed, may
expire, or may be evidenced by separate certificates
and will no longer be evidenced by this certificate.
GPU, Inc. will mail to the holder of this certificate
a copy of the Rights Agreement without charge within
fifteen days after receipt of a written request
therefor. Under certain circumstances, Rights issued
to Acquiring Persons (as defined in the Rights
Agreement) or certain related persons and any
subsequent holder of such Rights may become null and
void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. If the Company purchases or otherwise acquires shares of Common
Stock prior to the Distribution Date, any Rights associated with such Common
Stock shall be deemed canceled and retired so that the Company shall not be
entitled to exercise any Right associated with the shares of Common Stock which
are no longer outstanding.
9
<PAGE>
Section 4. Form of Rights Certificates.
----------------------------
(a) The Rights Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof) shall
each be substantially in the form set forth in Exhibit A hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 23 hereof, the Rights Certificates,
whenever distributed, on their face shall entitle the holders thereof to
purchase such number of shares (or fractions thereof) of Common Stock as shall
be set forth therein at the price per share set forth therein (the "Purchase
Price"), but the number of such shares and the Purchase Price shall be subject
to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 23 hereof that represents Rights beneficially owned by an Acquiring
Person or any Associate or Affiliate thereof and any Rights Certificate issued
at any time upon the transfer of any Rights to such an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate, and any Rights Certificate issued pursuant to Section 6
or Section 11 upon
10
<PAGE>
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain the following legend:
The Rights represented by this Rights Certificate
were issued to a Person who was an Acquiring
Person or an Affiliate or an Associate of an
Acquiring Person (as such terms are defined in the
Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby are
null and void.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.
Section 5. Countersignature and Registration. The Rights
-------------------------------------
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, any Vice Chairman of the Board, any President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent, and issued and delivered
by the Company with the same force and effect as though the person
11
<PAGE>
who signed such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at one of its offices, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the
certificate number and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
--------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- -------------------------------------------------------------------------
Subject to the provisions of Section 4(b), Section 7(e) and Section 15 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates, entitling the registered holder to
purchase a like number of shares (or fractions thereof) of Common Stock as the
Rights Certificate or Rights Certificates surrendered then entitled such holder
to purchase. Any registered holder desiring
12
<PAGE>
to transfer, split up, combine or exchange any Rights Certificate shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the principal office of the Rights Agent. Thereupon the Rights
Agent shall countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
---------- ---------------------------------------------------
of Rights.
- ----------
(a) Subject to Section 7(e) hereof, the registered holder
of any Rights Certificate may exercise the
13
<PAGE>
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon presentation of the Rights
Certificate, with the appropriate form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for each share of
Common Stock (or such other number of shares or other securities) as to which
the Rights are exercised, at or prior to the earlier of (i) the close of
business on August 6, 2008 (the "Final Expiration Date"), or (ii) the time at
which the Rights are redeemed as provided in Section 25 hereof (such earlier
time being herein referred to as the "Expiration Date"). Notwithstanding any
other provision of this Agreement, any Person who prior to the Distribution Date
becomes a record holder of shares of Common Stock may exercise all of the rights
of a registered holder of a Rights Certificate with respect to the Rights
associated with such shares of Common Stock in accordance with and subject to
the provisions of this Agreement, including the provisions of Sections 4(b), 6
and 7(e) hereof, as of the date such Person becomes a record holder of shares of
Common Stock.
(b) Subject to the terms and conditions set forth herein,
including the provisions of Sections 11 and 13 hereof, when exercisable, each
Right shall represent the right to purchase one tenth of a share of Common
Stock. The Purchase Price for each full share of Common Stock pursuant to the
exercise of a Right shall initially be $120 (being $12 per one
14
<PAGE>
tenth of a share of Common Stock), shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the appropriate form of election to purchase duly
executed, accompanied by payment of the Purchase Price for the shares (or other
securities or property) to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) in cash, or by certified check
or bank draft payable to the order of the Company, the Rights Agent shall,
subject to Section 21(k), thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Common Stock (or make available, if the Rights
Agent is the transfer agent) certificates for the number of shares of Common
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company, in its sole
discretion, shall have elected to deposit the shares of Common Stock issuable
upon exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of shares of
Common Stock as are to be purchased (in which case certificates for the shares
of Common Stock represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company will direct the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash, if any, to be
15
<PAGE>
paid in lieu of issuance of fractional shares in accordance with Section l5,
(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
Rights 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 Rights Certificate. In the
event that the Company is obligated to issue other securities of the Company,
and/or distribute other property pursuant to Section 11(a), the Company will
make all arrangements necessary so that such other securities and/or property
are available for distribution by the Rights Agent, if and when appropriate. In
addition, in the case of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii), the Rights Agent shall return such Rights Certificate to the
registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Rights Certificate no longer include
the rights provided by Section 11(a)(ii) of the Rights Agreement and if less
than all the Rights represented by such Rights Certificate were so exercised,
the Rights Agent shall indicate on the Rights Certificate the number of Rights
represented thereby which continue to include the rights provided by Section
11(a)(ii).
(d) In case the registered holder of any Rights Certificate
shall exercise (except pursuant to Section 11(a)(ii)) less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining
16
<PAGE>
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Rights Certificate or to his duly authorized assigns, subject to
the provisions of Section l5 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the time an Acquiring Person first becomes such, any
Rights beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Corporation has determined is part of a
plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Corporation shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are
17
<PAGE>
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless the certificate
contained in the appropriate form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise shall have
been completed and signed by the registered holder thereof and the Company shall
have been provided with such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
------------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for such purpose and cancellation or,
if surrendered to the Rights Agent for such purpose, shall be canceled by it,
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of 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 other Rights
18
<PAGE>
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Common Stock. The Company
---------------------------------------------
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued shares of Common Stock, or any authorized and issued
shares of Common Stock held in its treasury, the number of shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Rights and, after the occurrence of an event specified in Section 11, shall so
reserve and keep available a sufficient number of shares of Common Stock (and/or
other securities) which may be required to permit the exercise in full of the
Rights pursuant to this Agreement.
So long as the shares of Common Stock (and, after the occurrence of
an event specified in Section 11, any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares (or other securities) reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of
19
<PAGE>
Common Stock, Common Stock and/or other securities delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares or
other securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares or securities.
The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates or
of any certificates for shares of Common Stock and/or other securities upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a person other than, or in respect of the issuance or
delivery of the shares of Common Stock and/or other securities in a name other
than that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for shares of
Common Stock and/or other securities in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Distribution Date, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the securities purchasable
upon exercise
20
<PAGE>
of the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the date of the expiration of the
rights provided by Section 11(a)(ii). The Company will also take such action as
may be appropriate under the blue sky laws of the various states.
Section 10. Common Stock Record Date. Each person in whose name any
-------------------------
certificate for shares of Common Stock (and/or other securities) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the shares of Common Stock and/or other securities
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly presented and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such presentation and payment is a date upon which
the Common Stock (and/or other securities) transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Common Stock (and/or other securities) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the
21
<PAGE>
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
----------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- --------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Common
Stock payable in shares or fractional units of shares of Common
Stock, (B) subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the
Common Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a), and Section 7(e), the Purchase Price in effect at the time of
the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number of
shares (or fractions thereof) of Common Stock and the number and
kind of shares of capital stock issuable on such date upon exercise
of a
22
<PAGE>
Right, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock and other
securities which, if such Right had been exercised immediately prior
to such date and at a time when the Common Stock transfer books of
the Company were open, he would have owned upon such exercise and
been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event
shall the consideration to be paid upon exercise of one Right be
less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. If an event occurs
which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 hereof, in the event any
Person, alone or together with its Affiliates and Associates, shall
become an Acquiring Person, then proper provision shall be made so
that each holder of a Right, except as provided in Section 7(e)
hereof, shall, for a period of 60 days (or such other longer period
as may be established by action of a majority of the Board of
Directors) after the later of the
23
<PAGE>
occurrence of any such event and the effective date of an
appropriate registration statement pursuant to Section 9, have a
right to receive, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, such number of
shares (or fractions thereof) of Common Stock as shall equal the
result obtained by (x) multiplying the then current Purchase Price
for a full share of Common Stock by the then number of one tenths of
a share of Common Stock for which a Right is exercisable immediately
prior to the first occurrence of such event and dividing that
product by (y) 50% of the current market price per one full share of
Common Stock (determined pursuant to Section 11(d)) on the date of
such first occurrence (such number of one tenths of a share being
referred to as the "number of Adjustment Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), then, in the event
the Rights become so exercisable, the Company shall (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value") over (2) the Purchase
Price (such
24
<PAGE>
excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon
exercise of the Rights and payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company (including, without limitation, shares of
preferred stock which a majority of the Board of Directors of the
Company have deemed to have the same value as shares of Common Stock
(such shares of preferred stock, "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by a
majority of the Board of Directors of the Company based upon the
advice of a nationally recognized investment banking firm selected
by the Board of Directors of the Company; provided, however, that if
the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
Stock Acquisition Date, then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the
Board of Directors of the Company shall
25
<PAGE>
determine in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth
above may be extended to the extent necessary, but not more than one
hundred and fifty days (150) days after the Stock Acquisition Date,
in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first
and/or second sentences of this subparagraph (iii), the Company (x)
shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value
thereof. In the event of any such suspension, the Company shall
issue a public announcement and shall give concurrent written notice
to the Rights Agent stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement and
notice to the Rights Agent at such time as the suspension is no
longer in effect. For purposes of
26
<PAGE>
this subparagraph (iii), the value of the Common Stock shall be the
Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Common Stock on the Stock Acquisition Date and
the value of any Common Stock Equivalent shall be deemed to be the
same as the value of Common Stock on such date. The Company shall
give the Rights Agent notice of the selection of any Common Stock
Equivalent under this subparagraph (iii). In the event any
applicable law, regulation, requirement of any federal or state
agency, commission or authority, or agreements or instruments in
effect on the Stock Acquisition Date (a "Restriction") prohibits all
or part of the payments or distributions required hereunder,
payments or distributions shall be made pro rata to holders of
Rights to the extent permitted and the Company shall advise the
Rights Agent of any unpaid amounts. If any or all such Restrictions
shall thereafter lapse, additional payments or distributions shall
be made to the extent permitted pro rata to all holders of Rights
until all unpaid amounts have been paid in full. If payment has been
postponed in full or in part as aforesaid, the Company shall notify
all holders of Rights of such postponement and of the maximum amount
that may be paid or distributed consistent with any Restriction.
Such notice shall describe all such Restrictions, specify the
amount, if any, that may be
27
<PAGE>
paid or distributed and the amount of the payment of which must be
postponed, and describe the efforts being undertaken by the Company
to eliminate all such Restrictions. At such time as the Company may
make additional payments or distributions, the Company shall so
notify all holders of Rights, which notice shall indicate the
maximum additional amount that the Company may then pay or
distribute. The Company shall use its best efforts to eliminate
expeditiously any and all Restrictions so as to permit the full
payment or distribution of amounts acquired hereunder. During such
time as amounts are unpaid the Company shall not make any
distributions on, or repurchases of, or any shares of Common Stock.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Common Stock (or shares having substantially the same rights and
privileges as shares of Common Stock ("equivalent common stock") or securities
convertible into Common Stock or equivalent common stock) at a price per share
of Common Stock or per share of equivalent common stock (or having a conversion
price per share, if a security convertible into Common Stock or equivalent
common stock) less than the current market price (as defined in Section 11(d)
per share of Common Stock on such record date, the Purchase Price to be in
effect after such record date
28
<PAGE>
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date, plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock and/or equivalent common stock to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price and the denominator
of which shall be the number of shares of Common Stock outstanding on such
record date, plus the number of additional shares of Common Stock and/or
equivalent common stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be determined
reasonably and with good faith to the holders of Rights 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. Shares of
Common Stock owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in
29
<PAGE>
the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Common Stock, but including
any dividend payable in stock other than Preferred Stock) or subscription rights
or warrants (excluding those referred to in Section 11(b)), the Purchase Price
to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current market price (as defined in Section
11(d)) per share of Common Stock on such record date, less the fair market value
(as determined reasonably and with good faith to the holders of Rights 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)
of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants distributable in respect
of one share of Common Stock and the denominator of which shall be current
market price per share of the Common Stock; provided, however, that in no event
shall the
30
<PAGE>
consideration to be paid upon exercise of one Right be less than the aggregate
par value of the shares of capital stock of the Company issuable upon exercise
of one Right. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would be
in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than in Section 11(a)(iii), the "current market price" per share of Common Stock
on any date shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that in
the event that the current per share market price of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock or (B) any subdivision, combination or reclassification of such Common
Stock, and prior to the expiration of 30 Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the "current
market price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing
31
<PAGE>
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the Company.
If on any such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined reasonably and with good
faith by the Board of Directors of the Company shall be used and shall be
binding on the Rights Agent. The term, "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or
32
<PAGE>
admitted to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share determined reasonably and
with good faith to the holders of Rights 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.
(ii) For the purpose of any computation hereunder,
the "current market price" of any other security shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this Section
11(d).
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share of any other capital stock. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction which
mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) or
Section 13(a), the holder of any Right thereafter
33
<PAGE>
exercised shall become entitled to receive any shares of capital stock of the
Company other than Common Stock, thereafter the number of such other shares 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 with respect to the shares of Common Stock contained in Section 11(a)
through (c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 15
hereof with respect to the Common Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares (or
fractions thereof) of Common Stock (calculated to the nearest one-millionth)
obtained by (i) multiplying (x) the number of one tenths of a share of Common
Stock covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price
34
<PAGE>
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 15
35
<PAGE>
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one tenths of a share of Common Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated or par value, if any, of the
shares of Common Stock or other securities issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock or other securities at such
adjusted Purchase Price.
36
<PAGE>
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the shares of Common Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything to the contrary in this Section 11
notwithstanding, the Company, by action of a majority of the Board of Directors,
shall be entitled to make such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that it in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Common Stock, issuance wholly for cash of
any shares of Common Stock at less than the current market price, issuance
wholly for cash of shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common Stock, stock dividends or
issuance of rights, options or warrants referred to hereinabove in this Section
11, hereafter made by the Company to holders of its Common Stock shall not be
taxable to such stockholders.
37
<PAGE>
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a subsidiary of the Company in a transaction which does not violate Section
11(o) hereof), (ii) merge with or into any other Person (other than a subsidiary
of the Company in a transaction which does not violate Section 11(o) hereof, or
(iii) sell or transfer (or permit any subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its subsidiaries in one or more transactions each of which
does not violate Section 11(o) hereof), if (x) at the time of or immediately
after such consolidation, merger, sale or transfer there are any charter or
by-law provisions or any rights, warrants or other instruments or securities
outstanding or agreements in effect or other actions taken, which would
materially diminish or otherwise eliminate the benefits intended to be afforded
by the Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such other Person shall have executed and delivered
38
<PAGE>
to the Rights Agent a certificate certifying compliance with this
Section 11(n).
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any subsidiary to take) any action the purpose of which
is to, or if at the time such action is taken it is reasonably foreseeable that
the effect of such action is to, materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the date
of this Agreement and prior to the Distribution Date (i) declare or pay a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, (iii) combine or consolidate
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of the outstanding Common
Stock, then in any such case, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the
39
<PAGE>
event and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately following the occurrence of such event. The
adjustments provided for in this Section 11(p) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination,
consolidation or reclassification is effected.
(q) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of
--------------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
- --------
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
40
<PAGE>
Section 13. Consolidation, Merger or Sale or Transfer of Assets
---------------------------------------------------
or Earning Power.
- -----------------
(a) In the event that, on or following the Stock Acquisition
Date, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person, (y) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property or all holders of shares of Common Stock are not treated alike or
following the merger or consolidation the holders of Common Stock immediately
prior to the transaction do not hold in the same proportion all of the voting
power of the corporation surviving the transaction, or (z) the Company shall
sell, mortgage or otherwise transfer (or one or more of its subsidiaries shall
sell, mortgage or otherwise transfer), in one or more transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its subsidiaries (taken as a whole) to any other Person, then, and
in each such case, proper provision shall be made so that (i) following the
Distribution Date, each holder of a Right, shall have the right to receive, upon
the exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of shares of freely tradable Common Stock
of the Principal Party (as hereinafter defined), free and clear of liens, rights
of call or first refusal,
41
<PAGE>
encumbrances or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Purchase Price for one full share of Common
Stock by the number of one tenths of a share of Common Stock for which a Right
is then exercisable and dividing that product by (2) 50% of the current market
price per one full share of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply to such Principal Party; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock in accordance with Section 9
hereof) in connection with such consummation as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (x) or
(y) of the first sentence of this Section 13, the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are
42
<PAGE>
converted in such merger or consolidation, and if no securities are
so issued, the Person that is the other party to the merger or
consolidation (including, if applicable, the Company if it is the
surviving corporation); and
(ii) in the case of any transaction described in (z) of
the first sentence in this Section 13, the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect subsidiary or Affiliate of another Person, "Principal Party"
shall refer to such other Person; (2) in case such Person is a subsidiary,
directly or indirectly, or Affiliate of more than one Person, the Common Stocks
of two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a "Subsidiary" of both or all of
such joint venturers and the Principal Parties in each
43
<PAGE>
such chain shall bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the total of
such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and each Principal
Party and each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have a sufficient number of shares
of its authorized Common Stock which have not been issued or reserved for
issuance in order to permit the exercise in full of the Rights in accordance
with this Section 13 and shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
paragraph (a) of this Section 13, the Principal Party at its own expense will
(i) prepare and file a registration statement under the
Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, will use its best
efforts to cause such registration statement to become effective as
soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the Expiration Date;
44
<PAGE>
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights
under the blue sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all material respects with the
requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. The rights under this Section 13
shall be in addition to the rights to exercise Rights and adjustments under
Section 11(a)(ii) and, if applicable, the right to receive shares of Common
Stock in exchange for the Rights pursuant to Section 24 hereof and shall survive
any exercise or exchange thereunder.
Section 14. Additional Covenant. Notwithstanding any other provision
--------------------
of this Agreement, no adjustment to the Purchase Price, the number of shares (or
fractions of a share) of Common Stock or other securities for which a Right is
exercisable or the number of Rights outstanding or any similar 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 Section 11(a)(ii)
and Section 13, unless the terms of this Agreement are amended so as to preserve
such benefits.
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Section 15. Fractional Rights and Fractional Shares.
----------------------------------------
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(n), or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 15(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading, or if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter
46
<PAGE>
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined reasonably and with good faith to
the holders of Rights by the Board of Directors of the Company shall be used and
shall be binding on the Rights Agent.
(b) The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, the Company may 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 a share of
Common Stock.
(c) Following the occurrence of one of the transactions or
events specified in Section 11 giving rise to the right to receive shares of
Common Stock or other securities upon the exercise or exchange of a Right, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise or exchange of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock
or of any such other securities, the Company may pay to the registered holders
of
47
<PAGE>
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 a unit
or share of such securities, as the case may be. For purposes of this Section
15(c), the current market value of any such unit or share shall be the closing
price of a share of Common Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 16. Rights of Action. All rights of action in respect of
--------------------
this Agreement (other than rights of action given to the Rights Agent under
Section 19 hereof) are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it
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<PAGE>
is specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any action to enforce the provisions of this Agreement in which they
successfully prosecute their claims.
Section 17. Agreement of Rights Holders. Every holder of a Right by
-----------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) subject to Section 6 and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
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<PAGE>
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company shall not have sought or otherwise cooperated in
obtaining such order, decree or ruling and must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 18. Rights Certificate Holder Not Deemed a Stockholder. No
---------------------------------------------------- -
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be
50
<PAGE>
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 26 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions thereof.
Section 19. Concerning the Rights Agent. The Company agrees to pay
------------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company shall indemnify the Rights
Agent for, and hold it harmless against, any loss, liability, claim or expense
("Loss") arising out of or in connection with its duties under this Agreement,
including the costs and expenses of defending itself against any Loss, unless
such Loss shall have been determined by a court of competent jurisdiction to be
a result of the Rights Agent's gross negligence or intentional misconduct. The
obligations of the Company under this section shall survive the termination of
this Agreement.
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The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
The Company shall give the Rights Agent notice as promptly as
reasonably practicable of the date set for the Record Date.
Section 20. Merger or Consolidation or Change of Name of Rights
--------------------------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights Agent
- ------
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 22 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the
52
<PAGE>
Rights 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 Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in the
Rights Certificates in this Agreement.
In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 21. Duties of Rights Agent. The Rights Agent undertakes the
-----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected
by it (who may be legal counsel for the
53
<PAGE>
Company), and the opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person) be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, any Vice
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or intentional misconduct. In no case, however,
will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damages of any kind whatsoever (including but not limited
to lost profits), even if the Rights Agent has been advised of the possibility
of such damages.
54
<PAGE>
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except as to the fact that it has countersigned the Rights
Certificates) 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 Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or execution of any
Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any Rights becoming null and void pursuant to Section 7(e)
hereof or for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Sections 11 or 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it be responsible for any
determination by the Board of Directors of the Company of the current market
value of the Rights, Common Stock, or any other security pursuant to the
provisions of Section 15 hereof; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Common Stock to
55
<PAGE>
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from the Chairman of the
Board, any Vice Chairman of the Board, the President, any Vice President, or the
Secretary of the Company, and is authorized to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may at the option of the Rights Agent, set
forth in writing any action proposed to be taken or omitted by the Rights Agent
with respect to its duties or obligations under this Agreement and the date on
and/or after which such action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein (which
date shall not be less than three Business Days after the date any such officer
actually receives
56
<PAGE>
such application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions from the Company in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, omission, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company or to the holders
of the Rights resulting from any such act, omission, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall
57
<PAGE>
be reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with 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
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock by registered or certified mail, and,
subsequent to the Distribution Date, to holders of the Rights Certificates 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 Stock by registered or certified mail, and, subsequent to the
Distribution Date, to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or
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<PAGE>
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be either (a) a corporation organized and doing business under the laws of
the United States or of any state, in good standing, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of such a corporation. 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 Right 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 Stock, and, if such appointment occurs
after the Distribution Date, mail a notice thereof in writing to the registered
holders of the Rights
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<PAGE>
Certificates. 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 New Rights Certificates.
-------------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price per share and the number
or kind or class of shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Stock following the
Distribution Date and prior to the Expiration Date, the Company shall with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company
prior to the Distribution Date, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) the Company shall not be obligated to issue any such Right
Certificate 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 shall
be
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<PAGE>
issued, and (ii) no 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. Exchange.
---------
(a) The Board of Directors of the Company may, at its option,
at any time prior to the time that any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Stock of the Company at an exchange ratio equal to of
the lesser of (i) three shares of Common Stock per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof and (ii) a pro rata portion of the total number of shares
of Common Stock available for issuance at the time of the Board action (such
exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, any entity holding Common Shares for or pursuant to the terms of any
such plan or any trustee, administrator or fiduciary of such a plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights
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<PAGE>
pursuant to subsection (a) of this Section 24 and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights (other than rights to exercise
such Rights pursuant to Section 13, which shall be in addition to the rights
under this Section) shall be to receive that number of Common Shares equal to
the number of such rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
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 set the
method by which the exchange of the Common Shares for Rights 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 have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.
Section 25. Redemption and Termination.
---------------------------
(a) (i) The Board of Directors of the Company may, at its
option, at any time prior to 5:00 P.M., New Jersey time, on the earlier of (x)
the Stock Acquisition Date or (y) the
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Final Expiration Date, redeem all but not less than all of the then outstanding
Rights at the redemption price of $.001 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"). This Agreement shall terminate and be of no further force
and effect if the Effective Date shall not have occurred by December 31, 1998
(or such later date as may be determined by resolution adopted by Board of
Directors before such date).
(ii) In addition, a majority of the Board of Directors of the
Company may, at its option, at any time following the Stock Acquisition Date and
the expiration of the period during which the rights of holders of Rights
pursuant to Section 11(a)(ii) hereof may be exercised as a result of the
occurrence of such Stock Acquisition Date, but prior to any event described in
clause (x), (y), or (z) of Section 13(a) hereof, redeem all but not less than
all of the then outstanding Rights at the Redemption Price in connection with
any such event in which all holders of shares of Common Stock are treated alike
and not involving an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any Person in which the Acquiring Person or an Affiliate or
Associate of an Acquiring Person has an interest, or any other Person acting
directly or indirectly on behalf of or in concert with any such Acquiring
Person, Associate or Affiliate (other than involvement by an Acquiring Person,
Affiliate, Associate or such other Person solely as a holder of shares of
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Common Stock (of the Company) being treated like all other such holders) or (z)
following the occurrence of an event set forth in, and the expiration of any
period during which the holder of Rights may exercise the rights under, Section
11(a)(ii) if and for as long as the Acquiring Person is not thereafter the
Beneficial Owner of securities representing ten percent or more of the voting
power of all securities of the Company generally entitled to vote for the
election of directors of the Company.
(b) Immediately upon the date for redemption set forth (or
determined in the manner specified) in a resolution of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
Within ten days after the action of the Board of Directors ordering any such
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to the Rights Agent and 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
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
64
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Section 26. Notice of Certain Events. In case the Company at
-----------------------------
any time on or after the Distribution Date shall propose (a) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company) or
(b) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, or (c) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), or (d) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any
65
<PAGE>
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least 20 days prior to the record
date for determining holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Preferred Stock whichever shall be the
earlier.
In case any of the events set forth in Section 11(a)(ii) of this
Agreement shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof.
Section 27. Notices. Notices or demands authorized by this Agreement
---------
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
GPU, Inc.
310 Madison Avenue
Morristown, NJ 07962-1957
Subject to the provisions of Section 22, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class
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mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
450 West 43rd Street, 10th Floor
New York, New York 10001
Attention: Vice President -- Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 28. Supplements and Amendments. Prior to the Distribution
----------------------------
Date, the Company may from time to time supplement or amend any provision of
this Agreement in any respect without the approval of any holders of
certificates representing Common Stock and the Rights. From and after the
Distribution Date, the Company may from time to time supplement or amend this
Agreement without the approval of any holders of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person); provided, however, that this
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Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment,
provided that such supplement or amendment does not adversely affect the rights
or obligations of the Rights Agent under Section 19 or Section 21 of this
Agreement and such amendment or supplement shall be effective regardless of
whether or when executed by the Rights Agent. Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of shares of Common Stock.
Section 29. Determination and Actions by the Board of Directors,
-------------------------------------------------------
etc.. The Board of Directors of the Company shall have the exclusive power and
- ------
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this
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<PAGE>
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock or other securities outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock or any other securities of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement. All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Right Certificates and all other parties, and (y) not subject the
Board to any liability to the holders of the Right Certificates or holders of
shares of Common Stock.
Section 30. Successors. All the covenants and provisions of
------------
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 31. Benefits of this Agreement. Nothing in this
--------------------------
Agreement shall be construed to give to any person or corporation other than
the Company, the Rights Agent and the
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<PAGE>
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, the Common Stock).
Section 32. Severability. If any term, provision, covenant or
---------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 33. Governing Law. This Agreement, each Right and each
---------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Pennsylvania and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and to be performed entirely within such State; provided, however,
that all provisions regarding the rights, duties and obligations of the Rights
Agent shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such State.
Section 34. Counterparts. This Agreement may be executed in any
---------------
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original,
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and all such counterparts shall together constitute but one and the same
instrument.
Section 35. Descriptive Headings. Descriptive headings of the
---------------------
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions heereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: GPU, INC.
By
- ---------------------------- --------------------------
Name: Name:
Title: Title:
Attest: CHASEMELLON SHAREHOLDER
SERVICES L.L.C.
By
- ---------------------------- --------------------------
Name: Name:
Title: Title:
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<PAGE>
[Form of Rights Certificate]
Certificate No. R- Rights
------------
NOT EXERCISABLE AFTER August , 2008 OR
EARLIER IF NOTICE OF REDEMPTION IS GIVEN. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
[THE RIGHTS REPRESENTED BY THIS CERTIFICATE
WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING
PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE AMENDED AND RESTATED RIGHTS
AGREEMENT). THIS RIGHT CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY ARE NULL AND
VOID.]*
Rights Certificate
GPU, 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 August , 1998 (the "Rights Agreement") between GPU, Inc.,
a Delaware corporation (the "Company"), and ChaseMellon Shareholder Services,
L.L.C. (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M. (New Jersey time) on August , 2008 at the principal office of the
Rights Agent, or its successors as Rights Agent, one tenth of a fully paid,
nonassessable share of Common Stock of the Company, at a purchase price of $120
per one share of Common Stock (the "Purchase Price"), being $12 per one tenth of
a share,
- ------
* The portion of the legend in brackets shall be inserted only if
applicable.
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<PAGE>
upon presentation and surrender of this Rights Certificate with the appropriate
Form of Election to Purchase duly executed. The number of Rights evidenced by
this Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of August , 1998, based on the Common Stock
as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the
number of shares of Common Stock or other securities which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent, may be exercised for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights
74
<PAGE>
entitling the holder to purchase a like aggregate number of shares of Common
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised (other than pursuant to Section 11(a)(ii) of the
Rights Agreement) in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised. If this Rights Certificate shall be
exercised in whole or in part in pursuant to Section 11(a)(ii) of the Rights
Agreement, the holder shall be entitled to receive this Rights Certificate duly
marked to indicate that such exercise has occurred as set forth in the Rights
Agreement.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.001 per Right.
No fractional shares of Common Stock will be issued upon the
exercise of any Right or Rights evidenced hereby, which may, at the election of
the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such,
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<PAGE>
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
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<PAGE>
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of , 19 .
Attest: GPU, INC.
By
- ------------------------------ ------------------------------
Name: Name:
Title: Title:
Countersigned:
[ ]
- ------------------------------
Authorized Signature
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<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby sells,
-----------------------------------------
assigns and transfers unto
-----------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------------------------
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: , 19
----------------------- ---
------------------------------------
Signature
Signature Guaranteed:
78
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: , 19
---------------------- --
------------------------------
Signature
NOTICE
------
The signature to the foregoing Assignment must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the Beneficial Owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
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<PAGE>
FORM OF ELECTION TO PURCHASE
- ----------------------------
(To be executed if holder desires to exercise
the Rights Certificate other than pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To GPU, INC.:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Rights Certificate to purchase the
shares of Common Stock (or such other securities of the Company or any other
Person) issuable upon the exercise of the 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)
- -------------------------------------------------------------------------------
The Rights Certificate indicating the balances, if any, of such
Rights which may still be exercised pursuant to each of Section 11(a)(ii) and
Section 13 of the Rights Agreement shall be returned to the undersigned unless
such person requests that the Rights Certificate be registered in the name of
and delivered to:
Please insert social security or other identifying number
(complete only if Rights Certificate is to be registered in a name other than
the undersigned)
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated: , 19
------------------- ---
----------------------------------
Signature
Signature Guaranteed:
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<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is or was an Acquiring Person or an Affiliate or Associate
of an Acquiring Person. Dated: , 19
------------------ --
----------------------------------
Signature
NOTICE
------
The signature to the foregoing Election to Purchase must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the Beneficial Owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
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<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To GPU, INC.:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Rights Certificate to purchase
the shares of Common Stock (or such other securities of the Company) issuable
upon the exercise of the 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)
- -------------------------------------------------------------------------------
The Rights Certificate indicating the balances, if any, of such
Rights which may still be exercised pursuant to each of Section 11(a)(ii) and
Section 13 of the Rights Agreement shall be returned to the undersigned unless
such person requests that the Rights Certificate be registered in the name of
and delivered to:
Please insert social security or other identifying number
(complete only if Rights Certificate is to be registered in a name other than
the undersigned)
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated: , 19
------------------- --
------------------------------------
Signature
Signature Guaranteed:
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<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is or was an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated: , 19
-------------------- ---
---------------------------------------
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the Beneficial Owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
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<PAGE>
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On August 6, 1998, the Board of Directors of GPU, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of common stock, par value $2.50 per share (the "Common Stock"), of the
Company to stockholders of record as of the close of business on the tenth
business day following the first public announcement by the Company of receipt
of approval of the dividend by the Securities and Exchange Commission pursuant
to the Public Utility Holding Company Act of 1935 (the "Record Date"). Except as
set forth below, each Right, when exercisable, entitles the registered holder to
purchase from the Company one tenth of a share of Common Stock, at a price of
$120 per one share of Common Stock (the "Purchase Price), being $12 per one
tenth of a share of Common Stock, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent.
Until the earlier to occur of (i) a public announcement that,
without the prior consent of the Board of Directors of the Company, a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) ten
business days (or such later date as the Board may determine) following the
commencement of (or a public announcement of an intention to make) a tender
offer or exchange offer which would result in any person or group and related
persons having beneficial ownership of 10% or more of the outstanding shares of
Common Stock without the prior consent of the Board of Directors of the Company,
or (the earliest of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Stock certificates
outstanding as of the Record Date, by such Common Stock certificate and no
separate Rights Certificates will be distributed. The Rights Agreement provides
that, until the Distribution Date, the Rights will be transferred with and only
with Common Stock certificates. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Record Date (or as soon thereafter as practicable) upon transfer or
new issuance of the Common Stock will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Common Stock outstanding as of the Record Date, will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate, even without such notation. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights
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<PAGE>
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on August 6, 2008, unless earlier redeemed by the Company as
described below.
In the event that any person becomes an Acquiring Person, each
holder of a Right generally will thereafter have the right for a 60 day period
after the later of the date of such event or the effectiveness of an appropriate
registration statement (or such other longer period set by the Board of
Directors) to receive upon exercise of the Right that number of shares of Common
Stock (or, under certain circumstances, other securities) having an average
market value during a specified time period (immediately prior to the occurrence
of a Person becoming an Acquiring Person) of two times the then current Purchase
Price (such right being called the "Subscription Right"). Notwithstanding the
foregoing, following the occurrence of a Person becoming an Acquiring Person,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by the Acquiring Person or any affiliate or
associate thereof will be null and void. In addition, the Board of Directors of
the Company may, at its option, at any time following the Stock Acquisition Date
and prior to the time an Acquiring Person becomes the beneficial owner of more
than 50% of the outstanding shares of Common Stock, exchange all or part of the
then outstanding Rights (other than Rights beneficially owned by an Acquiring
Person or its affiliates or associates, which Rights have become void) for
shares of Common Stock at an exchange ratio equal to the lesser of (i) three
shares of Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar occurrence, and (ii) a pro rata portion of the
total number of shares of Common Stock then available for issuance (such
exchange ratio, the "Exchange Ratio"). Immediately upon such action by the Board
of Directors, the right to exercise the exchanged Rights with respect to the
Subscription Right will terminate and each such Right with respect to the
Subscription Right will thereafter represent the right to receive a number of
shares of Common Stock equal to the Exchange Ratio.
In the event that, at any time following the Stock Acquisition Date,
the Company is acquired in a merger or other business combination transaction or
50% or more of the Company's assets or earning power are sold (in one
transaction or a series of transactions), proper provision shall be made so that
each holder of a Right (except a Right voided as set forth above) shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company (or, in the event there is more than one acquiring
company, the acquiring company receiving the greatest portion of the assets or
earning
85
<PAGE>
power transferred) which at the time of such transaction would have a market
value of two times the exercise price of the Right (such right being called the
"Merger Right"). The holder of a Right will continue to have the Merger Right
whether or not such holder exercises the Subscription Right or the Right is
exchanged in lieu of the Subscription Right.
The Purchase Price payable, the number of Rights and the number of
shares of the Common Stock or other securities or property issuable upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of the Common Stock, (ii) upon the grant to holders of the
Common Stock of certain rights or warrants to subscribe for Common Stock or
certain convertible securities at less than the current market price of the
Common Stock or (iii) upon the distribution to holders of the Common Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends
out of earnings or retained earnings and dividends payable in Common Stock) or
of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractions of shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) the close of
business on the Stock Acquisition Date or (ii) the expiration of the Rights, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right (the "Redemption Price"), which redemption shall be effective upon the
action of the Board of Directors. Additionally, following the Stock Acquisition
Date and the expiration of the period during which the Subscription Right is
exercisable, the Board of Directors may redeem the then outstanding Rights in
whole, but not in part, at the Redemption Price provided that such redemption is
in connection with a merger or other business combination transaction or series
of transactions involving the Company in which all holders of Common Stock are
treated alike but not involving an Acquiring Person (or any person who was an
Acquiring Person) or it affiliates or associates. Upon the effective date of the
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised or exchanged, the holder thereof, as
such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
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<PAGE>
Except as set forth above, the terms of the Rights may be amended by
the Board of Directors of the Company (i) prior to the Distribution Date in any
manner, and (ii) on or after the Distribution Date to cure any ambiguity, to
correct or supplement any provision of the Rights Agreement which may be
defective or inconsistent with any other provisions, or in any manner not
adversely affecting the interests of the holders of the Rights.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
87
