EXHIBIT 10.21
LONE STAR ENERGY PLANT OPERATIONS, INC.
AND
XXXXXX TRUST COMPANY OF NEW YORK,
RIGHTS AGENT
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RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 10, 1996
TABLE OF CONTENTS
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 6
Section 3. Issuance of Rights Certificates 7
Section 4. Form of Rights Certificates 8
Section 5. Countersignature and Registration 9
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates 10
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights 11
Section 8. Cancellation and Destruction of Rights Certificates 12
Section 9. Reservation and Availability of Capital Stock 13
Section 10. Preferred Stock Record Date 14
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights 15
Section 12. Certification of Adjusted Purchase Price or Number of Shares 23
Section 13. Consolidation. Merger or Sale or Transfer of Assets
or Earning Power 23
Section 14. Fractional Rights and Fractional Shares 25
Section 15. Rights of Action 26
Section 16. Agreement of Rights Holders 27
Section 17. Rights Certificate Holder Not Deemed a Shareholder 27
Section 18. Concerning the Rights Agent 28
Section 19. Merger or Consolidation or Change of Name of Rights Agent 28
i
Section 20. Duties of Rights Agent 29
Section 21. Change of Rights Agent 31
Section 22. Issuance of New Rights Certificates 31
Section 23. Redemption and Termination 32
Section 24. Notice of Certain Events 33
Section 25. Notices 34
Section 26. Supplements and Amendments 34
Section 27. Successors 35
Section 28. Determinations and Actions by the Board of Directors, etc 35
Section 29. Benefits of this Agreement 35
Section 30. Severability 35
Section 31. Governing Law 36
Section 32. Counterparts 36
Section 33. Descriptive Headings 36
Exhibit A -- Statement of Resolution Establishing and
Designating a Series of Shares of Lone
Star Energy Plant Operations, Inc.
Exhibit B -- Form of Rights Certificate
Exhibit C -- Summary of Rights to Purchase Voting
Preferred Stock
ii
RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of September 10, 1996 (the "Agreement"), between
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Lone Star Energy Plant Operations, Inc., a Texas corporation (the "Company"),
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and Xxxxxx Trust Company of New York, a New York trust company (the "Rights
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Agent").
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W I T N E S S E T H
- - - - - - - - - -
WHEREAS, effective September 10, 1996 (the "Rights Declaration Date"), the
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Board of Directors of the Company (the "Board") authorized the issuance and
distribution of one Right for each share of Common Stock outstanding upon the
close of business on September 30, 1996 (the "Record Date"), and has authorized
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the issuance of one Right (as such number may hereinafter be adjusted pursuant
to the provisions of Section 11(p) hereof) for each share of Common Stock issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date (as hereinafter defined), each
Right initially representing the right to purchase one two-hundredths of a share
of $200 Series A Junior Participating Preferred Stock of the Company having the
rights, powers and preferences set forth in the Statement of Resolution of the
Company, attached hereto as Exhibit A upon the terms and subject to the
conditions hereinafter set forth (the "Rights").
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WHEREAS, the Board has also approved an Agreement and Plan of Merger (the
"EEX Plan of Merger") which provides that (i) ENSERCH Exploration, Inc., a Texas
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corporation ("EEX") whose common stock is 83% owned by ENSERCH Corporation
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("ENSERCH"), shall merge (the "EEX Merger") with and into the Company, (ii) the
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Company shall be the surviving corporation of the EEX Merger in which the name
of the Company shall be changed to ENSERCH Exploration, Inc. ("New EEX"), and
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(iii) this Agreement shall survive the effectiveness the EEX Merger and Rights
shall be issued in respect of all shares of Common Stock issued in the EEX
Merger upon conversion of common stock of EEX or the Company. The EEX Merger
will become effective upon the issuance of a certificate of merger therefor by
the Secretary of State of the State of Texas (the "EEX Merger Effective Time")
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and, from and after the EEX Merger Effective Time, all references herein to
"Company" shall become references to New EEX as the surviving corporation of the
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EEX Merger. After the EEX Merger ENSERCH plans to distribute all of the shares
of Common Stock then owned by ENSERCH, expressly including all of the shares
issued to ENSERCH upon the conversion of common stock of EEX into Common Stock
in the EEX Merger, to the holders of the common stock of ENSERCH on a pro rata
basis (the "ENSERCH Distribution").
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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
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following terms have the meanings indicated:
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(a) "Acquiring Person" shall mean any Person who or which, together with
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all Affiliates and Associates of such Person, shall be the Beneficial Owner of
eighteen percent (18%) or more of the shares of Common Stock then outstanding,
but shall not include (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 such Person who has reported
or is required to report such ownership (but less than 20%) 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 does not state any intention to or reserve 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 such Schedule (other than the disposition of the
Common Stock) and, within 10 Business Days of being requested by the Company to
advise it regarding the same, certifies to the Company that such Person acquired
shares of Common Stock in excess of 17.9% inadvertently or without knowledge of
the terms of the Rights and who, together with all Affiliates and Associates,
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of eighteen percent (18%) or more of the shares of Common Stock
then outstanding; provided, however, that if the Person requested to so certify
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fails to do so within 10 Business Days, then such Person shall become an
Acquiring Person immediately after such 10 Business Day Period, (vi) any such
Person who became such a Person solely as a result of having received shares of
Common Stock in the ENSERCH Distribution and who, together with all Affiliates
and Associates, thereafter does not acquire any additional shares of Common
Stock while the Beneficial Owner of eighteen percent (18%) or more of the Common
Stock then outstanding, or (vii) prior to the effective time of the ENSERCH
Distribution, ENSERCH and any of its Subsidiaries and other Affiliates and
Associates.
(b) "Act" shall mean the Securities Act of 1933.
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(c) "Adjustment Shares" shall have the meaning set forth in Section
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11(a)(ii) hereof.
(d) "Affiliate" and "Associate" shall have the respective meanings ascribed
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to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and in effect on the date of this
Agreement (the "Exchange Act").
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(e) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
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to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
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shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange
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offer made by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, (E)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to Section 11(i)
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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 reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (e)) or
disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (e) shall cause a Person
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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 (40) days after the date of such acquisition.
Notwithstanding anything contained in this Section 1(e) to the contrary,
securities (including any securities issuable upon conversion or exercise of
such securities) issued (or agreed to be issued) by the Company or a Subsidiary
of the Company to any Person or Persons prior to the Stock Acquisition Date
shall not be deemed to be "beneficially owned" by such Person or Persons for
purposes of determining whether any such Person is an Acquiring Person or
whether a Stock Acquisition Date or a Section 11(a)(ii) Event (as hereinafter
defined) has occurred,
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provided that (i) such securities were issued (or agreed to be issued) as part
of a business combination (as hereinafter defined) involving such Person or
Persons which is approved by a majority of the Continuing Directors (as
hereinafter defined) at such time as there are Continuing Directors then in
office, and (ii) it is contemplated at the time of issuance (or agreement to
issue) that such securities will be transferred (and in fact are transferred
within one year of issuance) to other Persons. In the event that such
securities are not transferred to other Persons within one year of issuance,
then such Person or Persons shall be deemed to "beneficially own" all such
securities beneficially owned by it or them at the end of such year. For
purposes hereof, the term "business combination" shall mean any merger or
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consolidation of the Company or any Subsidiary of the Company with any other
Person, any sale or exchange to the Company or any Subsidiary of the Company of
all or any part of the assets of any other Person or any Subsidiary of such
other Person, any share exchange transaction under the Texas Business
Corporation Act or any other transaction pursuant to which all or any part of
the assets and operations of any other Person and its Subsidiaries are combined
with or acquired by the Company or any Subsidiary of the Company.
(f) "Business Day" shall mean any day other than a Saturday, Sunday or a
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day on which banking institutions in the States of Texas or New York are
authorized or obligated by law or executive order to close.
(g) "Close of business" on any given date shall mean 5:00 P.M., New York
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City time (or Dallas time for purposes of Section 23 hereof), on such date;
provided, however, that if such date is not a Business Day it shall mean 5:00
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P.M., New York City time (or Dallas time for purposes of Section 23 hereof), on
the next succeeding Business Day.
(h) "Common Stock" shall mean the common stock, par value $0.01 per share,
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of the Company, except that (i) from and after the effective time of the EEX
Merger, "Common Stock" shall mean the common stock, par value $.01 per share, of
New EEX as the surviving corporation of the EEX Merger, and (ii) "Common Stock"
when used with reference to any Person other than the Company or New EEX shall
mean the capital stock of such Person with the greatest voting power, or the
equity securities or other equity interest having power to control or direct the
management, of such Person.
(i) "Common Stock Equivalents" shall have the meaning set forth in Section
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11(a)(iii) hereof.
(j) "Continuing Director" shall mean (i) any member of the Board of
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Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
was a member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an Acquiring Person or
of any such Affiliate or
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Associate, if such Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
(k) "Current Market Price" shall have the meaning set forth in Section
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11(d) hereof.
(l) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
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hereof.
(m) "Distribution Date" shall have the meaning set forth in Section 3(a)
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hereof.
(n) "Equivalent Preferred Stock" shall have the meaning set forth in
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Section 11(b) hereof.
(o) "Exchange Act" shall have the meaning set forth in Section 1(d) hereof.
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(p) "Expiration Date" shall have the meaning set forth in Section 7(a)
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hereof.
(q) "Final Expiration Date" shall mean the close of business on September
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10, 2006.
(r) "NASDAQ" shall have the meaning set forth in Section 11(d)(i) hereof.
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(s) "Original Rights" shall have the meaning set forth in Section 1(e)
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hereof.
(t) "Person" shall mean any individual, firm, corporation, partnership,
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limited liability company, trust or other entity.
(u) "Preferred Stock" shall mean shares of $200 Series A Junior
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Participating Preferred Stock, without par value, of the Company (New EEX after
the EEX Merger Effective Time) and, to the extent that there are not a
sufficient number of shares of $200 Series A Junior Participating Preferred
Stock authorized to permit the full exercise of the then outstanding Rights,
such other series of Preferred Stock, without par value, of the Company
designated by the Board of Directors for such purpose containing terms
substantially similar to the terms of the $200 Series A Junior Participating
Preferred Stock.
(v) "Principal Party" shall have the meaning set forth in Section 13(b)
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hereof.
(w) "Purchase Price" shall have the meaning set forth in Section 4(a)
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hereof.
(x) "Qualified Offer" shall have the meaning set forth in Section 11(a)(ii)
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hereof.
(y) "Record Date" shall have the meaning set forth in the first WHEREAS
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clause at the beginning of this Agreement.
(z) "Redemption Price" shall have the meaning set forth in Section 23(a)
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hereof.
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(aa) "Rights" shall have the meaning set forth in the first WHEREAS clause
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at the beginning of this Agreement.
(bb) "Rights Agent" shall have the meaning set forth in the parties clause
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at the beginning of this Agreement.
(cc) "Rights Certificates" shall have the meaning set forth in Section 3(a)
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hereof.
(dd) "Rights Declaration Date" shall have the meaning set forth in the
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third WHEREAS clause at the beginning of this Agreement.
(ee) "Section 11(a)(ii) Event" shall mean any event described in Section
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11(a)(ii) hereof.
(ff) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
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Section 11(a)(iii) hereof.
(gg) "Section 13 Event" shall mean any event described in clauses (x), (y)
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or (z) of Section 13(a) hereof.
(hh) "Spread" shall have the meaning set forth in Section 11(a)(iii)
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hereof.
(ii) "Stock Acquisition Date" shall mean the first date of public
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announcement (which, for purposes of this definition, shall include, without
limitation, a report filed or amended pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(jj) "Subsidiary" shall mean, with reference to any Person, any corporation
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or other entity of which an amount of securities or other equity interests with
voting power (in the absence of a contingency) sufficient to elect at least a
majority of the directors, managers or the equivalent of such corporation or
other entity is beneficially owned, directly or indirectly, by such Person, or
otherwise controlled by such Person. The foregoing notwithstanding, each
limited partnership of which the Company or any of its other Subsidiaries is a
general partner shall be deemed to be a Subsidiary of the Company.
(kk) "Substitution Period" shall have the meaning set forth in Section
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11(a)(iii) hereof.
(ll) "Summary of Rights" shall have the meaning set forth in Section 3(b)
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hereof.
(mm) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
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hereof.
(nn) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
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Section 13 Event.
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Section 2. Appointment of Rights Agent. The Company hereby appoints the
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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 earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business on the Record Date),
or (ii) the close of business on the tenth Business Day (or such later date as
the Board shall determine) after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act, if upon consummation thereof, such Person would be the Beneficial Owner of
eighteen percent (18%) or more of the shares of Common Stock then outstanding
(the earlier of (i) and (ii) being herein referred to as the "Distribution
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Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
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(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
right certificates, in substantially the form of Exhibit B hereto (the "Rights
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Certificates"), evidencing one Right for each share of Common Stock so held,
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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) The Company will make available a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights"),
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to any holder of Rights who may so request from time to time. With respect to
certificates for the Common Stock outstanding as of the Record Date, or which
were issued subsequent to the Record Date, unless and until the Distribution
Date shall occur, 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
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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 (whether originally issued or from the Company's treasury and
expressly including all of the shares issued upon the conversion of common
stock of EEX into Common Stock in the EEX Merger) 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:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between the Company and
the Rights Agent thereunder (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file
at the principal offices of the Rights Agent. Under certain circumstances,
as set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate.
The Rights Agent will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
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 set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject
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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 two-hundredths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one two-hundredth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
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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
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding (whether or not in
writing) which has as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
The Company shall notify the Rights Agent, and, if such notification is
given orally, the Company shall confirm same in writing on or prior to the
Business Day next following, at such time as the Company has notice that any
Person constitutes an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, and until such notice is received by the Rights Agent, the
Rights Agent may conclusively presume for all purposes that the foregoing legend
need be imprinted only on Rights Certificates beneficially owned by Persons that
the Company has previously identified to the Rights Agent as constituting an
Acquiring Person or an Affiliate or Associate of an Acquiring Person and
transferees of any such Persons. The Rights Agent, however, will use its best
efforts to assist the Company in its efforts to identify any such persons.
Section 5. Countersignature and Registration.
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(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
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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 Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the 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 two-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 Rights Certificate or Rights Certificates, as the case may
be, as so requested.
10
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute. and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
----------------------------------- -------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office 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 two-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) the close of business on
September 10, 2006 (the "Final Expiration Date"), or (ii) the time at which the
---------------------
Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and
(ii) being herein referred to as the "Expiration Date").
---------------
(b) The Purchase Price for each one two-hundredth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $45.00, and shall
be subject to adjustment from time to time as provided in Section 11 and Section
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 two-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 two-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
11
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 two-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 (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.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights or (B) a transfer
which the Board has determined is part of a plan, arrangement or understanding
(whether or not in writing) which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
neither the Company nor the Rights Agent shall have any liability to any holder
of Rights Certificates or other Person as a result of the Company's failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
12
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled 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 canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of 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 or other securities, or both, 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 or other securities, or both) that, as provided in this Agreement
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock or other securities, or both) 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 occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration
13
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction has not been obtained, the exercise
thereof is not permitted under applicable law or a registration statement has
not been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one two-hundredths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock or
other securities, or both) 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 two-hundredths of a share of Preferred
Stock (or Common Stock or other securities, or both, 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 two-hundredths of a share of Preferred Stock (or Common Stock or
other securities, or both, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one two-hundredths of a share of Preferred Stock (or Common Stock or other
securities, or both, 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.
14
Section 10. Preferred Stock Record Date. Each person in whose name any
---------------------------
certificate for a number of one two-hundredths of a share of Preferred Stock (or
Common Stock or other securities, or both, 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
or other securities, or both, 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 or other securities, or both, 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 or other securities, or both, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred 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, such holder 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
15
be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person, alone or together with its Affiliates
and Associates, shall, at any time after the Rights Declaration Date,
becomes an Acquiring Person, unless the event causing such Person to become
an Acquiring Person 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 a 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, after receiving advice
from one or more investment banking firms selected by them, to be (a) at a
price that is fair to shareholders (taking into account all factors that
such members of the Board deem relevant including, without limitation,
prices that could reasonably be achieved if the Company or its assets were
sold on an orderly basis designed to realize maximum value) and (b)
otherwise in the best-interests of the Company and its shareholders (a
"Qualified Offer"), then, promptly following 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
two-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 two-
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 fifty percent (50%) of the Current
Market Price (determined pursuant to Section 11(d) hereof) per share of
Common Stock on the date of such first occurrence (such number of shares,
the "Adjustment Shares").
-----------------
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the fore going subparagraph (ii) of this Section
11(a), the Company shall: (A) determine the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") and (B) with
-------------
respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units
of shares, of voting preferred stock,
16
such as the Preferred Stock, which the Board has deemed to have essentially
the same value or economic rights as shares of Common Stock (such shares of
voting 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 (in the case of clauses (1),
(3), (4), (5) and (6)) equal to the Current Value (less the amount of any
reduction in the Purchase Price), where such aggregate value has been
determined by the Board based upon the advice of a nationally recognized
investment banking firm selected by the Board; provided, however, that if
-------- -------
the Board 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
and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
------------------------------
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread.
For purposes of the preceding sentence, the term "Spread" shall mean the
------
excess of (i) the Current Value over (ii) the Purchase Price. If the Board
determines 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
shareholder approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended, is hereinafter called the
"Substitution Period"). To the extent that some action is to be taken
--------------------
pursuant to the first and/or third sentences of this Section 11(a)(iii) the
Company (1) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek such shareholder approval for such any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercis ability of the Rights
has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of each Adjustment Share shall be the current
market price 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
17
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 consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, 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
dividend out of the earnings or retained earnings of the Company), assets (other
than a regular quarterly dividend referred to above or 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.
18
(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) con secutive Trading Days (as 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 the ex-dividend
date for such divi dend or distribution, or the record date for such
subdivision, combination or reclassification shall not have occurred prior
to the commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such case, the
"Current Market Price" shall be properly adjusted to take into account 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 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
-------
19
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 200 (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 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 two-hundredth of a share of
--------------------
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 200.
(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.
20
(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 two-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one two-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one two-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 two-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 two-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 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 two-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights
21
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one two-hundredth of a share and the number of one two-
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 two-
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 two-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 two-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 two-hundredths 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 xxxx 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 their 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
shareholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise
22
eliminate the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
shareholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights 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
outstanding 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.
Section 12. Certification 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) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights Certificate 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, (w) the Common Stock shall be acquired by any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) pursuant to a share exchange transaction effected in accordance
with the applicable provisions of the Texas Business Corporation Act, (x) the
Company shall consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such
23
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) except by
way of a pro-rata distribution to all holders of Common Stock, the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than fifty percent (50%) of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as 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 two-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 two-hundredths of a share
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) fifty percent
(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
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of 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.
(b) "Principal Party" shall mean:
-----------------
(i) in the case of any transaction described in clause (w), (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of
any securities into
24
which shares of Common Stock of the Company are converted in such merger or
consolidation, or for which such shares are exchanged in such share
exchange, and if no securities are so issued, the Person that is the other
party to such merger, consolidation or share exchange; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
-------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common 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 share exchange,
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 share exchange, consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement 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 share
exchanges, mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any
25
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, Section 13
shall not be applicable to a transaction described in subparagraphs (w), (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a Qualified Offer (or a
wholly owned subsidiary of any 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 tender offer or exchange 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 tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
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 two-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of
26
Preferred Stock (other than fractions which are integral multiples of one two-
hundredth of a share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one two-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 two-
hundredth of a share of Preferred Stock. For purposes of this Section 14(b),
the current market value of one two-hun dredth of a share of Preferred Stock
shall be one two-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 Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it 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:
27
(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
(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 Shareholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one two-
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
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting shareholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
28
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 acceptance, exercise or performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, or expense, incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done, suffered 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 (including reasonable
counsel fees and expenses).
(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 counter signed; and in case at that time any of the
Rights Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name
29
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, suffered or omitted by it in good faith and in reliance upon 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, suffering or omitting 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 Corporate Secretary or any Assistant Corporate
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full and complete authorization to the Rights Agent for any action
taken, suffered or omitted 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, the Summary of
Rights 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 cove nant 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
30
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.
(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 Corporate
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,
suffered or omitted to be taken by it in good faith in reliance upon
instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
-------- -------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof, or
both, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice
31
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) legal
business entity organized and doing business under the laws of the United States
or of the States of Texas or New York (or of any other state of the United
States so long as such corporation is authorized to do business in the States of
Texas or New York), in good standing, having a principal office in the. States
of Texas or New York which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $25,000,000 or (b) an
affiliate of a legal business entity 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 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, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter
32
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.
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 fifteenth 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 fifteenth day following the Record Date), as such
date may be extended from time to time (but in no event more than a year from
the Stock Acquisition Date) by the Board while the Rights are redeemable in
accordance with the terms of this Agreement, or (ii) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"); provided, however, if the Board authorizes redemption of the Rights or
-------- -------
the extension of the redemption period in either of the circumstances set forth
in clauses (i) and (ii) below, then there must be Continuing Directors then in
office and such authorization shall require the concurrence of a majority of
such Continuing Directors: (i) such authorization occurs on or after the time a
Person becomes an Acquiring Person, or (ii) such authorization occurs on or
after the date of a change (resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement of such solicitation if
any Person who is a participant in such solicitation has stated (or, if upon the
commencement of such solicitation, a majority of the Board has determined in
good faith) that such Person (or any of its Affiliates or Associates) intends to
take, or may consider taking, any action which would result in such Person
becoming an Acquiring Person or which would cause the occurrence of a Triggering
Event unless, concurrent with such solicitation, such Person (or one or more of
its Affiliates or Associates) is making a tender offer which constitutes a
Qualified Offer (as defined in Section 11(a)(ii) hereof). 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
33
of the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. 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 fifty percent (50%) of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 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.
(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.
34
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:
Lone Star Energy Plant Operations, Inc.
Energy Square II
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
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:
Xxxxxx Trust Company of New York
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution Date,
--------------------------
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to conform, in the opinion of the Board,
to applicable law, 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 in any material respect the interests of the holders of Rights
Certificates. 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. 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. Notwithstanding anything contained herein to the
contrary, this Agreement may not be amended prior to the Distribution Date and
following the first occurrence of an event
35
set forth in clauses (i) and (ii) of the proviso to Section 23(a) hereof, unless
there are Continuing Directors and such amendment is approved by a majority of
the Continuing Directors.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors, etc.
---------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board (with, where specifically provided for
herein, the con xxxxxxxx of the Continuing 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 Continuing Directors) or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (with, where specifically provided for herein the
concurrence of the Continuing 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 Continuing
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 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 lan guage from this
Agreement would adversely affect the purpose or effect of this Agreement, the
36
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date of
such determination by the Board. Without limiting the foregoing, if any
provision requiring a majority of the Continuing Directors to act 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 Articles 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 Texas 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, except that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
New York.
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.
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.
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: LONE STAR ENERGY PLANT
OPERATIONS, INC.
By: /s/ X. X. Xxx By:/s/ X. X. Xxxxxxxxx
------------------------------- -----------------------------------
Name: X. X. Xxx Name: X. X. Xxxxxxxxx
Title: Assistant Corporate Title: Vice President
Secretary
37
Attest: XXXXXX TRUST COMPANY
OF NEW YORK
By:/s/ Xxxxxxx X. Xxxx By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------- -----------------------------------
Name: Xxxxxxx X. Xxxx Name: Xxxxxxx X. Xxxxxxx
Title: Vice President Title: Vice President
38
Exhibit A
---------
STATEMENT OF RESOLUTION
ESTABLISHING AND DESIGNATING A SERIES OF SHARES
OF
LONE STAR ENERGY PLANT OPERATIONS, INC.
$200 Series A Junior Participating Preferred Stock, no par value per share
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, and pursuant to Article Four of its Articles of Incorporation,
the undersigned, Lone Star Energy Plant Operations, Inc. (the "Company"), hereby
-------
submits the following statement for the purposes of establishing and designating
a series of shares and fixing and determining the relative rights and
preferences thereof:
I. The name of the Company is Lone Star Energy Plant Operations, Inc.
II. The following resolution establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof
was duly adopted by the Board of Directors of the Company effective September
10, 1996:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors of this Company by the provisions of the Restated Articles of
Incorporation of this Company, the Board of Directors hereby creates a new
series of Preferred Stock of the Company which shall consist of 1,000,000 shares
of no par value, which shall be designated and known as $200 Series A Junior
Participating Preferred Stock, and that in addition to the preferences, rights,
voting powers and the restrictions or qualifications of all shares of Preferred
Stock regardless of series, described and expressed in the Restated Articles of
Incorporation of the Company, the Board of Directors hereby declares that the
shares of the $200 Series A Junior Participating Preferred Stock shall have the
terms, conditions, rights and preferences, as follows:
1. Designation. The shares of such series shall be designated "$200
Series A Junior Participating Preferred Stock" (herein called "Series A
Preferred Stock").
2. Number. The number of shares of Series A Preferred Stock shall be
1,000,000, which number may be increased or decreased by resolution adopted by
the Board of Directors; provided, however, that no decrease shall reduce the
number of authorized shares of Series A Preferred Stock to less than the number
of shares then issued and outstanding plus the number of shares issuable upon
the exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Company.
39
3. Dividends. Subject to the rights of the holders of any shares of any
other series of Preferred Stock (or any similar stock) of the Company with
respect to dividends, but in preference to the holders of shares of the Common
Stock, par value $0.01 per share (the "Common Stock"), of the Company or of any
other class or series of stock of the Company ranking junior to the Series A
Preferred Stock, the holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, dividends for each Quarterly Dividend
Period (as hereinafter defined) equal (rounded to the nearest cent) to the
greater of (a) $20 or (b) subject to the provision for adjustment hereinafter
set forth, 200 times the aggregate per share amount of all cash dividends, and
200 times the aggregate per share amount (payable in cash, based upon the fair
market value at the time the non-cash dividend or other distribution is declared
as determined in good faith by the Board of Directors) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared (but not withdrawn) on the Common Stock during the
immediately preceding Quarterly Dividend Period, or, with respect to the first
Quarterly Dividend Period, since the first issuance of any share or fraction of
a share of Series A Preferred Stock. In the event the Company shall at any time
after September 10, 1996 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
As used herein "Quarterly Dividend Period" shall mean a period of three
months which shall commence on February 1, May 1, August 1 and November 1 in
each year (or in the case of original issuance, from the date of original
issuance) and shall end on and include the day next preceding the first date of
the next Quarterly Dividend Period. The first day of each such Quarterly
Dividend Period shall be the dividend payment date for the regular quarterly
dividend payable for the preceding Quarterly Dividend Period, except that the
first dividend on shares of Series A Preferred Stock shall be payable on the
quarterly payment date next succeeding the expiration of 30 days after the date
of initial issue of any shares of the Series A Preferred Stock.
Dividends on the Series A Preferred Stock, if any, shall be cumulative so
that no dividend (other than a dividend payable in Common Stock) or other
distribution shall be paid or declared or made on, and no amounts shall be
applied to the purchase or redemption of, the Common Stock or any other class of
stock ranking junior to the Series A Preferred Stock as to dividends or assets
unless (i) full cumulative dividends for all past Quarterly Dividend Periods
have been paid or declared and set apart for payment, and full cumulative
dividends for the then current Quarterly Dividend Period shall have been or
simultaneously therewith shall be paid and declared on
40
outstanding Series A Preferred Stock, and (ii) after giving effect to such
payment of dividend, other distribution, purchase or redemption, the aggregate
capital of the Company applicable to all capital stock outstanding ranking
junior to the Series A Preferred Stock as the dividends or assets plus the
consolidated surplus of the Company and its subsidiaries shall exceed the
aggregate amount payable on involuntary dissolution, liquidation or winding up
of the Company on all shares of the Series A Preferred Stock and all stock
ranking prior to on a parity with the Series A Preferred Stock as the dividends
or assets to be outstanding after the payment of such dividend, other
distribution, purchase or redemption. Determinations made with respect to the
declaration and payment of dividends and other distributions shall be made in
accordance with the provisions of the Texas Business Corporation Act, as amended
and in effect at the time (the "TBCA").
4. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the Series
A Preferred Stock shall, subject to the prior and superior rights of the holders
of any shares of any other series of Preferred Stock (or any similar stock) of
the Company, be entitled to receive the greater of (a) $200 per share, or (b) an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 200 times the aggregate amount to be distributed per share to holders
of Common Stock, plus in either instance accrued dividends to the date of
distribution, whether or not earned or declared. In the event the Company shall
at any time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event pursuant to clause
(b) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
No distribution shall be made to the holders of shares of Common Stock or
any other stock ranking junior to the Series A Preferred Stock upon liquidation,
distribution or winding up, unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received the amounts set forth above. If
the assets available for distribution to holders of shares of Series A Preferred
Stock shall not be sufficient to pay in full the amounts so determined to be
payable on all shares of the Series A Preferred Stock in the event of such
voluntary or involuntary dissolution, liquidation or winding up, as the case may
be, then the assets available for payment shall be distributed ratably among the
holders of the Series A Preferred Stock of all series in accordance with the
amounts so determined to be payable on the shares of each series in the event of
voluntary or involuntary dissolution, liquidation or winding up, as the case may
be, in proportion to the full preferential amounts to which they are
respectively entitled. After payment to the holders of the Series A Preferred
Stock of the full preferential amounts hereinbefore provided for, the holders of
Series A Preferred Stock will have no other rights or claims to any of the
remaining assets of the Company either upon distribution of such assets or upon
dissolution, liquidation or winding up. The sale of all or substantially all of
the property of the Company to, or the merger or consolidation of the Company
into or with, any other corporation, or the purchase or redemption by the
Company of any shares of its Preferred Stock, or its Series A Preferred Stock or
its
41
Common Stock or any other class of its stock shall not be deemed to be a
distribution of assets or a dissolution, liquidation or winding up for the
purposes of this paragraph.
5. Optional Redemption. So long as full cumulative dividends on all
outstanding shares of Series A Preferred Stock for all dividend periods ending
on or prior to the date fixed for redemption shall have been paid or declared
and set apart for payment and subject to any applicable requirements of Texas
law and the rights of the holders of any shares of any other series of Preferred
Stock (or any similar stock) of the Company, the Company shall have the option
to redeem the whole or any part of the Series A Preferred Stock at any time on
at least 30 days notice in accordance with the provisions of the procedures for
redemptions set forth in the TBCA at a redemption price equal to the greater of
(a) $200 and (b), subject to the provision for adjustment hereinafter set forth,
200 times the "current per share market price" of the Common Stock on the date
of mailing of the notice of redemption, together with unpaid accumulated
dividends to the date of such redemption. In the event the Company shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were otherwise entitled immediately prior to such event under
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event. The "current per share market price" on any date shall be deemed to be
the average of the closing price per share of such Common Stock for the 10
consecutive "trading days" (as such term is hereinafter defined) immediately
prior to such date. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is 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 or admitted to trading on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use or, if on any such
date the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the Company.
If on such date no such market maker is making a market in the Common Stock, the
fair value of the Common Stock on such date as determined in good faith by the
Board of Directors of the Company shall be used. The term "trading day" shall
mean a day on which the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for the transaction of
business or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday
on
42
which banking institutions in the State of New York are not authorized or
obligated by law or executive order to close.
6. Treasury Shares. So long as any shares of the Series A Preferred
Stock are outstanding, shares of the Series A Preferred Stock which are
purchased, redeemed or otherwise acquired by the Company shall not be reissued,
or otherwise disposed of, as shares of Series A Preferred Stock.
7. Conversion. Other than as set forth above, the Series A Preferred
Stock shall not have any conversion or exchange rights.
8. Voting Rights.
(A) Each share of Series A Preferred Stock shall entitle the holder thereof
to 200 votes on all matters submitted to a vote of the shareholders of the
Company. In the event the Company shall at any time after the Rights
Declaration Date, (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Series A Preferred Stock shall have no voting rights other than the
voting rights set forth herein, in the Restated Articles of Incorporation of the
Company or as otherwise provided by Texas law.
9. Consolidation, Merger, etc. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or converted or changed into other stock or
securities, cash and/or other property, then in any such case proper provision
shall be made so that each share of Series A Preferred Stock shall at the same
time be similarly exchanged for or converted or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
200 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into which each
share of Common Stock is exchanged for or converted or changed. In the event
the Company shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or conversion or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
43
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
10. Amendment. No change shall be made in any of the rights or
preferences of the Series A Preferred Stock at the time outstanding without the
affirmative vote of at least two-thirds the votes entitled to be cast with
respect to the shares of the Series A Preferred Stock outstanding on the record
date for such meeting in addition to any other vote, if any, as may be required
for such change under the applicable provisions of the Restated Articles of
Incorporation and the laws of the State of Texas at the time applicable thereto.
IN WITNESS WHEREOF, this Statement of Resolution is executed on behalf of
the Company by its Vice President this 10th day of September, 1996.
Lone Star Energy Plant Operations, Inc.
By:
--------------------------------------------
Vice President
44
Exhibit B
---------
(Form of Rights Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER SEPTEMBER 10, 2006 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT./*/
/*/ The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
Rights Certificate
Lone Star Energy Plant Operations, Inc.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of September 10, 1996 (the "Rights
Agreement"), between Lone Star Energy Plant Operations, Inc., a Texas
corporation (the "Company"), and Xxxxxx Trust Company of New York, a New York
trust company (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (New York City time) on September 10, 2006 at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one two-hundredth of a fully paid, non-assessable share of $200
Series A Junior Participating Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $45 per one two-hundredth of a share (the
"Purchase Price"), upon
45
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of March 26, 1996,
based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of 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.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent 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 two-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 shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the fifteenth day following the Stock Acquisition Date (as
such time period may be extended for up to a year pursuant to the Rights
46
Agreement), and (ii) the Final Expiration Date. Under certain circumstances set
forth in the Rights Agreement, the decision to redeem or extend the period for
redemption shall require the concurrence of a majority of the Continuing
Directors.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one two-hundredth of a share of Preferred Stock which may,
at the election of the Company, be evidenced by depositary receipts), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of 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 Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions af fecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ____________________ ______, 1996
ATTEST: LONE STAR ENERGY PLANT
OPERATIONS, INC.
______________________________ By_____________________________________
Secretary Title:
Countersigned:
XXXXXX TRUST COMPANY OF NEW YORK
By_____________________________
Authorized Signature
47
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
______________________________ Attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: ___________________________, 19____
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
48
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] I did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _______________, 19____
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.
49
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: LONE STAR ENERGY PLANT OPERATIONS 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: ______________________, 19___
Signature
Signature Guaranteed:
50
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ______________________, 19___
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.
51
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
VOTING PREFERRED STOCK
Effective September 10, 1996, the Board of Directors of Lone Star
Energy Plant Operations, Inc. (the "Company") authorized the issuance and
distribution of one Right for each outstanding share of Lone Star Energy Plant
Operations, Inc. Common Stock to shareholders of record at the close of business
on September 30, 1996 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company a unit consisting of one two-hundredth of a
share of $200 Series A Junior Participating Preferred Stock, without par value
(the "Preferred Stock"), at a Purchase Price of $45 per one two-hundredth of a
share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
Xxxxxx Trust Company of New York, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights generally will be separate from
the Common Stock and a Distribution Date will occur upon the earlier of (i) 10
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 18% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date"), or (ii) 10 business days (or such
later date as the Board shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 18% or more of such outstanding shares of Common Stock. Notwithstanding
the foregoing, a person will not be deemed an Acquiring Person if such person
became such a person solely as a result of acquiring shares of Common Stock in a
distribution by ENSERCH Corporation of all of its shares of the Company to its
shareholders if such person, together with all of its affiliates and associates
does not acquire additional shares of Common Stock while such a beneficial
owner. Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after the Record
Date will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on September 10, 2006, unless earlier redeemed
by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and,
52
thereafter, the separate Rights Certificates alone will represent the Rights.
Except as otherwise determined by the Board of Directors and except in certain
circumstances set forth in the Rights Agreement, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights.
In the event that a Person becomes the beneficial owner of 18% or more
of the then outstanding shares of Common Stock (except pursuant to an offer for
all outstanding shares of Common Stock which the independent directors determine
to be fair to and otherwise in the best interests of the Company and its
shareholders), each holder of a Right will thereafter have the right to receive,
upon exercise, Common Stock (or, in certain circumstances, other consideration
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $45 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $90
worth of Common Stock (or other consideration, as noted above) for $45.
Assuming that the Common Stock had a per share value of $10 at such time, the
holder of each valid Right would be entitled to purchase 9 shares of Common
Stock for $45.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger which follows an offer described in the second preceding paragraph), (ii)
the Company is acquired pursuant to a share exchange transaction under the Texas
Business Corporation Act, or (iii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time until fifteen days following the Stock Acquisition Date,
or such later date not to exceed one year from the Stock Acquisition Date which
may be set by the Board while the Rights are still redeemable, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right.
Under certain circumstances set forth in the Rights Agreement, the decision to
redeem or extend the period of redemption shall require the concurrence of a
majority of the Continuing Directors. Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 redemption price.
53
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances with the concurrence of a majority of the
Continuing Directors) prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to correct any inconsistency, to conform to
applicable law or to make changes which do not adversely affect in any material
respect the interests of holders of Rights.
A copy of the Rights Agreement is available free of charge from the
Rights Agent. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
54
