<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTER ENDED SEPTEMBER 28, 1996
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-3258
LUKENS INC.
50 South First Avenue
Coatesville, PA 19320-0911
(610) 383-2000
Incorporated in Delaware
I.R.S. Employer Identification Number 23-2451900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes /x/ No
SHARES OUTSTANDING AS OF OCTOBER 21, 1996
Common Stock, $.01 Par Value, 14,801,032
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Earnings
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
THIRD QUARTER
Thirteen Weeks Ended
September 28, September 30,
1996 1995
- ----------------------------------------------------------------------------------------- ------------------
<S> <C> <C>
Net Sales $ 234,421 254,660
Operating Costs and Expenses
Cost of products sold 223,192 222,825
Selling and administrative expenses 13,089 14,307
Unusual item - work force reduction provision (Note 5) - -
- -------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 236,281 237,132
Operating Earnings (Loss) (1,860) 17,528
Interest expense 4,135 3,545
- -------------------------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes (5,995) 13,983
Income tax expense (benefit) (Note 7) (1,908) 5,285
- -------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ (4,087) 8,698
- -------------------------------------------------------------------------------------------------------------
Dividend requirements for preferred stock (499) (488)
Net Earnings (Loss) Applicable to Common Stock $ (4,586) 8,210
- -------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share
Primary $ (.31) .55
Fully diluted $ (.31) .52
Common Shares and Equivalents Outstanding
Primary 14,796 14,853
Fully diluted 16,258 16,352
Cash Dividends on Common Stock - Per Share (Note 9) $ .50 .25
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE
Thirty-nine Weeks Ended
September 28, September 30,
1996 1995
- -------------------------------------------------------------------------------- ------------
<S> <C> <C>
Net Sales 754,548 786,442
Operating Costs and Expenses
Cost of products sold 711,999 689,245
Selling and administrative expenses 40,955 43,512
Unusual item - work force reduction provision (Note 5) 10,782 -
- -----------------------------------------------------------------------------------------------
Total operating costs and expenses 763,736 732,757
Operating Earnings (Loss) (9,188) 53,685
Interest expense 12,030 9,729
- -----------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes (21,218) 43,956
Income tax expense (benefit) (Note 7) (7,023) 16,615
- -----------------------------------------------------------------------------------------------
Net Earnings (Loss) (14,195) 27,341
- -----------------------------------------------------------------------------------------------
Dividend requirements for preferred stock (1,495) (1,472)
Net Earnings (Loss) Applicable to Common Stock (15,690) 25,869
- -----------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share
Primary (1.06) 1.75
Fully diluted (1.06) 1.65
Common Shares and Equivalents Outstanding
Primary 14,778 14,820
Fully diluted 16,286 16,351
Cash Dividends on Common Stock - Per Share (Note 9) 1.00 .75
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(Dollars in thousands)
September 28, December 30,
1996 1995
- ----------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 7,087 11,056
Receivables, less allowance of $7,666 in 1996 and $6,632 in 1995 113,956 130,601
Inventories
Products finished and in process 116,030 131,886
Raw materials 28,186 26,240
Supplies 4,845 4,999
---------------------------------------------------------------------------------------------- -----------------
149,061 163,125
Deferred income taxes (Note 7) 9,184 8,442
Prepaid expenses and other 2,844 1,667
---------------------------------------------------------------------------------------------- -----------------
Total current assets 282,132 314,891
Plant and Equipment (Note 2) 954,549 908,379
Less accumulated depreciation 414,257 378,947
---------------------------------------------------------------------------------------------- -----------------
Net plant and equipment 540,292 529,432
Intangible Assets, net of accumulated amortization of $8,605 in 1996
and $7,076 in 1995 (Note 2) 84,632 57,861
Deferred Income Taxes (Note 7) 26,272 16,301
Other Assets 1,263 1,178
---------------------------------------------------------------------------------------------- -----------------
Total Assets $ 934,591 919,663
--------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable $ 96,819 121,923
Accrued employment costs 48,923 53,688
Other accrued expenses 23,719 22,209
Current maturities of long-term debt (Note 8) 4,679 10,850
---------------------------------------------------------------------------------------------- -----------------
Total current liabilities 174,140 208,670
Long-Term Debt (Note 8) 260,495 217,339
Retirement Benefits (Note 6)
Pensions 70,217 39,275
Medical and life insurance 147,088 146,401
Other Liabilities 10,477 9,259
---------------------------------------------------------------------------------------------- -----------------
Total liabilities 662,417 620,944
Commitments and Contingencies (Note 10)
Stockholders' Investment (Note 9)
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred 29,107 29,665
(485,113 shares outstanding in 1996 and 494,413 in 1995)
Common stock, 40,000,000 shares authorized and 15,813,259 issued (Note 3) 158 158
Capital in excess of par value 85,963 85,204
Earnings invested 186,451 216,934
Foreign currency translation adjustments (1,128) (1,141)
Deferred compensation - ESOP (Note 8) (16,436) (19,404)
Repurchased stock, at cost (1,013,103 shares in 1996 and 1,077,305 in 1995) (11,941) (12,697)
---------------------------------------------------------------------------------------------- -----------------
Total stockholders' investment 272,174 298,719
---------------------------------------------------------------------------------------------- -----------------
Total Liabilities and Stockholders' Investment $ 934,591 919,663
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR-TO-DATE
Thirty-nine Weeks Ended
September 28, September 30,
1996 1995
- ------------------------------------------------------------------------------------ ----------------
<S> <C> <C>
Operating Activity
Net earnings (loss) $ (14,195) 27,341
Adjustments to Reconcile Net Earnings (Loss) to
Cash Flow From Operating Activity
Depreciation and amortization 36,940 31,018
Income taxes deferred (10,713) 4,415
Provision for uncollectible accounts 5,329 7,340
Retirement benefit funding less than expense 12,959 750
Changes in working capital affecting operations
Accounts receivable 11,316 (24,856)
Inventories 14,064 (38,535)
Prepaid expenses and other (1,177) (480)
Accounts payable (28,793) 12,646
Accrued expenses (12,517) (845)
Other, net 1,615 727
- ------------------------------------------------------------------------------------ ----------------
Cash flow from operating activity 14,828 19,521
Financing Activity
Long-term debt
Proceeds from issuance of notes 74,538 -
Other borrowed - 70,350
Other repaid (34,664) (15,475)
Dividends paid (12,854) (12,843)
Proceeds from stock options exercised 802 408
Other, net (537) (12)
- ------------------------------------------------------------------------------------ ----------------
Net from financing activity 27,285 42,428
Investing Activity
Capital expenditures (45,590) (77,769)
Proceeds from sale of assets/subsidiaries 420 17,007
Other, net (912) (3,827)
- ------------------------------------------------------------------------------------ ----------------
Net for investing activity (46,082) (64,589)
Cash and Cash Equivalents
Increase (decrease) (3,969) (2,640)
Start of period 11,056 9,806
- ------------------------------------------------------------------------------------ ----------------
End of period $ 7,087 7,166
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. Basis of Presentation
The financial statements are unaudited but reflect all adjustments
(including normal recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the
interim periods presented. The preparation of our financial statements
in conformity with generally accepted accounting principles requires
estimates and assumptions that affect the reported amounts and
contingency disclosures. These financial statements should be read in
conjunction with the financial statements and related notes in the 1995
Annual Report to Stockholders. Results from any interim period are not
necessarily indicative of the results for a full year.
2. Accounting Changes
In 1996, Lukens adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." This statement requires
review and measurement methods to calculate impairment of long-lived
assets, including certain identifiable intangible assets and goodwill.
The statement also requires that long-lived assets to be disposed of be
reported at the lower of the carrying amount or fair value less costs
to sell. The adoption of the statement, based on conditions existing at
the beginning of the year, did not require a write-down of assets.
In 1996, Lukens will also adopt SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement provides for an
implementation option, reflecting the controversy surrounding the
measurement of compensation expense for stock options and other
stock-based compensation. One option is to recognize compensation
expense in the consolidated financial statements using a fair-value
based method, applied to virtually all stock-based compensation. The
alternative would not change the current intrinsic-value approach to
expense recognition, but would require pro forma disclosure in the
notes to the consolidated financial statements using the fair-value
method. We plan on adopting the pro forma disclosure option in the 1996
Annual Report to Stockholders, which will not have a material effect on
our consolidated financial condition or results of operations.
3. Stock Options
At the Annual Meeting of Stockholders on April 24, 1996, stockholders
approved an amendment to the 1985 Stock Option and Appreciation Plan
that increased the number of shares of common stock available for
issuance by 900,000 to a maximum of 2,737,500.
<PAGE>
4. Business Group Reporting
With the continued integration of our facilities, effective in 1996
business group results are reported on a product line basis. The new
groups are the Carbon & Alloy Group and the Stainless Group. Prior
year results have been restated to conform with these business groups.
5. Unusual Item
During the second quarter of 1996, Lukens announced a work force
reduction program of approximately 150 salaried positions. The program
was primarily aimed at reducing costs by integrating administrative
functions. Termination benefits accrued and charged to expense in the
second quarter totaled $10,782. On an after-tax basis, the provision
reduced results by $6,859, or $.46 per common share.
The components of the charge included severance related benefits of
$6,784. Termination benefits paid and charged against the liability as
of September 28, 1996, were $2,098. The remaining severance benefits
are anticipated to be paid during the fourth quarter of 1996 and during
1997. Pension related benefits included $3,998 from the combination of
pension plan benefits that are triggered at termination and from the
recognition of a curtailment loss. Pension benefits were measured at a
7.75 percent discount rate.
6. Retiree Benefits - Retiree Health & Life Insurance Benefits
As required under the new contract for the bargaining unit employees at
the Coatesville, Pennsylvania, plant, a Voluntary Employees'
Beneficiary Association (VEBA) Trust was established to provide funding
for retiree medical benefit and life insurance programs. The trust
agreement requires an annual contribution of $2,500 during the
four-year term of the contract. The initial contribution was made on
July 1, 1996.
7. Income Taxes
Because of the unusual nature of the work force reduction provision,
the tax impact of 36.4 percent was recognized separately in the 1996
second quarter income tax provision. Excluding the work force
provision, an effective rate of 29.9 percent was applied to 1996
results for the first three quarters. Year-to-date results were used
to develop the 1996 effective tax rate.
8. Financial Instruments - Long-term Debt
The Employee Stock Ownership Plan (ESOP) term loan, guaranteed by
Lukens, is recognized as debt in the Consolidated Balance Sheets. In
June 1996, the quarterly payments of the ESOP debt were restructured to
align anticipated benefits with the release of Lukens Inc. preferred
stock. The term of the ESOP loan on the component that carries a
variable interest rate and a prepayment option was not changed.
Prepayments may be made into 2000. With the revised estimates of
benefit requirements, however, the entire ESOP loan is projected to be
repaid by the end of 1999.
<PAGE>
9. Stockholders' Investment
Common Stock. Due to the timing of the Board of Directors meetings, two
quarterly common stock dividends were declared in the third quarter,
totaling $.50 per share. Common stock dividends paid in 1996 totaled
$1.00 per share.
Shareholder Rights Plan. In September 1996, the Board of Directors
adopted the Renewed Rights Agreement, effective when the existing plan
expires on August 10, 1997. The Renewed Rights Agreement is
substantially identical to the existing plan with the following
modifications:
. each outstanding share of common stock is entitled to one right
. each right entitles stockholders to buy one one-hundredth of a
share of Series A Junior Participating Preferred Stock at an
exercise price of $80
. the rights become exercisable if a person or group acquires or
makes a tender or exchange offer for 15 percent or more of common
stock outstanding
. Lukens will generally be entitled to redeem the rights at $.01
per right at any time until the tenth day following public
announcement that a 15 percent position has been acquired
. the purchase rights will expire on September 25, 2006, unless the
Board of Directors extends the final expiration date or redeems
the rights earlier.
10. Commitments and Contingencies
The company is party to various claims, disputes, legal actions and
other proceedings involving product liability, contracts, equal
employment opportunity, occupational safety, environmental issues and
various other matters. In the opinion of management, the outcome of
these matters should not have a material adverse effect on the
consolidated long-term financial condition or results of operations of
the company.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(Dollars in thousands)
Changes in Financial Condition during
the Thirty-nine Weeks Ended September 28, 1996
Capital Structure
Cash and cash equivalents totaled $7,087 at the end of the third quarter, a
decrease of $3,969 from the end of 1995. Working capital of $107,992 was up
$1,771 from the balance at the end of 1995. The reductions in accounts
receivable and inventory were primarily offset by the change in accounts
payable. The current ratio was 1.6 compared to 1.5 at year-end 1995.
Included in Intangible Assets and Retirement Benefits - Pensions was $25,570 of
pension minimum liabilities recognized during the first quarter. The additional
minimum liabilities resulted from a new labor contract for the Coatesville,
Pennsylvania, facility.
Debt at the end of the third quarter was $265,174, an increase of $36,985 from
the beginning of the year. The increase reflected the issuance of $75,000 of
Medium-Term Notes, Series A, under a $100,000 shelf registration completed in
June 1994. The notes are due in February 2006 and are rated BBB+ by Standard and
Poor's and Baa2 by Moody's. Interest is paid semi-annually and the notes carry a
coupon rate of 6.5 percent with an effective rate of 6.585 percent. Net proceeds
were primarily used to repay the outstanding balance of revolving credit
agreements. The ratio of long-term debt to capital (long-term debt plus
stockholders' investment) was 48.9 percent, which compared to 42.1 percent at
year-end 1995.
At the Annual Meeting of Stockholders on April 24, 1996, stockholders approved a
900,000 increase in the number of shares of common stock available for issuance
under the 1985 Stock Option and Appreciation Plan, increasing the total to
2,737,500.
Liquidity
Cash flow from operating activity totaled $14,828 for the first three quarters
compared to $19,521 in the comparable 1995 period. The decrease was primarily
due to lower results in 1996. Cash flow from operations benefited from lower
inventory levels as inventory reduction initiatives began to be realized in the
third quarter.
Financing activity generated $27,285. Proceeds from the issuance of the notes
discussed in the Capital Structure section above were offset by net repayments
of $34,664 and dividend payments of $12,854. Investing activity required $46,082
primarily for capital expenditures of $45,590.
Improving cash flow from operations for the balance of 1996 is primarily
dependent on an inventory reduction program. We do not see any immediate
improvement in the weak North American stainless steel market conditions as
imports continue to severely depress selling prices. We anticipate that we will
record a loss again in the fourth quarter, making it difficult to surpass
<PAGE>
1995 cash flow levels. Improved operations from the Steckel Mill Advanced
Rolling Technology (SMART(R)) system should be a positive factor during the
balance of the year.
We have released 10 grades of SMART carbon, alloy and stainless plate for
order-entry, in sizes that represent the core of our wide, light-gauge product
mix. Our challenge now is to balance order rates to levels that will match the
increased production of the SMART system. The wide anneal & pickle line project
is expected to be ready for production by the end of the year.
Order backlog was $118,300 at the end of the third quarter, which was 13 percent
lower than year-end 1995 order backlog and 23 percent lower than at the same
time last year.
In the long term, Lukens relies on the ability to generate sufficient cash flows
from operating activity to fund investing and financing requirements and to
maintain a target long-term debt-to-capital ratio of 35 percent. Because of our
aggressive capital expenditure program, we continue to exceed our target
long-term debt-to-capital ratio. The projected benefits of the program should
improve cash flow from operations and enable us to reach our target in the long
term.
Results of Operations for the Quarters Ended
September 28, 1996 and September 30, 1995
Operating Earnings (Loss)
The third quarter operating loss of $1,860 compared to operating earnings of
$17,528 in the third quarter of 1995. The Stainless Group reported a loss in the
third quarter primarily due to a highly competitive stainless steel market,
which put substantial pressure on base selling prices.
Sales for the third quarter were $234,421, down 8 percent from 1995 sales of
$254,660. The decrease resulted from lower sales in the Stainless Group,
partially offset by improvements in the Carbon & Alloy Group.
Interest Expense
Interest expense of $4,135 was up 17 percent compared to 1995 expense of $3,545.
The increase primarily related to higher debt levels in 1996.
<PAGE>
Income Tax Expense (Benefit)
The effective tax rate was 31.8 percent in 1996 and 37.8 percent in 1995.
Year-to-date results were used to develop the 1996 effective tax rate.
Net Earnings (Loss)
A net loss of $4,087 was recorded for the third quarter of 1996 compared to net
earnings of $8,698 for the same period in 1995.
Business Group Results
<TABLE>
<CAPTION>
Operating
Net Sales Earnings (Loss)
3Q 1996 3Q 1995 3Q 1996 3Q 1995
<S> <C> <C> <C> <C>
Carbon & Alloy $ 119,567 102,297 6,896 3,301
Stainless 114,854 152,363 (5,398) 18,604
Corporate - - (3,358) (4,377)
------------ ------------ ------------ ------------
$ 234,421 254,660 (1,860) 17,528
------------ ------------ ------------ ------------
</TABLE>
Carbon & Alloy Group
Net sales increased 17 percent. The increase was largely attributable to a 20
percent increase in shipments, particularly in the carbon steel product line.
Shipped tons were 159,600 tons in 1996 compared to 132,600 tons in 1995. The
sales improvement translated into a strong earnings improvement from the third
quarter of 1995. Although to a lesser extent, results continued to be impacted
by production disruptions and expenses associated with the commissioning of the
SMART system.
Stainless Group
Highly competitive conditions in the stainless steel market led to a 25 percent
decrease in sales. Increases in imported products contributed to depressed base
selling prices across all product lines. Shipments were 63,000 tons in 1996
compared to 63,500 tons in 1995. Excluding lower-value conversion tonnage,
shipments were down 12 percent from last year, primarily due to a decrease in
hot-rolled stainless product shipments.
The group recorded a loss in the third quarter. Lower margins due to a less
favorable shipment mix and lower selling prices contributed to the earnings
erosion.
<PAGE>
Results of Operations for the Thirty-nine Weeks Ended
September 28, 1996 and September 30, 1995
Operating Earnings (Loss)
The operating loss of $9,188 through three quarters compared to operating
earnings of $53,685 in 1995. Included in 1996 results was a work force reduction
provision of $10,782. Excluding the provision for comparison purposes, operating
earnings were $1,594, down 97 percent from 1995. The Stainless Group primarily
contributed to the decrease due to a highly competitive stainless steel market,
which put substantial pressure on base selling prices. The Carbon & Alloy Group
results were impacted by higher utility costs caused by severe winter weather
and by signing bonuses associated with a new labor contract for the Coatesville,
Pennsylvania, facility.
Sales for the first three quarters of $754,548 were 4 percent behind 1995 sales
of $786,442. The decrease resulted from weak business conditions in the
Stainless Group, partially offset by improvements in the Carbon & Alloy Group.
Interest Expense
Interest expense of $12,030 was up 24 percent compared to 1995 expense of
$9,729. Higher debt levels primarily contributed to the increase.
Income Tax Expense (Benefit)
The effective tax rate was 33.1 percent in 1996 and 37.8 percent in 1995.
Because of the unusual nature of the work force reduction provision, the tax
impact of 36.4 percent was recognized separately in the second quarter 1996
income tax provision. Excluding the work force provision, an effective rate of
29.9 percent was applied to 1996 results through the first three quarters.
Year-to-date results were used to develop the 1996 effective tax rate.
Net Earnings (Loss)
A net loss of $14,195 in 1996 compared to net earnings of $27,341 in 1995. On an
after-tax basis, the work force reduction provision recorded in the second
quarter reduced results by $6,859 in 1996.
<PAGE>
Business Group Results
<TABLE>
<CAPTION>
Operating
Net Sales Earnings (Loss)
YTD 1996 YTD 1995 YTD 1996 YTD 1995
<S> <C> <C> <C> <C>
Carbon & Alloy $ 366,389 325,460 2,523 7,576
Stainless 388,159 460,982 375 59,703
Corporate - - (12,086) (13,594)
----------- ----------- ---------- -----------
$ 754,548 786,442 (9,188) 53,685
=========== =========== ========== ===========
</TABLE>
Carbon & Alloy Group
Net sales for three quarters increased 13 percent. The increase was largely
attributable to a 16 percent increase in shipments, particularly in the carbon
steel product line. Shipped tons were 498,800 tons in 1996 compared to 428,600
tons in 1995.
Earnings through three quarters were down 67 percent, primarily due to a work
force reduction charge of $6,178 recorded in the second quarter. Before the
provision, earnings of $8,701 were up 15 percent from 1995. Also impacting 1996
results was a $3,756 charge for signing bonuses associated with the new labor
agreement at the Coatesville, Pennsylvania, facility, higher utility costs
caused by severe winter weather and strike preparation costs. Although to a
lesser extent, results continued to be impacted by production disruptions and
expenses associated with the commissioning of the SMART system.
Stainless Group
Weak stainless steel market conditions led to a 16 percent decrease in sales.
Inventory corrections by our customers during the first half of the year reduced
cold-rolled stainless shipments and increased imported products significantly
reduced stainless selling prices across product lines. A lower-value shipment
mix also contributed to the decrease. Shipments for three quarters increased
3 percent, from 196,900 tons in 1995 to 203,700 tons in 1996. The increase was
primarily due to lower-value conversion tonnage.
Earnings through three quarters were down significantly. Included in earnings
was a work force reduction charge of $3,695 recorded in the second quarter.
Excluding the unusual charge for comparison purposes, earnings of $4,070 were
down 93 percent. The decline reflected a significant deterioration in stainless
steel market conditions as previously discussed.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As of the end of the 1996 third quarter, there were 21 active workers'
compensation hearing loss claims alleged against Lukens Steel Company. This
includes five new workers' compensation hearing loss claims that were filed
against Lukens Steel Company during the 1996 third quarter.
Item 2. Changes in Securities.
Lukens has a Shareholder Rights Plan designed to deter coercive or unfair
takeover tactics and to prevent a buyer from gaining control of Lukens without
offering a fair price to stockholders. The existing plan is scheduled to expire
in August 1997. At its meeting on September 25, 1996, the Board of Directors
adopted the Renewed Rights Agreement, a copy of which is attached as Exhibit
(4), and incorporated in this Item by reference.
Effective upon expiration of the existing plan, the Renewed Rights Agreement
entitles each outstanding share of common stock to one right. Each right
entitles stockholders to buy one one-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $80. The rights become
exercisable if a person or group acquires or makes a tender or exchange offer
for 15 percent or more of common stock outstanding. The rights can also become
exercisable if the Board of Directors determines, with the concurrence of
outside directors, that a person has certain interests adverse to Lukens and has
acquired at least 10 percent of common stock outstanding.
If the company is then acquired in a merger or other business combination
transaction, each right will entitle the holder to receive, upon exercise,
common stock of either Lukens or the acquiring company having a value equal to
two times the exercise price of a right.
Lukens will generally be entitled to redeem the rights at $.01 per right at any
time until the tenth business day following public announcement that a
15 percent position has been acquired. The purchase rights will expire on
September 25, 2006, unless the Board of Directors extends the final expiration
date or redeems the rights earlier.
Item 5. Other Information.
On October 10, 1996, Lukens published a letter from the Chief Executive Officer
to the shareholders regarding the decline in the common stock price, results for
the balance of the year and other management initiatives. A copy of the letter
is attached as Exhibit (19) and is incorporated in this Item by reference.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(4) Renewed Rights Agreement, dated as of September 25, 1996
(11) Statement regarding computation of per share earnings
(19) Letter to Lukens Shareholders, dated October 10, 1996
(27) Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended September 28, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUKENS INC.
November 1, 1996 /s/ R. W. Van Sant
--------------
R. W. Van Sant
Chairman and Chief Executive
Officer
November 1, 1996 /s/ John C. van Roden, Jr.
----------------------
John C. van Roden, Jr.
Senior Vice President, Chief
Financial Officer and Treasurer
November 1, 1996 /s/ P. Blaine Clemens
-----------------
P. Blaine Clemens
Vice President and Controller
<PAGE>
RENEWED RIGHTS AGREEMENT
------------------------
RENEWED RIGHTS AGREEMENT, dated as of September 25, 1996 (the
"Agreement"), between Lukens Inc., a Delaware corporation (the "Company"), and
American Stock Transfer and Trust Company (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on July 29, 1987, the Board of Directors of the Company (the
"Board") adopted a stockholder rights plan (the "Existing Rights Plan") and
executed a Rights Agreement, dated as of July 29, 1987, between the Company and
Mellon Bank (East) N.A., which agreement was amended as of July 25, 1990 (as so
amended, the "Existing Rights Agreement"); and
WHEREAS, the Existing Rights Plan is scheduled to expire on August 10,
1997; and
WHEREAS, on September 25, 1996, the Board determined it desirable and
in the best interests of the Company and its stockholders for the Company to
renew the Existing Rights Plan upon its expiration and to implement such renewal
by executing this Agreement and declaring the dividend distribution referred to
in the next WHEREAS clause; and
WHEREAS, on September 25, 1996 (the "Rights Dividend Declaration
Date"), the Board authorized and declared a dividend distribution of one Right
(as hereinafter defined) for each share of Common Stock (as hereinafter defined)
of the Company outstanding upon the "Expiration Date" under the Existing Rights
Agreement (the "Record Date") and authorized the issuance of one Right (subject
to adjustment) for each share of Common Stock of the Company issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the Distribution Date (as hereinafter defined), and under certain
circumstances thereafter, each Right initially representing the right to
purchase one one-hundredth of a share (subject to adjustment) of Preferred Stock
(as hereinafter defined), upon the terms and subject to the conditions
hereinafter set forth (a "Right").
<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 hereinafter
defined) who or which, together with all Affiliates (as hereinafter defined) and
Associates (as hereinafter defined) of such Person, shall be the Beneficial
Owner (as hereinafter defined) of 15% or more of the shares of Common Stock of
the Company then outstanding, but shall not include an Exempt Person (as
hereinafter defined).
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(d) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board (with the concurrence of a majority of the Outside
Directors (as hereinafter defined)) upon the determination that the criteria set
forth in Section 11(a)(ii)(D) hereof apply to such Person.
(e) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act (as hereinafter defined).
(f) "Agreement" shall have the meaning set forth in the first
paragraph hereof.
(g) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrange-
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ment or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
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"Beneficial Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise
of Rights at any time prior to the occurrence of a Triggering Event (as
hereinafter defined), or (C) securities issuable upon exercise of Rights
from and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section 3(a) or Section 22
hereof (the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
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of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or under-
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standing (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (ii) of this paragraph (g)) or disposing of any
voting securities of the Company; provided, however, that nothing in this
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paragraph (g) shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty days after the
date of such acquisition.
(h) "Board" shall have the meaning set forth in the first
WHEREAS clause at the beginning of the Agreement.
(i) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
(j) "Close of Business" on any given date shall mean 5:00 P.M.,
Philadelphia time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., Philadelphia time, on the next succeeding
Business Day.
(k) "Common Stock" shall mean the common stock, presently having
a par value of $0.01 per share, of the Company or any other shares of capital
stock of the Company into which such stock shall be reclassified or changed;
provided, however, (i) that "Common Stock," when used with reference to any
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Person other than the Company organized in corporate form, shall mean the
capital stock or other equity security of such Person with the greatest voting
power, or the equity securities or other equity interest having power to control
or direct the management, of such Person or, if such Person is a Subsidiary (as
hereinafter defined) of another Person, the Person which ultimately controls
such first-mentioned Person and which has issued any such outstanding capital
stock, equity securities or equity interests and (ii) "Common Stock," when used
with reference to any Person which shall not be organized in corporate form,
means
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units of beneficial interest which (A) shall represent the right to participate
generally in the profits and losses of such Person (including, without
limitation, any flow-through tax benefits resulting from an ownership interest
in such Person) and (B) shall be entitled to exercise the greatest voting power
of such Person or, in the case of a limited partnership, shall have the power to
remove the general partner or partners.
(l) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(m) "Company" shall have the meaning set forth in the first
paragraph of the Agreement.
(n) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(o) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(p) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(q) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) hereof.
(r) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(s) "Exempt Person" shall mean (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, (iv) any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (v)
any Person or group of Persons (as determined pursuant to Section 13(d)(3) of
the Exchange Act) which was, as of the date of this Agreement, the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding or (vi) any
Person who (A) is the Beneficial Owner of less than 25% of the Common Stock of
the Company then outstanding and has reported such ownership on Schedule 13G
under the Exchange Act (or any comparable or successor report) or on Schedule
13D under the Exchange Act (or any comparable or successor report) which
Schedule 13D, as amended from time to time, does not state any intention to or
reserve
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the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of Schedule 13D (other than the
disposition of the Common Stock of the Company), (B) within 10 Business Days of
being requested by the Company to advise the Company regarding its intentions,
certifies to the Company that such Person acquired shares of Common Stock of the
Company in excess of 14.99% inadvertently or without knowledge of the terms of
the Rights, (C) the Company determines acquired shares of Common Stock of the
Company in excess of 14.99% inadvertently or without knowledge of the terms of
the Rights and (D) together with its Affiliates and Associates, thereafter does
not acquire additional shares of Common Stock of the Company while the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding.
(t) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(u) "Final Expiration Date" shall mean the Close of Business on
September 25, 2006.
(v) "NASDAQ" shall have the meaning set forth in Section
11(d)(i) hereof.
(w) "Outside Directors" shall have the meaning set forth in
Section 11(a)(ii)(B) hereof.
(x) "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(y) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, presently having a par value of $0.01 per share,
of the Company.
(z) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(aa) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(ab) "Record Date" shall have the meaning set forth in the
fourth WHEREAS clause at the beginning of the Agreement.
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(ac) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(ad) "Right" shall have the meaning set forth in the fourth
WHEREAS clause at the beginning of the Agreement.
(ae) "Rights Agent" shall have the meaning set forth in the
first paragraph of the Agreement.
(af) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(ag) "Rights Dividend Declaration Date" shall have the meaning
set forth in the fourth WHEREAS clause at the beginning of the Agreement.
(ah) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii)(A), (B), (C) or (D) hereof.
(ai) "Section 11(a)(ii) Trigger Date" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(aj) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(ak) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(al) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(am) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions of such corporation or other entity are at the time directly
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or indirectly beneficially owned, or otherwise controlled, by such Person and
any Affiliate of such Person.
(an) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ao) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ap) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
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the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Rights Certificates.
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(a) Until the earliest of (i) the Close of Business on the
tenth Business Day (or such specified or unspecified later date as may be
determined by the Board prior to the expiration of such ten Business Day period)
after the Stock Acquisition Date (or, if the tenth Business Day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), (ii) the Close of Business on the tenth Business Day (or such
specified or unspecified later date as may be determined by the Board prior to
the expiration of such ten Business Day period) after the date that a tender or
exchange offer by any Person (other than an Exempt Person) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding or (iii) immediately after the Board determines (with the
concurrence of the Outside Directors), pursuant to the criteria set forth in
Section 11(a)(ii)(D) hereof, that a Person is an Adverse Person, (the earliest
of (i), (ii) and (iii) being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the
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provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage-
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, substantially in the
form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as provided herein.
In the event that an adjustment in the number of Rights per share of Common
Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any certificates representing shares of Common Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
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This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Renewed Rights Agreement between Lukens Inc. and
American Stock Transfer and Trust Company, dated as of September 25, 1996,
as the same shall be amended, restated, extended or renewed from time to
time (the "Renewed Rights Agreement"), the terms of which are incorporated
herein by reference and a copy of which is on file at the principal offices
of Lukens Inc. Under certain circumstances set forth in the Renewed Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. Lukens Inc. will mail to the
holder of this certificate a copy of the Renewed Rights Agreement, as in
effect on the date of mailing, without charge, promptly after receipt of a
written request therefor. Under certain circumstances set forth in the
Renewed Rights Agreement, Rights beneficially owned by an Acquiring Person,
an Adverse Person or any Affiliate or Associate of an Acquiring Person or
an Adverse Person (as such terms are defined in the Renewed Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void. The Rights shall not be
exercisable, and shall be void so long as held, by a holder in any
jurisdiction where the requisite qualification to the issuance to such
holder, or the exercise by such holder, of the Rights in such jurisdiction
shall not have been obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
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Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price per one one-hundredth of a share set
forth therein (such exercise price per one one-hundredth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or an Adverse Person or any Associate or Affiliate of an Acquiring Person
or an Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any Associate or Affiliate of an Acquiring Person or an Adverse
Person) who becomes a transferee after the Acquiring Person or Adverse Person
becomes such or (iii) a transferee of an Acquiring Person or Adverse Person (or
of any Associate or Affiliate of an Acquiring Person or an Adverse Person) who
becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of
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a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend, modified as applicable to
apply to such Person:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an [Acquiring] [Adverse] Person or an
Affiliate or Associate of an [Acquiring] [Adverse] Person (as such terms
are defined in the Renewed Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void in
the circumstances specified in Section 7(e) of the Renewed Rights
Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, 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 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 Renewed Rights
Agreement any such person was not such an officer.
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(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
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Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
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(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a
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Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
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Rights.
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(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of Preferred Stock (or other
shares, securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof or (iii) the time at which the Rights expire
pursuant to Section 13(d) hereof (the earliest of (i), (ii) and (iii) being
herein referred to as the "Expiration Date").
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(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $80, and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one one-
hundredths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be
made in cash or by certified bank check or bank draft payable to the order of
the Company. In the event that the Company is obligated to issue other
securities
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(including Common Stock) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
The Company reserves the right to require, prior to the occurrence of a
Triggering Event that, upon exercise of Rights, such number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of an Acquiring Person or an Adverse Person, which the Board, in
its sole discretion, determines is or was involved in or caused or facilitated,
directly or indirectly (including through any change in the Board), such Section
11(a)(ii) Event, (ii) a transferee of such Acquiring Person or Adverse Person
(or of any Associate or Affiliate of an Acquiring Person or an Adverse Person)
who becomes a transferee after such Acquiring Person or Adverse Person becomes
such or (iii) a transferee of such Acquiring Person or Adverse Person (or of any
Associate or Affiliate of an Acquiring Person or an Adverse Person) who becomes
a transferee prior to or concurrently with such Acquiring Person or Adverse
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from such Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board has determined is part of a plan, arrangement or
understand-
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ing which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or an Adverse 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 such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
17
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Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock of the Company, other shares, securities, cash or other assets) that, as
provided in this Agreement (including, without limitation, Section 11(a)(iii)
hereof), will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock, other shares, securities,
cash or other assets) issuable and deliverable upon the exercise of the Rights
may be listed on any national securities exchange, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the Act,
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the
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various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required in other circumstances following the Distribution Date, the Company may
similarly temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification in such jurisdiction
shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or
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deliver any certificates for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be) in
a name other than that of the registered holder upon the exercise of any Rights
until such tax shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name
---------------------------
any certificate for a number of one one-hundredths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
20
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(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price
in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the
case may be, issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the aggregate
number and kind of shares of Preferred Stock or capital stock, as the case
may be, which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred 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. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, shall merge into the Company or otherwise combine
with the Company and the Company shall be the continuing or sur-
21
<PAGE>
viving corporation of such merger or combination and the Common Stock of
the Company shall remain outstanding and unchanged,
(B) any Person (other than an Exempt Person), alone or
together with its Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding, unless the event
causing the 15% threshold to be crossed is a transaction set forth in
Section 13(a) hereof, or is an acquisition of shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding shares
of Common Stock at a price and on terms determined by at least a majority
of the members of the Board who are not officers of the Company and who are
not representatives, nominees, Affiliates or Associates of an Acquiring
Person or an Adverse Person (the "Outside Directors"), after receiving
advice from one or more investment banking firms, to be (1) at a price that
is fair to stockholders (taking into account all factors which such members
of the Board deem relevant, including, without limitation, prices which
could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (2) otherwise in the
best interests of the Company and its stockholders,
(C) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with or into or otherwise
involving an Acquiring Person) which has the effect, directly or
indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity secu-
22
<PAGE>
rities of the Company or any of its Subsidiaries which is directly or
indirectly beneficially owned by any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, or
(D) The Board (with the concurrence of a majority of
the Outside Directors) shall declare any Person to be an Adverse Person,
upon a determination that such person, alone or together with its
Affiliates and Associates, has, at any time after the Rights Dividend
Declaration Date, become the Beneficial Owner of an amount of Common Stock
which the Board (with the concurrence of a majority of the Outside
Directors) determines to be substantial (which amount shall in no event be
less than 10% of the shares of Common Stock then outstanding) and a
determination by at least a majority of the Board (with the concurrence of
a majority of the Outside Directors) after reasonable inquiry and
investigation, which may include a review of the public record regarding
such Person and any information such directors may request from such Person
and consultation with such Persons as such directors shall deem
appropriate, that (1) such Beneficial Ownership by such Person is intended
to cause the Company to repurchase the Common Stock beneficially owned by
such Person or to cause pressure on the Company to take action or enter
into a transaction or series of transactions intended to provide such
Person with short-term financial gain under circumstances where such
directors determine that the best long-term interests of the Company and
its stockholders would not be served by taking such action or entering into
such transaction or series of transactions at that time or (2) such
Beneficial Ownership is causing or reasonably likely to cause a material
adverse impact (including, without limitation, impairment, of the Company's
relationships with its customers, its ability to maintain its competitive
position, its business reputation or its ability to deal with governmental
agencies) on the business or prospects of the Company,
23
<PAGE>
then, promptly after the occurrence of such event, proper provision shall
be made so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a share
of Preferred Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares being referred to as the "Adjustment
Shares").
(iii) In lieu of issuing shares of Common Stock in
accordance with Section 11(a)(ii) hereof, the Company, acting by resolution
of the Board, may and, in the event that the number of shares of Common
Stock which are authorized by the Company's Restated Certificate of
Incorporation, as amended from time to time, but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights
are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company, acting by resolution of the Board, shall: (A) determine the excess
of (1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess being
referred to as the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity secu-
24
<PAGE>
rities of the Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board has deemed to have the same
value as shares of Common Stock (such shares of preferred stock being
referred to as "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 the Board based upon the advice of a nationally
recognized investment banking firm selected by the Board; provided,
--------
however, if the Company shall not have made adequate provision to deliver
-------
value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of
the Purchase Price, shares of Common Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty
(30) day period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii) Trigger
Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be
extended, being referred to herein as the "Substitution Period"). To the
extent that the Company determines that some action need be taken pursuant
to the first and/or second sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such
first sentence and to deter-
25
<PAGE>
mine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Stock shall be the Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
the Common Stock on the Section 11(a)(ii) Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the
Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within forty-
five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or Equivalent Preferred Stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consider-
26
<PAGE>
ation part or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred 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 Preferred 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)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
27
<PAGE>
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the Current Market Price per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following such date; provided, however, that in
-------- -------
the event that the Current Market Price per share of 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 (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Market Price
shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the 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
28
<PAGE>
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. If on any
such date no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by the Board
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, Current Market Price per
share shall mean the fair value per share as determined in good faith by
the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the
manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d),
the Current Market Price per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 100 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date
of this Agreement) multiplied by the Current Market Price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as
29
<PAGE>
determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of one one-hundredth of a share of Preferred Stock
shall be equal to the Current Market Price of one share of Preferred Stock
divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (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 or one-millionth of a share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one onehundredths of a
share of Preferred Stock purchasable from
30
<PAGE>
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest one-
millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred 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-hundredths 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 one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record
31
<PAGE>
date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one one-
hundredth of a share and the number of one one-hundredths of a share which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-hundredths of
a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hun-
32
<PAGE>
dredths of a share of Preferred 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 (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be
33
<PAGE>
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.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the out-standing shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, 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 event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(q) The failure by the Board (with the concurrence of a
majority of the Outside Directors) to declare a Person to be an Adverse Person
following such Person becoming the Beneficial Owner of 10% or more of the
outstanding Common Stock shall not imply that such Person is not an Adverse
Person or limit the right of the Board (with the concurrence of a majority of
the Outside
34
<PAGE>
Directors) at any time in the future to declare such Person to be an Adverse
Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
- ------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) here-of), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then,
35
<PAGE>
and in each such case (except as may be contemplated by Section 13(d) hereof),
proper provision shall be made so that: (i) each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-hundredths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-hundredths of a share
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence) and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the Current
Market Price (determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of con-summation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, without limitation, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
36
<PAGE>
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation;
and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and
has been so registered, "Principal Party" shall refer to such other Person; and
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common 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.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will;
37
<PAGE>
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
this Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) hereof if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii)(B) hereof
(or a wholly owned Subsidiary of such Person or Persons), (ii) the price per
share of Common Stock offered in such transaction is not less than the price per
share of Common Stock paid to all holders of shares of Common Stock whose shares
were purchased pursuant to such offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
offer. Upon consummation of any such transaction contemplated by this Section
13(d), all Rights hereunder shall expire.
38
<PAGE>
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board. If on any such date no such market maker is
making a market in the Rights the fair value of the Rights on such date as
determined in good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates which evidence
39
<PAGE>
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock). In lieu of
fractional shares of Preferred Stock that are not integral multiples of one one-
hundredth of a share of Preferred Stock, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-hundredth of a share of
Preferred Stock shall be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of 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 Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common 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 Certif-
40
<PAGE>
icate (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 is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
41
<PAGE>
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
hundredths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
there-by, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the
42
<PAGE>
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or 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.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, however, that such
-------- -------
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of
43
<PAGE>
the successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of Current Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman 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
44
<PAGE>
suffered in good faith by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 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 by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred 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.
45
<PAGE>
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
-------- -------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative
46
<PAGE>
response to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise of transfer without first
consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any state
of the United States, in good standing, which is authorized to do business as a
banking institution in such state, is authorized under such laws to exercise
corporate trust powers, is subject to supervision or examination by federal or
state authority and has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the
47
<PAGE>
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 the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
-----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
-------- -------
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
48
<PAGE>
Section 23. Redemption and Termination.
--------------------------
(a) The Board may, at its option, at any time prior to the
earlier of (i) the Close of Business on the tenth Business Day following the
Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the Close of Business on the tenth Business Day
following the Record Date) or (ii) the Final Expiration Date, redeem all but not
less than all of the then outstanding Rights at a redemption price of $.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding the foregoing, the Board may not redeem any Rights following its
declaration that any Person is an Adverse Person. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
Current Market Price, as defined in Section 11(d)(i) hereof, of the shares of
Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company's right
of redemption hereunder has expired.
(b) Immediately upon the action of the Board ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the Transfer Agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
49
<PAGE>
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in 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 (ii) 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 (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (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 twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
50
<PAGE>
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Lukens Inc.
50 South First Avenue
Coatesville, Pennsylvania 19320
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
Attention: Vice President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
51
<PAGE>
Section 26. Supplements and Amendments. Prior to the Distribution
--------------------------
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Board so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Board so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person, an Adverse
Person or an Affiliate or Associate of an Acquiring Person or an Adverse
Person); provided, this Agreement may not be supplemented or amended to
--------
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person, an Adverse
Person or an Affiliate or Associate of an Acquiring Person or an Adverse
Person). Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement
to the contrary, no supplement or amendment shall be made which changes the
Redemption Price or the number of one one-hundredths of a share of Preferred
Stock for which a Right is exercisable. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the
52
<PAGE>
benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors.
----------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board (with, where specifically provided for
herein, the concurrence of the Outside Directors) or, where specifically
provided for herein, the Outside Directors, shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
the concurrence of the Outside Directors) or, when specifically provided for
herein, the Outside Directors. In addition, the Board shall have the exclusive
power and authority as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights, to declare that a
Person is an Adverse Person or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board (with, where specifically provided for herein, the concurrence
of the Outside Directors) or, where provided for herein, the Outside Directors,
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties and (y) not
subject the Board or the Outside Directors to any liability to the holders of
the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or
53
<PAGE>
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, registered holders
of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the Close of Business on the tenth Business Day following the
date of such determination by the Board. Without limiting the foregoing, if any
provision requiring that a determination be made by less than the entire Board
(or with the concurrence of a group of directors consisting of less than the
entire Board) is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable, such determination shall then be made by the
Board in accordance with applicable law and the Company's certificate of
incorporation and by-laws.
Section 31. Governing Law. This Agreement, each Right and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such state.
Section 32. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
54
<PAGE>
Section 33. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
55
<PAGE>
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: LUKENS INC.
By /s/ William D. Sprague By /s/ R.W. Van Sant
------------------------------- --------------------------------------
Name: William D. Sprague Name: R.W. Van Sant
Title: Secretary Title: Chairman and
Chief Executive Officer
Attest: AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By /s/ Susan Silber By /s/ Herbert J. Lemmer
------------------------------- --------------------------------------
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
56
<PAGE>
Exhibit A
---------
LUKENS INC.
---------------------------------------
AMENDMENT TO CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
Lukens Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance with
the provisions of Section 103 thereof, does hereby certify:
FIRST: That the Corporation filed a Certificate of Designations,
Preferences and Rights on August 3, 1987 (as amended prior to the date hereof,
the "Certificate of Designations") creating a series of 60,000 shares of
preferred stock designated as "Series A Junior Participating Preferred Stock."
SECOND: That the Corporation filed a Certificate of Increase on
August 28, 1996 to increase the number of shares constituting the series from
60,000 to 75,000.
THIRD: That none of the shares of the Corporation's Series A Junior
Participating Preferred Stock have been issued as of the last date set forth
below.
FOURTH: That the Certificate of Designations is hereby amended to
change the Rights Declaration Date (as referenced therein) from July 29, 1987 to
September 25, 1996 and that the foregoing amendment to the Certificate of
Designations was effected by the following resolution adopted by the Board at a
duly convened meeting of the Board held on September 25, 1996, pursuant to the
authority vested in it by the provisions of the Restated Certificate of
Incorporation of the Corporation:
<PAGE>
RESOLVED, that, subject to the filing by the Company of an
Amendment to Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock with the Secretary of
State of the State of Delaware, the Certificate of Designations,
Preferences and Rights of Series A Junior Participating Preferred
Stock filed by the Company with the Secretary of State of the State
of Delaware on August 3, 1987, as amended by the Certificate of
Increase filed on August 28, 1996 (the "Certificate of
Designations"), be amended to change the Rights Declaration Date
(as defined in the Certificate of Designations) from July 29, 1987
to September 25, 1996.
FIFTH: That this Amendment to Certificate of Designations,
Preferences and Rights of Series A Junior Participating Preferred Stock has been
duly adopted in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware.
SIXTH: That this Amendment to Certificate of Designations,
Preferences and Rights of Series A Junior Participating Preferred Stock shall
not become effective until 5:01 p.m., Philadelphia time, on [August 10, 1997].
The Corporation has caused this Certificate to be signed by its
___________________ this ___ day of ____________, 19__.
------------------------------------------------
Name:
Title:
A-2
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 25, 2006 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RENEWED RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR AN ADVERSE PERSON
(AS SUCH TERMS ARE DEFINED IN THE RENEWED RIGHTS AGREEMENT) WHETHER CURRENTLY
HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE
ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN [ACQUIRING]
[ADVERSE] PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON
(AS SUCH TERMS ARE DEFINED IN THE RENEWED RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RENEWED RIGHTS AGREEMENT.]/*/
THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A
HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO
THE HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF RIGHTS IN SUCH JURISDICTION SHALL
NOT HAVE BEEN OBTAINED OR BE OBTAINABLE.
Rights Certificate
LUKENS INC.
- -------------------
* The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as
applicable, and shall replace the preceding sentence.
<PAGE>
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
Renewed Rights Agreement, dated as of September 25, 1996, as amended, restated,
extended or renewed from time to time (the "Renewed Rights Agreement"), between
Lukens Inc., a Delaware corporation (the "Company"), and American Stock Transfer
and Trust Company (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (Philadelphia time) on September 25, 2006, at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, nonassessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $80 per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase set forth on the reverse hereof and the Certificate
contained therein 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 , based on the Preferred Stock
as constituted at such date.
From and after the first occurrence of a Section 11(a)(ii) Event (as
such term is defined in the Renewed Rights Agreement), if the Rights evidenced
by this Rights Certificate are beneficially owned by (i) an Acquiring Person, an
Adverse Person or an Associate or Affiliate of an Acquiring Person or an Adverse
Person (as such terms are defined in the Renewed Rights Agreement), which the
Board, in its sole discretion, determines is or was involved in or caused or
facilitated, directly or indirectly (including through any change in the Board),
such Section 11(a)(ii) Event, (ii) a transferee of any Acquiring Person or
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
after such Acquiring Person or Adverse Person becomes such or (iii) under
certain circumstances specified in the Renewed Rights Agreement, a transferee of
such Acquiring Person or Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with such Acquiring Person or
Adverse Person becoming such,
2
<PAGE>
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
The rights shall not be exercisable, and shall be void so long as
held, by a holder in any jurisdiction where the requisite qualification to the
issuance to the holder, or the exercise by such holder, of rights in such
jurisdiction shall not have been obtained or be obtainable.
As provided in the Renewed Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events (as such term is defined in the
Renewed Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Renewed Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Renewed Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific
circumstances set forth in the Renewed Rights Agreement. Copies of the Renewed
Rights Agreement are on file at the above-mentioned office of the Rights Agent
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 or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate
3
<PAGE>
shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Renewed Rights Agreement, the Rights
evidenced by this Certificate may (unless the Board of Directors (with the
concurrence of a majority of the Outside Directors (as such term is defined in
the Renewed Rights Agreement)) shall have made a determination pursuant to
Section 11(a)(ii)(D) of the Renewed Rights Agreement that a Person is an Adverse
Person) be redeemed by the Company at its option at a redemption price of $.01
per Right at any time prior to the earlier of the Close of Business on (i) the
tenth Business Day following the Stock Acquisition Date (as such time period may
be extended pursuant to the Renewed Rights Agreement) and (ii) the Final
Expiration Date (as such terms are defined in the Renewed Rights Agreement).
No fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts) are
required to be issued by the Company upon the exercise of any Right or Rights
evidenced hereby, but in lieu thereof a cash payment may be made, as provided in
the Renewed 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 Preferred
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 Renewed
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Renewed Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Rights Certificate shall have been exercised as provided in the Renewed Rights
Agreement.
4
<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 _________ __, _____
ATTEST: LUKENS INC.
By
- ---------------------------------- -----------------------------
Secretary Title
Countersigned:
- ---------------------------
By
------------------------
Authorized Signature
5
<PAGE>
[Form of Reverse Side of Rights Certificate]
ASSIGNMENT
----------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
---------------------------------------
hereby sells, assigns and transfers unto
-----------------
- ---------------------------------------------------------
(Please print name and address of transferee)
- ---------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
------------------, -----
-----------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Renewed Rights Agreement);
<PAGE>
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated:
-------------, -----------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires
to exercise Rights represented by the
Rights Certificate.)
To: LUKENS INC.:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
----------------, -----
-----------------------------------------
Signature
<PAGE>
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_] are [_]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person (as
such terms are defined in the Renewed Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated:
--------------, ----- -----------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit 11
Computation of Earnings Per Common Share
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
THIRD QUARTER
Thirteen Weeks Ended
September 28, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Primary Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) $ (4,087) 8,698
ESOP dividend requirements
Preferred stock dividends declared (582) (594)
Tax benefit on dividends - unallocated shares 83 106
------------- -------------
Net earnings (loss) applicable to common stock $ (4,586) 8,210
------------- -------------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding 14,796 14,718
Common stock equivalents:
Stock options, assuming exercised at average market price - * 135
------------- -------------
Weighted average number of common shares and equivalents outstanding 14,796 14,853
------------- -------------
Primary Earnings (Loss) per Common Share $ (0.31) 0.55
============= =============
Fully Diluted Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) $ - 8,698
Incremental cash contribution to the ESOP assuming conversion
of preferred stock to common - (223)
Tax benefit on the incremental cash contribution - 78
------------- -------------
Net earnings (loss) applicable to common stock $ - 8,553
------------- -------------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding - 14,718
Common stock equivalents:
Stock options, assuming exercised at greater of ending or average
market price - 135
Series B ESOP preferred stock - 1,499
------------- -------------
Weighted average number of common shares and equivalents outstanding - 16,352
------------- -------------
Fully Diluted Earnings (Loss) per Common Share $ (0.31)** 0.52
============= =============
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE
Thirty-nine Weeks Ended
September 28, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Primary Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) (14,195) 27,341
ESOP dividend requirements
Preferred stock dividends declared (1,762) (1,812)
Tax benefit on dividends - unallocated shares 267 340
------------- -------------
Net earnings (loss) applicable to common stock (15,690) 25,869
------------- -------------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding 14,778 14,683
Common stock equivalents:
Stock options, assuming exercised at average market price - * 137
------------- -------------
Weighted average number of common shares and equivalents outstanding 14,778 14,820
------------- -------------
Primary Earnings (Loss) per Common Share (1.06) 1.75
============= =============
Fully Diluted Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) - 27,341
Incremental cash contribution to the ESOP assuming conversion
of preferred stock to common - (680)
Tax benefit on the incremental cash contribution - 238
------------- -------------
Net earnings (loss) applicable to common stock - 26,899
------------- -------------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding - 14,683
Common stock equivalents:
Stock options, assuming exercised at greater of ending or average
market price - 152
Series B ESOP preferred stock - 1,516
------------- -------------
Weighted average number of common shares and equivalents outstanding - 16,351
------------- -------------
Fully Diluted Earnings (Loss) per Common Share (1.06)** 1.65
============= =============
</TABLE>
* Not applicable because it would result in an anti-dilutive calculation.
** Fully diluted calculation is not presented because it is anti-dilutive.
<PAGE>
October 10, 1996
Dear Lukens Shareholder:
Since the beginning of the year, we all have witnessed the disappointing drop
in Lukens' stock price. This downturn has been driven by several key market and
operating issues:
. Devastating price declines in the North American stainless steel market that
virtually eliminated stainless operating margins
. The financial impact of commissioning our Steckel Mill Advanced Rolling
Technology (SMART/k/) system
. And the poor performance of cyclical stocks, particularly in the steel sector.
Lower Stainless Steel Prices Cut Operating Margins
Unquestionably, the biggest factor affecting our stock price has been the
dramatic declines in selling prices of stainless products delivered into the
North American market over the last nine months. The decline was caused
primarily by sharply higher levels of low priced, imported stainless steel that
have poured into the country. During the first half of the year, imports
climbed to a 21 percent share of the U.S. cold-rolled sheet market, up 12
percent from the same period a year ago. In the stainless plate market, imports
captured a 19 percent market share, up 41 percent over 1995.
This flood of imports severely pressured domestic selling prices. Cold rolled
sheet prices averaged about 25 percent lower than one year ago. Even with some
reduction in raw materials costs, our cold rolled stainless operating margins
dropped by more than $500 per ton in the third quarter versus 1995. As a
result, the corporation announced on October 7 it would report a net loss for
the third quarter of between $0.26 and $0.32 per share. The falling selling
prices also were evident in the Stainless Group's year-to-date operating
results. For the first nine months of 1996, the group recorded operating
earnings of less than $1 million, almost $60 million less than the same period
last year.
While stainless demand and pricing appear to be strengthening somewhat in
Europe, we do not see any immediate improvement in North American market
fundamentals. Should the situation continue, we anticipate the corporation will
post a loss again in the fourth quarter.
In the face of rising imports, Lukens joined with other domestic specialty
steel producers in calling for its trade association, the Specialty Steel
Institute of North America (SSINA), to investigate possible violations of
Federal trade laws. The SSINA is conducting an investigation that is
aggressively looking for instances of illegal dumping and foreign subsidies.
SMART Start-Up Costs Decline, Production Capacity Increases
While significant progress has been made commissioning our new SMART system at
Conshohocken, Pa., costs associated with start-up activities have affected
earnings and share value. We estimate this impact at about $.50 per share for
the first nine months of 1996. These costs have declined steadily since the
beginning of the year and should diminish when the system is commissioned by
year-end.
<PAGE>
We continue to make excellent progress commercializing new SMART products.
Orders are being accepted for 10 carbon, alloy and stainless plate grades in
sizes that represent the core of our wide, light gauge product mix. Our
challenge now is to accelerate order rates for SMART plate products to levels
that will match the increased production capabilities of the system. The fourth
quarter will be a transition period as we work to balance orders with steadily
increasing capacity.
Management Pursues Five-Part Improvement Effort
Your management team is responding to Lukens' present market valuation with a
five-part effort to improve the elements of performance under our control:
. Finish the commissioning of Lukens' key capital projects -- including the
SMART system and our new wide annealing and pickling system.
. Introduce new SMART plate products to the market
. Continue reducing costs -- Saving more than $10 million a year, beginning in
1997.
. Complete an aggressive inventory reduction program -- eliminating about $50
million in inventory from the beginning of the year.
. And improve customer satisfaction and productivity -- we achieved record
shipped-on-time rates in the 90 to 100 percent range at our stainless
operations in September; quality ratings climbed to record highs; and both the
Coatesville and Houston, Pa., melt shops achieved record tons-per-hour
productivity rates.
Steel Stocks Fall Out Of Favor
Our share price also has fallen victim to Wall Street's apparent present
dislike of cyclical stocks, particularly in the steel sector. Since the
beginning of the year, the S&P Steel Group is down more than 10 percent while
the S&P 500 is up almost 12 percent. Almost all steel stocks have suffered in
the sell-off of cyclical issues, making it a difficult environment in which to
improve shareholder value.
Dividend Continues
We deeply appreciate your patience and understanding during a very difficult
period. We've stayed the course in the face of adversity -- confident our
strategies are sound, and that the fundamentals are in place for long-term
growth. Cash flow remains good, there are no plans for a reduction in the
dividend and our capital projects are only beginning to demonstrate their great
potential. We ask for your continued support as we surmount the challenges that
lie ahead.
Sincerely,
/s/ R.W. Van Sant
RWV/rdw
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
LUKENS INC. FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED
SEPTEMBER 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 7,087
<SECURITIES> 0
<RECEIVABLES> 121,622
<ALLOWANCES> 7,666
<INVENTORY> 149,061
<CURRENT-ASSETS> 282,132
<PP&E> 954,549
<DEPRECIATION> 414,257
<TOTAL-ASSETS> 934,591
<CURRENT-LIABILITIES> 174,140
<BONDS> 260,495
0
29,107
<COMMON> 158
<OTHER-SE> 242,909
<TOTAL-LIABILITY-AND-EQUITY> 934,951
<SALES> 754,548
<TOTAL-REVENUES> 754,548
<CGS> 711,999
<TOTAL-COSTS> 711,999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,329
<INTEREST-EXPENSE> 12,030
<INCOME-PRETAX> (21,218)
<INCOME-TAX> (7,023)
<INCOME-CONTINUING> (14,195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,195)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
