-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C5KR1hbUxEmo6MSAjeBuY3Vv73P/PqaXAK21SAj8wOCxzlBNwUvup9va+GzweuuV wQUvqWrp8svkJ3cc3GmXaQ== 0000893220-98-000787.txt : 19980424 0000893220-98-000787.hdr.sgml : 19980424 ACCESSION NUMBER: 0000893220-98-000787 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980423 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980423 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONECTIV INC CENTRAL INDEX KEY: 0001029590 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 510377417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13895 FILM NUMBER: 98599837 BUSINESS ADDRESS: STREET 1: 800 KING STREET P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 3024293703 MAIL ADDRESS: STREET 1: 800 KING ST STREET 2: P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19801 8-K 1 FORM 8-K, CONECTIV 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) April 23, 1998 -------------- CONECTIV - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) Delaware I-13895 51-0377417 - ---------------------------- ------------ ------------------- (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 800 King Street, P.O. Box 231, Wilmington, Delaware 19899 - --------------------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's Telephone Number, Including Area Code 302-429-3448 ------------ None - -------------------------------------------------------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 2 ITEM 5. OTHER EVENTS On April 23, 1998, the Company issued a press release announcing the adoption of a stockholders rights plan, a copy of which press release is attached hereto as Exhibit 99(a) and is incorporated herein in its entirety. The description and terms of the new Rights are set forth in the Rights Agreement, dated as of April 23, 1998 by and between Conectiv and Conectiv Resource Partners, Inc., as Rights Agent, a copy of which is filed herewith as Exhibit 99(b) and is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits A press release announcing the adoption of a stockholders rights plan is filed as Exhibit 99(a) to this Report. A Rights Agreement dated as of April 23, 1998, between Conectiv and Conectiv Resource Partners, Inc., which includes a Form of Company Common Rights Certificate and Class A Common Rights Certificate as Exhibits A-1 and A-2 thereto, a Summary of Rights to Purchase Series 1 Junior Preferred Stock and a Summary of Rights to Purchase Series 2 Junior Preferred Stock as Exhibits B-1 and B-2 thereto and a Form of Certificate of Designation of Series 1 Junior Preferred Stock and a Form of Certificate of Designation of Series 2 Junior Preferred Stock as Exhibits C-1 and C-2 thereto, is attached hereto as Exhibit 99(b). 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Conectiv (Registrant) Date: April 23, 1998 /s/ L.M. Walters ------------------------------------- Treasurer 4 EXHIBIT INDEX 99 (a) - A press release announcing the adoption of a stockholders rights plan 99 (b) - A Rights Agreement dated as of April 23, 1998, between Conectiv and Conectiv Resource Partners, Inc., which includes a Form of Company Common Rights Certificate and Class A Common Rights Certificate as Exhibits A-1 and A-2 thereto, a Summary of Rights to Purchase Series 1 Junior Preferred Stock and a Summary of Rights to Purchase Series 2 Junior Preferred Stock as Exhibits B-1 and B-2 thereto and a Form of Certificate of Designation of Series 1 Junior Preferred Stock and a Form of Certificate of Designation of Series 2 Junior Preferred Stock as Exhibits C-1 and C-2 thereto. EX-99.A 2 PRESS RELEASE 1 EXHIBIT 99.A For Immediate Release Contact: Bob Marshall Director of Investor Relations April 23, 1998 302-429-3114 CONECTIV ADOPTS STOCKHOLDER RIGHTS PLAN Wilmington, Delaware -- Conectiv (Ticker Symbol:CIV) announced today that its Board of Directors adopted a Stockholder Rights Plan in which preferred stock purchase rights will be distributed as a dividend at the rate of one Right for each share of Common Stock (CIV) and Class A Common Stock (CIV.A) held as of the close of business on May 11, 1998. Conectiv believes that the issuance of Rights to the two classes of common stock will prevent dilution of either class in the event the Rights become exercisable. The Rights are designed to guard against partial tender offers and other abusive or unfair tactics that might be used in an attempt to gain control of the Company without paying all stockholders a fair price for their shares. The Rights Plan will not prevent takeovers, but is designed to deter coercive, abusive, or unfair takeover tactics and to encourage anyone attempting to acquire the Company to first negotiate with the Board. Each Right, depending on its attachment to Common Stock or Class A Common Stock will entitle stockholders to buy one-hundredth of a share of Series One Preferred Stock or one-hundredth of a share of Series Two Preferred Stock, respectively, at an exercise price of $65 per Right. The Rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the aggregate voting power represented by the Company's outstanding securities (i.e. becomes an "Acquiring Person" as defined in the Rights Plan) or commences a tender or exchange offer to acquire beneficial ownership of 15% or more of the aggregate voting power represented by the Company's outstanding securities. If any person becomes an Acquiring Person, then each Right will entitle its holder to purchase, at each Right's exercise price, units of either the Company's Series One Preferred Stock or Series Two Preferred Stock having a market value equal to twice the respective exercise price. In addition, if after any person becomes an Acquiring Person, Conectiv is involved in a merger or other business combination with another company and all or part of the shares of Common Stock and Class A Common Stock are converted into other securities, cash, or property, or the Company sells 50% of more of its assets or earning power to another company, each Right will entitle its holder to purchase, at the 2 April 23, 1998-Page 2 Right's exercise price, shares of common stock of the ultimate parent of such other company having a market value equal to twice the exercise price. Conectiv generally will be entitled to redeem the Rights at $.01 per Right at any time before a person or group becomes an Acquiring Person. The Conectiv Stockholder Rights Plan has been outlined in a letter to be sent to each stockholder. # # # # # # # # # # # # # # # EX-99.B 3 RIGHTS AGREEMENT WITH EXHIBITS 1 EXHIBIT 99.B CONECTIV AND CONECTIV RESOURCE PARTNERS, INC. AS RIGHTS AGENT ------------------------------------- STOCKHOLDERS RIGHTS AGREEMENT DATED AS OF APRIL 23, 1998 ------------------------------------- 2 TABLE OF CONTENTS
Section Page - ------- ---- 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ------------------- 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 --------------------------- 3. Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ---------------------------- 4. Form of Rights Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 -------------------------- 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 --------------------------------- 6. Transfer, Split Up, Combination, and Exchange of Rights -------------------------------------------------------- Certificates; Mutilated, Destroyed, Lost, or -------------------------------------------- Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 -------------------------- 7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . 10 ------------------------------------------------------------- 8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . 13 --------------------------------------------------- 9. Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 --------------------------------------------- 10. Junior Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ---------------------------------- 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . . . . . . . . . . . 16 --------------------------------------------------------------------------- 12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . 24 ---------------------------------------------------------- 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . 24 -------------------------------------------------------------------- 14. Fractional Rights; Fractional Shares; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 -------------------------------------------- 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ---------------- 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 --------------------------- 17. Rights Certificate Holder Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . 31 --------------------------------------------------
i 3 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 --------------------------- 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 32 --------------------------------------------------------- 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ---------------------- 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ---------------------- 22. Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ----------------------------------- 23. Redemption and Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ------------------------- 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 -------- 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ------------------------ 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ------- 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 -------------------------- 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ---------- 29. Determinations and Actions by the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 41 ---------------------------------------------------- 30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 -------------------------- 31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ------------ 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ------------- 33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ------------ 34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 --------------------
ii 4 This STOCKHOLDERS RIGHTS AGREEMENT, dated as of April 23, 1998 between CONECTIV, a Delaware corporation (the "Company"), and Conectiv Resource Partners, Inc., a Delaware corporation (the "Rights Agent"). WHEREAS, effective April 23, 1998 (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a distribution of one right for each share of Common Stock, par value $.01 per share, of the Company (the "Company Common Stock") outstanding at the close of business on May 11, 1998 (the "Record Date"), and has authorized the issuance of one such right (as such number may hereinafter be adjusted pursuant hereto) for each share of Company Common Stock that shall become outstanding (whether originally issued or delivered from the Company's treasury) between the Record Date and, except as otherwise provided in Section 22 herein, the Distribution Date, each such right initially representing the right to purchase, upon the terms and subject to the conditions hereinafter set forth, one Unit of Series 1 Preferred Stock (the "Company Common Rights"); and WHEREAS, effective on the Rights Dividend Declaration Date, the Board of Directors of the Company authorized and declared a distribution of one right for each share of Class A Common Stock, par value $.01 per share, of the Company (the "Class A Common Stock") outstanding at the close of business on the Record Date, and has authorized the issuance of one such right (as such number may hereinafter be adjusted pursuant hereto) for each share of Class A Common Stock that shall become outstanding (whether originally issued or delivered from the Company's treasury) between the Record Date and, except as otherwise provided in Section 22 herein, the Distribution Date, each such right initially representing the right to purchase, upon the terms and subject to the conditions hereinafter set forth, one Unit of Series 2 Preferred Stock (the "Class A Common Rights"). NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of shares of Voting Stock representing 15% or more of the total Voting Power of the aggregate of all shares of Voting Stock then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any trustee or fiduciary holding Voting Stock for, or pursuant to the terms of, any such plan, acting in such capacity. Notwithstanding the foregoing: (1) no Person shall become an "Acquiring Person" as the result of an acquisition of Voting Stock by the Company, which, by reducing the number of 5 shares of Voting Stock outstanding, increases the proportionate percentage of the total Voting Power represented by all shares of Voting Stock Beneficially Owned by such Person, together with all Affiliates and Associates of such Person, to 15% or more of the total Voting Power of the aggregate of all shares of Voting Stock then outstanding; provided, however, that if a Person, together with all Affiliates and Associates of such Person, shall become the Beneficial Owner of shares of Voting Stock representing 15% or more of total Voting Power of the aggregate of all shares of Voting Stock then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of Voting Stock, then, subject to Section 1(a)(2), such Person shall be deemed to be an "Acquiring Person;" and (2) if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Voting Stock so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act Regulations, as in effect on the date of this Agreement; provided, however, that no director or officer of the Company shall be deemed an Affiliate or Associate of any other director or officer of the Company solely as a result of his or her being a director or officer of the Company. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "Beneficially Own" and to have "Beneficial Ownership" of any securities: (i) that such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly (as determined pursuant to Rule 13d-3 of the Exchange Act Regulations as in effect on the date of this Agreement); provided, however, that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own or to have Beneficial Ownership of, any security if the agreement, arrangement, or understanding to vote such security that would otherwise render such Person the Beneficial Owner of such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the Exchange Act Regulations, and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); 2 6 (ii) that such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement, or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants, or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own or to have Beneficial Ownership of securities tendered pursuant to a tender or exchange offer made in accordance with the Exchange Act Regulations by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement, or understanding (except to the extent contemplated by the proviso to subparagraph (i) of this paragraph (c)); or (iii) that are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate of such Person) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement, or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to subparagraph (i) of this paragraph (c)), or disposing of any such securities. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding that such Person would be deemed to Beneficially Own hereunder. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in New York City are authorized or obligated by law or executive order to close. (e) "Class A Common Right" shall have the meaning set forth in the Preamble to this Agreement. (f) "Class A Common Stock" shall have the meaning set forth in the Preamble to this Agreement. 3 7 (g) "Close of Business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. (h) "Common Stock" shall mean the Company Common Stock and the Class A Common Stock, collectively. (i) "Common Equity Interest" when used with reference to any Person other than the Company shall mean the class or series of capital stock (or equity interest) with the greatest voting power (in relation to any other classes or series of capital stock (or equity interest)) of such other Person. (j) "Company Common Stock" has the meaning set forth in the Preamble to this Agreement. (k) "Company Common Right" shall have the meaning set forth in the Preamble to this Agreement. (l) "Distribution Date" shall have the meaning set forth in Section 3(a). (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Exchange Act Regulations" shall mean the General Rules and Regulations under the Exchange Act. (o) "Expiration Date" has the meaning set forth in Section 7(a). (p) "Final Expiration Date" has the meaning set forth in Section 7(a). (q) "Junior Preferred Stock" shall mean the Series 1 Preferred Stock and/or the Series 2 Preferred Stock of the Company, as the context requires, having the voting rights, powers, designation, preferences, and relative, participating, optional, or other special rights and qualifications, limitations, and restrictions set forth in Exhibits B-1 and B-2 hereto. (r) "Person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization, or other entity, as well as any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act. (s) "Principal Party" shall have the meaning set forth in Section 13(b). (t) "Purchase Price" shall have the meaning set forth in Section 7(b). 4 8 (u) "Record Date" shall have the meaning set forth in the Preamble to this Agreement. (v) "Rights" shall mean Company Common Rights and/or Class A Common Rights, as the context requires. (w) "Rights Certificates" shall have the meaning set forth in Section 3(a). (x) "Rights Dividend Declaration Date" shall have the meaning set forth in the Preamble to this Agreement. (y) "Section 11(a)(ii) Event" shall mean the event described in Section 11(a)(ii) hereof that triggers the adjustment provided in Section 11(a)(ii). (z) "Section 13 Event" shall mean any event described in clause (x), (y), or (z) of Section 13(a) hereof. (aa) "Securities Act" shall mean the Securities Act of 1933, as amended. (bb) "Series 1 Preferred Stock" shall mean Series 1 Junior Preferred Stock, par value $.01 per share, having the voting rights, powers, designations, preferences, and relative, participating, optional, or other special rights and qualifications, limitations, and restrictions set forth in Exhibit B-1 hereof. (cc) "Series 2 Preferred Stock " shall mean Series 2 Junior Preferred Stock, par value $.01 per share, having the voting rights, powers, designations, preferences, and relative, participating, optional, or other special rights and qualifications, limitations, and restrictions set forth in Exhibit B-2 hereof. (dd) "Series 1 Purchase Price" has the meaning set forth in Section 7(b). (ee) "Series 2 Purchase Price" has the meaning set forth in Section 7(b). (ff) "Stock Acquisition Date" shall mean the first date of public announcement (including, without limitation, the filing of any report pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (gg) "Subsidiary" shall mean, with reference to any Person, any other Person of which (1) a majority of the Voting Power of the voting securities or equity interests is Beneficially Owned, directly or indirectly, by such first-mentioned Person or otherwise controlled by such first-mentioned Person, or (2) an amount of voting securities or equity 5 9 interests sufficient to elect at least a majority of the directors or equivalent governing body of such other Person is Beneficially Owned, directly or indirectly, by such first-mentioned Person, or otherwise controlled by such first-mentioned Person. (hh) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. (ii) "Unit" has the meaning set forth in Section 7(b). (jj) "Voting Power" when used with reference to the capital stock of, or units of equity interest in, any Person shall mean the number of votes entitled to be cast generally in the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation). (kk) "Voting Stock" shall mean the Common Stock, the Junior Preferred Stock, and any other class or series of securities of the Company entitled to vote generally, together with the Common Stock, in the election of directors of the Company. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 4 hereof, shall prior to the Distribution Date also be holders of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. With the consent of the Rights Agent, the Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Rights Certificates. (a) Until the earlier of (i) the Close of Business on the tenth day after the Stock Acquisition Date and (ii) the Close of Business on the tenth business day (or such later date as may be determined by action of a majority of the Company's Board of Directors prior to such time as any Person becomes an Acquiring Person and of which later date the Company will give the Rights Agent prompt written notice) 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 maintained by the Company or any of its Subsidiaries or any trustee or fiduciary holding Voting Stock for, or pursuant to the terms of, any such plan, acting in such capacity) is first published or sent or given within the meaning of Rule 14d-4(a) of the Exchange Act Regulations or any successor rule, if upon consummation thereof such Person would be the Beneficial Owner of shares of Voting Stock representing 15% or more of the total Voting Power of the aggregate of all shares of Voting Stock then outstanding (including any such date that is after the date of this Agreement and prior to the issuance of the Rights) (the earlier of (i) and (ii) above being the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for shares of Common Stock registered in the names of the holders of shares of Common Stock as of and subsequent to the Effective Date (which 6 10 certificates for shares of Common Stock shall be deemed also to be certificates for Rights) and not by separate rights 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 Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent, if so requested, will send) by first-class, insured, postage prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit A-1 hereto (in the case of a Company Common Right) or Exhibit A-2 hereto (in the case of a Class A Common Right) (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(i) or Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company may 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) As promptly as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Junior Preferred Stock in substantially the form attached as Exhibit B-1 (in the case of a Company Common Right) or B-2 (in the case of a Class A Common Right) and which may be appended to certificates that represent shares of Company Common Stock or Class A Common Stock, as the case may be (hereinafter referred to as the "Summary of Rights" with respect to the Company Common Rights and/or the Class A Common Rights, as the context requires), by first-class, postage prepaid mail, to each record holder of Company Common Stock or Class A Common Stock, as the case may be, as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of any certificate for Common Stock outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby. (c) Rights shall, without any further action, be issued in respect of all shares of Common Stock that become outstanding (whether originally issued or delivered from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date. Certificates, representing such shares of Common Stock, issued after the Record Date shall bear the following legend: 7 11 "This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between CONECTIV (the "Company") and Conectiv Resource Partners, Inc. (the "Rights Agent") dated as of April 23, 1998 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal office of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights that are Beneficially Owned by any Person who is, was, or becomes an Acquiring Person or any Affiliate or Associate thereof (as such capitalized terms are defined in the Rights Agreement), or specified transferees of such Acquiring Person (or Affiliate or Associate thereof) may become null and void." After the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, if new certificate(s) representing shares of Common Stock are issued in connection with the transfer, split up, combination, or exchange of certificate(s) representing shares of Common Stock or if new certificate(s) representing shares of Common Stock are issued to replace any certificate(s) that have been mutilated, destroyed, lost, or stolen, then such new certificate(s) shall bear the foregoing legend. With respect to all certificates containing the foregoing legend, until the earlier of the Distribution Date or the Expiration Date, the Rights associated with the shares of Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of the shares 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 shares of Common Stock represented by such certificates. In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock that are no longer outstanding. Section 4. Form of Rights Certificate. (a) The Rights Certificates (and the forms of election to purchase and of assignment and the certificate to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A-1 hereto (in the case of a Company Common Right) or Exhibit A-2 (in the case of a Class A Common Right) 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 any rule or regulation thereunder or with any rule or regulation of any 8 12 stock exchange that the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11, 13, 22, 24, and 27 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Distribution Date and on their face shall entitle the holders thereof to purchase such number of Units of Junior Preferred Stock as shall be set forth therein at the price set forth therein, but the amount and type of securities, cash, or other assets that may be acquired upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant hereto 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) that becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee prior to or concurrently with the Acquiring Person becoming such and that receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or such Associate or Affiliate) or to any Person with whom such Acquiring Person (or such Associate or Affiliate) has any continuing written or oral agreement, arrangement, or understanding regarding either the transferred Rights, shares of Common Stock, or the Company, or (B) a transfer that the Board of Directors of the Company has determined in good faith to be part of a plan, arrangement, or understanding that has as a primary purpose or effect the avoidance of Section 7(e) hereof shall, upon the written direction of the Board of Directors, 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 capitalized terms are defined in the Rights Agreement referred to below). 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." Section 5. Countersignature and Registration. (a) Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Vice Chairman of the Board, or its Treasurer, shall have affixed thereto the Company's corporate seal (or a facsimile thereof), and shall be attested by the Company's Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Rights Certificates may be manual or by facsimile. Rights Certificates bearing the manual or facsimile signatures of the individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersigning of such Rights Certificates by the Rights Agent or did not hold such offices at the date of such 9 13 Rights Certificates. No Rights Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose unless there appears on such Rights Certificate a countersignature duly executed by the Rights Agent by manual or facsimile signature of an authorized officer, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence, that such Rights Certificate has been duly countersigned as required hereunder. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated 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 name and address of each holder of the Rights Certificates, the number of Rights evidenced on its face by each Rights Certificate, and the date of each Rights Certificate. Section 6. Transfer, Split Up, Combination, and Exchange of Rights Certificates; Mutilated, Destroyed, Lost, or Stolen Rights Certificates. (a) Subject to the provisions of Sections 4(b), 7(e), and 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 (other than Rights Certificates representing Rights that have become void pursuant to Section 7(e) hereof, that have been redeemed pursuant to Section 23 hereof, or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined, or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder 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 office 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 executed the certificate set forth 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) of the Rights represented by such Rights Certificate or Affiliates or Associates thereof as the Company shall reasonably request; whereupon the Rights Agent shall, subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination, or exchange of Rights Certificates. 10 14 (b) If a Rights Certificate shall be mutilated, lost, stolen, or destroyed,upon request by the registered holder of the Rights represented thereby and upon payment to the Company and the Rights Agent of all reasonable expenses incident thereto, there shall be issued, in exchange for and upon cancellation of the mutilated Rights Certificate, or in substitution for the lost, stolen, or destroyed Rights Certificate, a new Rights Certificate, in substantially the form of the prior Rights Certificate, of like tenor and representing the equivalent number of Rights, but, in the case of loss, theft, or destruction, only upon receipt of evidence satisfactory to the Company and the Rights Agent of such loss, theft or destruction of such Rights Certificate and, if requested by the Company or the Rights Agent, indemnity also satisfactory to it. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Prior to the earlier of (i) the Close of Business on April 20, 2008 (the "Final Expiration Date"), or (ii) the time at which the Rights are redeemed as provided in Section 23 hereof or (iii) the time at which the Rights are exchanged as provided in Section 24 hereof (the earlier of (i), (ii), and (iii) being the "Expiration Date"), the registered holder of any Rights Certificate may, subject to the provisions of Sections 7(e) and 9(c) hereof, exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the 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 office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price (as hereinafter defined) for the number of Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) for which such surrendered Rights are then exercisable. (b) The purchase price for each one one-hundredth of a share of Series 1 Preferred Stock purchasable upon exercise of a Company Common Right shall be $65 (as adjusted from time to time as provided in Sections 11 and 13(a) hereof) (the "Series 1 Purchase Price"). The purchase price for each one one-hundredth of a share of Series 2 Preferred Stock upon exercise of a Class A Common Right shall be $65 (as adjusted from time to time as provided in Sections 11 and 13(a) hereof) (the "Series 2 Purchase Price"). The Series 1 Purchase Price and the Series 2 Purchase Price shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c)(2) below. Each one one-hundredth of a share of Series 1 Preferred Stock and each one one-hundredth of a share of Series 2 Preferred Stock shall be referred to herein as a "Unit" of Series 1 Preferred Stock or a "Unit" of Series 2 Preferred Stock, as the case may be. References in this Agreement to the "Purchase Price" shall mean the Series 1 Purchase Price and/or the Series 2 Purchase Price, as the context requires. (c) (1) Subject to Section 14(b) hereof, following the Distribution Date, the Company may (at the direction of the Board of Directors) deposit with a corporation in good 11 15 standing organized under the laws of the United States or any State of the United States, 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 (the "Depositary Agent") certificates representing the shares of Junior Preferred Stock that may be acquired upon exercise of the Rights and may cause such Depositary Agent to enter into an agreement pursuant to which the Depositary Agent shall issue receipts representing interests in the shares of Junior Preferred Stock so deposited. (2) 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 for the Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash, or other assets, as the case may be) to be purchased thereby as set forth below and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9 hereof, or evidence satisfactory to the Company of payment of such tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)(A) requisition from any transfer agent of the Junior Preferred Stock certificates representing such number of shares of Junior Preferred Stock (or fractions of shares that are integral multiples of one one-hundredth of a share of Junior Preferred Stock) as are to be purchased and the Company will direct its transfer agent to comply with all such requests, or (B) requisition from the Depositary Agent depositary receipts representing such number of Units of Junior Preferred Stock as are to be purchased and the Company will direct the Depositary Agent to comply with all such requests, (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 such 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. In the event that the Company is obligated to issue Company Common Stock or other securities of the Company, pay cash, and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such Common Stock, other securities, cash, and/or other property is available for distribution by the Rights Agent, if and when appropriate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified or bank check or money order payable to the order of the Company. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing 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. 12 16 (e) Notwithstanding anything in this Agreement to the contrary, from and after the time that any Person becomes an Acquiring Person, 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 who receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or any such Associate or Affiliate) or to any Person with whom the Acquiring Person (or such Associate or Affiliate) has any continuing written or oral agreement, arrangement, or understanding regarding the transferred Rights, shares of Common Stock, or the Company or (B) a transfer that the Board of Directors of the Company has determined in good faith to be part of a plan, arrangement, or understanding that has as a primary purpose or effect the avoidance of this Section 7(e), shall be null and void without any further action, and any holder of such Rights thereafter shall have no rights or preferences whatsoever with respect to such Rights, whether under any provision of this Agreement, the Rights Certificates, or otherwise (including, without limitation, rights and preferences pursuant to Sections 7, 11, 13, 23, and 24 hereof). The Company shall use reasonable efforts to ensure compliance with the provisions of this Section 7(e) and Section 4(b), but shall have no liability to any holder of Rights or any other Person as a result of its failure to make any determination under this Section 7(e) or such Section 4(b) with respect to an Acquiring Person or its Affiliates, Associates, or transferees. (f) Notwithstanding anything in this Agreement or any Rights Certificate 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 by such registered holder unless such registered holder shall have (i) completed and executed the certificate following 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) of the Rights represented by such Rights Certificate or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificates acquired by the Company otherwise than upon the exercise thereof. The Rights 13 17 Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Stock. (a) The Company shall at all times prior to the Expiration Date cause to be reserved and kept available out of its authorized but unissued shares of Junior Preferred Stock and/or out of any shares of Junior Preferred Stock held in its treasury (and following the occurrence of a Triggering Event, out of the authorized but unissued shares of such other equity securities of the Company as may be issuable upon exercise of the Rights and/or out of any shares of such securities held in its treasury), the number of shares of Junior Preferred Stock (and following the occurrence of a Triggering Event, the number of shares of such other equity securities of the Company) that, as provided in this Agreement, will be sufficient to permit the full exercise of all outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of Junior Preferred Stock (or other equity securities of the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved. (b) So long as the shares of Junior Preferred Stock (and following the occurrence of a Triggering Event, other equity securities of the Company) to be issued and delivered upon the exercise of the Rights may be listed on any national securities exchange, the Company shall during the period from the Distribution Date through the Expiration Date use its best efforts to cause all securities reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its reasonable best efforts (i) either (A) as soon as practicable following the first occurrence of a Section 11(a)(ii) Event and a determination by the Company in accordance with Section 11(a)(iii) hereof, if applicable, of the consideration to be delivered by the Company upon exercise of the Rights, or (B) if so required by law, as soon as required following the Distribution Date (the earliest of (A) and (B) being the "Registration Date"), to file a registration statement on an appropriate form under the Securities Act, with respect to the securities that may be acquired upon exercise of the Rights (the "Registration Statement"); (ii) to cause the Registration Statement to become effective as soon as practicable after such filing; (iii) to cause the Registration Statement to remain effective (and to include a prospectus at all times complying with the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for the securities covered by the Registration Statement and (B) the Expiration Date; and (iv) to take as soon as practicable following the Registration Date such action as may be required to ensure that any acquisition of securities upon exercise of the Rights complies with any applicable state securities or "Blue Sky" laws. The Company may temporarily suspend, for a period of time not to exceed 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 14 18 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 stating that the suspension on the exercisability of the Rights is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction (x) if the requisite qualification in such jurisdiction shall not have been obtained and until a registration statement has been declared effective or (y) if the exercise thereof shall not be permitted under applicable law. (d) The Company shall take such action as may be necessary to ensure that all shares of Junior Preferred Stock (and, following the occurrence of a Triggering Event, any other securities that may be delivered upon exercise of Rights) shall be, at the time of delivery of the certificates or depositary receipts for such securities (subject to payment of the Purchase Price), duly and validly authorized and issued, fully paid and non-assessable. (e) The Company shall pay when due and payable any federal or state documentary, stamp, or transfer tax, or other charge, that is payable in respect of the issuance and delivery of the Right Certificates or the issuance and delivery of any certificates or depository receipts for Junior Preferred Stock (or other equity securities of the Company that may be delivered upon exercise of the Rights) upon the exercise of Rights; provided, however, the Company shall not be required to pay any such tax that may be payable in connection with the issuance or delivery of Units of Junior Preferred Stock, or any certificates or depositary receipts for such Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to any person other than the registered holder of the Rights Certificates evidencing the Rights surrendered for exercise. The Company shall not be required to issue or deliver any certificates or depositary receipts for Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to, or in a name other than that of, the registered holder upon the exercise of any Rights until any 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. (f) The Company shall use its reasonable best efforts, on or prior to the date that is either (A) as soon as practicable following the first occurrence of a Section 11(a)(ii) Event and a determination by the Company in accordance with Section 11(a)(iii) hereof, if applicable, of the consideration to be delivered by the Company upon exercise of the Rights, or (B) if so required by law, as soon as required following the Distribution Date, to obtain any and all regulatory approvals that may be required with respect to the securities purchasable upon exercise of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in the first sentence of this 15 19 Section 9(f), the exercise of the Rights in order to permit the Company to obtain the necessary regulatory approvals. Upon any such suspension, the Company shall issue a public announcement stating that the exercise of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect stating that the suspension on the exercise of the Rights is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable unless and until all required regulatory approvals have been obtained with respect to the securities purchasable upon exercise of the Rights. Section 10. Junior Preferred Stock Record Date. Each Person in whose name any certificate for Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) 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 any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) transfer books of the Company are open and, provided further, that if delivery of Units of Junior Preferred Stock is delayed pursuant to Section 9(c) hereof, such Persons shall be deemed to have become the record holders of such Units of Junior Preferred Stock only when such Units first become deliverable. 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 securities 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 securities 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 Junior Preferred Stock payable in shares of Junior Preferred Stock, (B) subdivide the outstanding Junior Preferred Stock, (C) combine the outstanding Junior Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Junior Preferred Stock (including any such reclassification in connection with a consolidation or 16 20 merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), 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 Junior Preferred Stock or capital stock, as the case may be, issuable on such date upon exercise of the Rights, 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 Junior Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event any Person becomes an Acquiring Person, provision shall be made so that each holder of a Right (except as provided below in Section 11(a)(iii) and in Sections 7(e), 13, and 24 hereof) shall thereafter have the right to receive, upon exercise thereof, at a price equal to the then current Series 1 Purchase Price or Series 2 Purchase Price, as the case may be, multiplied by the number of Units of Series 1 Preferred Stock or Series 2 Preferred Stock, as the case may be, for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, in accordance with the terms of this Agreement, in lieu of the number of Units of Series 1 Preferred Stock or Series 2 Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, such number of Units of Series 1 Preferred Stock or Series 2 Preferred Stock, as the case may be, as shall equal the result obtained by (x) multiplying the then current Series 1 Purchase Price or Series 2 Purchase Price, as the case may be, by the number of Units of Series 1 Preferred Stock or Series 2 Preferred Stock, as the case may be, for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (such product thereafter being, for all purposes of this Agreement other than Section 13 hereof, the "Series 1 Purchase Price" or the "Series 2 Purchase Price," as the case may be, and collectively, the "Purchase Price"), and (y) dividing that product by 50% of the then current market price (determined pursuant to Section 11(d) hereof) per Unit of Series 1 Preferred Stock or Series 2 Preferred Stock, as the case may be, on the date of such first occurrence (such Units of Series 1 Preferred Stock or Series 2 Preferred Stock being the "Adjustment Shares"). 17 21 (iii) In the event that the number of shares of Junior Preferred Stock that are authorized by the Company's Certificate of Incorporation but are not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is insufficient to permit the exercise in full of the Company Common Rights or Class A Common Rights, as the case may be, in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall take all such action as may be necessary to authorize additional shares of Series 1 Preferred Stock and/or Series 2 Preferred Stock, as the case may be, for issuance upon exercise of the Company Common Rights or Class A Common Rights, as the case may be. In the event that the Company shall, after good faith effort, be unable to take all such actions as may be necessary to authorize such additional shares of Series 1 Preferred Stock and/or Series 2 Preferred Stock, as the case may be, the Company, by the vote of a majority of the Board of Directors, shall: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of each such Right (the "Current Value") over (2) the Purchase Price (such excess being the "Spread"), and (B) with respect to each such Right, make adequate provision to substitute for such Adjustment Shares, upon exercise of such Rights 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, each to the extent permitted by the Company's Certificate of Incorporation, (including, without limitation, shares, or units of shares, of preferred stock that the Board of Directors of the Company has deemed to have the same value as Units of Series 1 Preferred Stock or Units of Series 2 Preferred Stock, as the case may be (the "Preferred Stock Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Board of Directors, after receiving advice from a nationally recognized investment banking firm; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty 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 termination pursuant to Section 23(a) expires (the later of (x) and (y) being referred to as the "Section 11(a)(iii) 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, Units of Junior Preferred Stock (to the extent available) and then, if necessary, cash, which Units of Junior Preferred Stock and/or cash shall have an aggregate value equal to the Spread. To the extent that the Company determines that some action need be taken pursuant to the first sentence of this Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights. For purposes of this Section 11(a)(iii), the value of a Unit of Junior Preferred Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per Unit of Junior Preferred Stock on the Section 18 22 11(a)(iii) Trigger Date and the value of any Preferred Stock Equivalent shall be deemed to have the same value as the Junior Preferred 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 any series of Junior Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five calendar days after such record date) shares of such Junior Preferred Stock (or shares having substantially the same rights, privileges, and preferences as shares of such Junior Preferred Stock ("Equivalent Preferred Stock")) or securities convertible into such Junior Preferred Stock or Equivalent Preferred Stock at a price per share of Junior Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into such Junior Preferred Stock or Equivalent Preferred Stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of such Junior Preferred Stock on such record date, the Purchase Price with respect to such series of Junior Preferred Stock 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 sum of the number of shares of such Junior Preferred Stock outstanding on such record date plus the number of shares of such Junior Preferred Stock that the aggregate offering price of the total number of shares of such Junior 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 such Junior Preferred Stock outstanding on such record date plus the number of additional shares of such Junior 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 all or part of which may be in a form other than cash, the value of such consideration shall be as determined by the Board of Directors, 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 such Junior Preferred Stock owned by or held for the account of the Company or any Subsidiary shall not be deemed outstanding for the purpose of 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 that 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 shares of any series of Junior Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation), evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in shares of such Junior Preferred Stock, but including any dividend payable in stock other than such Junior Preferred Stock), or subscription rights or warrants (excluding those 19 23 referred to in Section 11(b) hereof), the Purchase Price with respect to such series of Junior Preferred Stock 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 such Junior Preferred Stock on such record date less the fair market value (as determined in good faith by a majority of the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holder of the Rights) of the cash, assets, or evidences of indebtedness so to be distributed or of such subscription rights or warrants distributable in respect of a share of such Junior Preferred Stock and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of such Junior 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 that would have been in effect if such record date had not been fixed. (d)(i) For the purpose of any computation hereunder, the "current market price" per share of Common Stock or Common Equity Interest on any date shall be deemed to be the average of the daily closing prices per share of such shares for the ten consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, if prior to the expiration of such requisite ten Trading Day period, the issuer announces either (A) a dividend or distribution on such shares payable in such shares or securities convertible into such shares, to the extent allowable by the Certificate of Incorporation (other than the Rights), or (B) any subdivision, combination, or reclassification of such shares, then, following the ex-dividend date for such dividend or the record date for such subdivision, as the case may be, the "current market price" shall be properly adjusted to take into account such event. The closing price for each day shall be, if the shares are listed and admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such shares are listed or admitted to trading or, if such shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date such shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such shares selected by a majority of the Board of Directors of the Company. If on any such date no market maker is making a market in such shares, the fair value of such shares on such date as determined in good faith by a majority of the Board of Directors of the Company shall be used. If such shares are not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by a majority of the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. 20 24 The term "Trading Day" shall mean, if such shares are listed or admitted to trading on any national securities exchange, a day on which the principal national securities exchange on which such shares are listed or admitted to trading is open for the transaction of business or, if such shares are not so listed or admitted, a Business Day. (ii) For the purpose of any computation hereunder, the "current market price" per share of Junior Preferred Stock shall be determined in the same manner as set forth above for Common Stock in clause (i) of this Section 11(d) (other than the fourth sentence thereof). If the current market price per share of either series of Junior Preferred Stock cannot be determined in the manner provided above or if either series of the Junior 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 such Junior Preferred Stock shall be conclusively deemed to be (A) in the case of the Series 1 Preferred Stock, the "current market price" per share of the Company Common Stock multiplied by 100 (as such amount may be appropriately adjusted to reflect any stock split, reverse stock split, stock dividend, or any similar transaction with respect to Company Common Stock occurring after the date of this Agreement) and (B) in the case of the Series 2 Preferred Stock, the "current market price" per share of the Class A Common Stock multiplied by 100 (as such amount may be appropriately adjusted to reflect any stock split, reverse stock split, stock dividend, or any similar transaction with respect to the Class A Common Stock occurring after the date of this Agreement. If neither the applicable series of Common Stock nor the applicable series of Junior Preferred Stock is publicly held or so listed or traded, "current market price" per share of such Series 1 Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors 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, and "current market price" per share of such Series 2 Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors 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. For all purposes of this Agreement, the "current market price" of a Unit of either series of Junior Preferred Stock shall be equal to the "current market price" of one share of the applicable series of Junior Preferred Stock divided by 100. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent in the Purchase Price; provided, however, that any adjustments that 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 Common Equity Interest or other share or one-millionth of a share of Junior 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 21 25 years from the date of the transaction that mandates such adjustment or (ii) the Expiration Date. (f) If, as a result of an adjustment made pursuant to Sections 11(a)(ii) or 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Junior 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 Junior Preferred Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (1), and (m), and the provisions of Sections 7, 9, 10, 13, and 14 hereof with respect to the Junior Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Units of Junior Preferred Stock (or other securities or amount of cash or combination thereof) that may be acquired 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 Units of Junior Preferred Stock (calculated to the nearest one ten-thousandth of a Unit) obtained by (i) multiplying (x) the number of Units of Junior Preferred Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price 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 Units of Junior Preferred Stock that may be acquired 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 Units of Junior 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 of a Right) 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, and notify the Rights Agent, 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 22 26 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 days later than the date of such 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 to be so 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 Units of Junior Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per Unit and the number of Units of Junior Preferred Stock which was 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 par value of the number of Units of Junior Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such fully paid and non-assessable number of Units of Junior 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 of that number of Units of Junior Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of Units of Junior Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. 23 27 (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 the Board of Directors shall determine that any (i) consolidation or subdivision of the Junior Preferred Stock, (ii) issuance wholly for cash of any shares of Junior Preferred Stock at less than the current market price, (iii) issuance wholly for cash of shares of Junior Preferred Stock or securities that by their terms are convertible into or exchangeable for shares of Junior 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 Junior Preferred Stock, shall not be taxable to such holders or shall reduce the taxes payable by such holders. (n) The Company shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that 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 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 direct or indirect, wholly-owned 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 that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with, or immediately after such consolidation, merger, or sale, the Person that constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have distributed or otherwise transferred to its shareholders or other persons holding an equity interest in such Person Rights previously owned by such Person or any of its Affiliates and Associates; provided, however, this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary of the Company. (o) After the Distribution Date and so long as any Rights shall then be outstanding (other than Rights that have become void pursuant to Section 7(e) hereof), the Company shall not, except as permitted by Sections 23, 24, and 27 hereof, take (or permit any Subsidiary of the Company 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 Effective Date and prior to the Distribution Date (i) declare a dividend on any class of the outstanding shares of Common Stock payable in shares 24 28 of Common Stock, (ii) subdivide any class of the outstanding shares of Common Stock, (iii) combine any class of the outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of any class of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), the number of Company Common Rights (in the case of an event affecting the Company Common Stock) or Class A Common Rights (in the case of an event affecting the Class A Common Stock) associated with each share of such class 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 such class of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of such class of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of such class 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 such class of Common Stock outstanding immediately following the occurrence of such event. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination, or reclassification is effected. If an event occurs that would require an adjustment under Section 11(a)(ii) and this Section 11(p), the adjustments provided for in this Section 11(p) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii). Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 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 Junior Preferred Stock and the Common Stock, a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) at any time after a Person has become an Acquiring Person, in the event that, directly or indirectly, either (x) the Company shall consolidate with, or merge with and into, any other Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the 25 29 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 converted into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) to any Person or Persons (other than the Company or any of its direct or indirect, wholly-owned Subsidiaries in one or more transactions, each of which complies with Section 11(o) hereof), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) (any such event described in (x), (y), or (z) being herein referred to as a "Section 13 Event"); then, and in each such case, 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 Series 1 Purchase Price multiplied by the number of Units of Series 1 Preferred Stock for which a Company Common Right is then exercisable (in the case of a Company Common Right) or the then current Series 2 Purchase Price multiplied by the number of Units of Series 2 Preferred Stock for which a Class A Common Right is then exercisable (in the case of a Class A Common Right), in accordance with the terms of this Agreement and in lieu of Units of Junior Preferred Stock, such number of validly authorized and issued, fully paid, and non-assessable shares of Common Equity Interest of the Principal Party (which shares shall not be subject to any liens, encumbrances, rights of first refusal, transfer restrictions, or other adverse claims) as shall be equal to the result obtained by (A) in the case of the Company Common Rights (1) multiplying such then current Series 1 Purchase Price by the number of Units of Series 1 Preferred Stock for which such Company Common 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 Units of Series 1 Preferred Stock for which a Company Common Right would be exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event by the Series 1 Purchase Price that would be in effect hereunder but for such first occurrence) and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be the "Series 1 Purchase Price" for all purposes of this Agreement) by 50% of the then current market price (determined pursuant to Section 11(d) hereof) per share of the Common Equity Interest of such Principal Party on the date of consummation of such Section 13 Event, or (B) in the case of the Class A Common Rights (1) multiplying such then current Series 2 Purchase Price by the number of Units of Series 2 Preferred Stock for which such Class A Common 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 Units of Series 2 Preferred Stock for which a Class A Common Right would be exercisable 26 30 hereunder but for the occurrence of such Section 11(a)(ii) Event by the Series 2 Purchase Price that would be in effect hereunder but for such first occurrence) and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be the "Series 2 Purchase Price" for all purposes of this Agreement) by 50% of the then current market price (determined pursuant to Section 11(d) hereof) per share of the Common Equity Interest of such Principal Party on the date of consummation of such Section 13 Event (and following the first occurrence of a Section 13 Event, the Series 1 Purchase Price and the Series 2 Purchase Price (as adjusted pursuant to this Section 13(a)) shall be referred to collectively as the "Purchase Price" for all purposes of this Agreement); (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 Equity Interest) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be possible, to its shares of Common Equity Interest thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no further effect following the first occurrence of any Section 13 Event, and the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in this Section 13. (b) "Principal Party" shall mean: (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person (including the Company as successor thereto or as the surviving corporation) that is the issuer of any securities or other equity interests into which shares of Common Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of Common Equity Interest that has the highest aggregate current market price (determined pursuant to Section 11(d) hereof) and (B) if no securities or other equity interests are so issued, the Person (including the Company as successor thereto or as the surviving 27 31 corporation) that is the other constituent party to such merger or consolidation, or, if there is more than one such Person, the Person that is a constituent party to such merger or consolidation, the Common Equity Interest of which has the highest aggregate current market price (determined pursuant to Section 11(d) hereof); 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 largest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person that has received assets or earning power pursuant to such transaction or transactions, the Common Equity Interest of which has the highest aggregate current market price (determined pursuant to Section 11(d) hereof); provided, however, that in any such case, (1) if the Common Equity Interest of such Person is not at such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the Exchange Act ("Registered Common Stock"), and such Person is a direct or indirect Subsidiary of another Person that has Registered Common Stock outstanding, "Principal Party" shall refer to such other Person; (2) if the Common Equity Interest of such Person is not Registered Common Stock, and such Person is a direct or indirect Subsidiary of another Person (other than an individual), but is not a direct or indirect Subsidiary of another Person that has Registered Common Stock outstanding, "Principal Party" shall refer to the ultimate parent entity of such first-mentioned Person; (3) if the Common Equity Interest of such Person is not Registered Common Stock, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, "Principal Party" shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate current market price (determined pursuant to Section 11(d) hereof); and (4) if the Common Equity Interest of such Person is not Registered Common Stock, and such Person is directly or indirectly controlled by more than one Person (one or more of which is a Person other than an individual), and none of such other Persons have Registered Common Stock outstanding, "Principal Party" shall refer to whichever ultimate parent entity is the corporation having the greatest stockholders' equity or, if no such ultimate parent entity is a corporation, shall refer to whichever ultimate parent entity is the entity having the greatest net assets. (c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of its Common Equity Interest that have not been issued (or reserved for issuance) or that are held in its treasury 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 28 32 supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that the Principal Party shall use its best efforts to: (i) (A) prepare and file on an appropriate form, as soon as practicable following the execution of such agreement, a registration statement under the Securities Act with respect to the shares of Common Equity Interest that may be acquired upon exercise of the Rights, (B) cause such registration statement to remain effective (and to include a prospectus at all times complying with the requirements of the Securities Act) until the Expiration Date, and (C) take such action as may be required to ensure that any acquisition of such shares of Common Equity Interest upon the exercise of the Rights complies with any applicable state security or "Blue Sky" laws as soon as practicable following the execution of such agreement; and (ii) as soon as practicable after the execution of such agreement, deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act. (iii) obtain any and all regulatory approvals as may be required with respect to the shares of Common Equity Interest securities that may be acquired upon exercise of the Rights. (d) In case the Principal Party that is to be a party to a transaction referred to in this Section 13 has at the time of such transaction, or immediately following such transaction will have, a provision in any of its authorized securities or in its Certificate of Incorporation or By-laws or other instrument governing its corporate affairs, or any other agreements or arrangements, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Equity Interest of such Principal Party at less than the then current market price per share (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible into, Common Equity Interest of such Principal Party at less than such then current market price (other than to holders of Rights pursuant to this Section 13); (ii) providing for any special payment, tax, or similar provisions in connection with the issuance of the Common Equity Interest of such Principal Party pursuant to the provisions of Section 13; or (iii) otherwise eliminating or substantially diminishing the benefits intended to be afforded by the Rights in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13; then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived, or amended, or that the authorized securities shall be 29 33 redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. (e) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). Section 14. Fractional Rights; Fractional Shares; Waiver. (a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the Persons to which such fractional Rights would otherwise be issuable, an amount in cash equal to such fraction of the market value of a whole Right. For purposes of this Section 14(a), the market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date that such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be, if the Rights are listed or admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used and such determination shall be described in a statement filed with the Rights Agent and the holders of the Rights. (b) The Company shall not be required to issue fractions of shares of Junior Preferred Stock (other than fractions that are integral multiples of one one-hundredth of a share of Junior Preferred Stock) upon exercise of the Rights or to distribute certificates that evidence such fractional shares of Junior Preferred Stock (other than fractions that are integral multiples of one one-hundredth of a share of Junior Preferred Stock). Subject to Section 7(c)(1) hereof, fractions of shares of Junior Preferred Stock in integral multiples of one one-hundredth of a share of Junior Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a Depositary Agent selected by it; provided, however, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges, and preferences to which they are entitled as Beneficial Owners of the shares of Junior Preferred Stock represented by such depositary receipts. In lieu of such fractional shares of 30 34 Junior Preferred Stock that are not integral multiples of one one-hundredth of a share, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the then current market price of a share of Junior Preferred Stock on the day of exercise, determined in accordance with Section 11(d) hereof. (c) The holder of a Right, by the acceptance of the Right, 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, other than rights of action vested in the Rights Agent pursuant to Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of certificates representing shares of Common Stock); and any registered holder of a Rights Certificate (or, prior to the Distribution Date, of a certificate representing shares of 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 a certificate representing shares of 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 or any other Person to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office 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 duly 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 31 35 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 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 any 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 promptly as practicable. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of shares of Junior Preferred Stock or any other securities of the Company that 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 stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or, except as provided in Section 25 hereof, to receive notice of meetings or other actions affecting shareholders, or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in connection with the execution and administration of this Agreement and the exercise and performance of its duties hereunder. The Company shall indemnify the Rights Agent for, and hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability hereunder. (b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered, or omitted by it in connection with, its administration of this 32 36 Agreement in reliance upon any Rights Certificate or certificate for Junior Preferred 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 have been 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 stockholder services businesses 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 document or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. 33 37 (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be specified herein) may be deemed to be proved conclusively and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Vice-Chairman of the Board, the Treasurer, any Assistant Treasurer, the Secretary, or any Assistant Secretary of the Company and delivered to the Rights Agent; provided, however, that so long as any Person is an Acquiring Person hereunder, such certificate shall be signed and delivered by a majority of the Board of Directors; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith, or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not have any responsibility for the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or for the validity or execution of any Rights Certificate (except its countersignature thereon); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy conditions contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including Rights becoming void pursuant to Section 7(e) hereof) or any adjustment in the terms of the Rights required under the provisions of Sections 11, 13, 23, or 24 hereof or for the manner, method, or amount of any such change or adjustment or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of the certificate describing any such adjustment contemplated by Section 12); 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 Junior Preferred Stock or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Junior Preferred Stock or any other securities will, when so issued, be validly authorized and issued, fully paid and non-assessable. (f) The Company shall perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further acts, instruments, and 34 38 assurances as may reasonably be required by the Rights Agent for the performance by the Rights Agent of its duties under this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, the Vice-Chairman of the Board, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer; provided, however, that so long as any Person is an Acquiring Person hereunder, the Rights Agent shall accept such instructions and advice only from the Board of Directors and shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with such instructions of the Board of Directors. (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 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 or in the exercise of its rights hereunder if the Rights Agent shall have 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 not been completed, has not been signed, or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. If such certificate has been completed and signed and shows a negative response 35 39 to clauses 1 and 2 of such certificate, unless previously instructed otherwise in writing by the Company (which instructions may impose on the Rights Agent additional ministerial responsibilities, but no discretionary responsibilities), the Rights Agent may assume without further inquiry that the Rights Certificate is not owned by a person described in Section 4(b) or Section 7(e) hereof and shall not be charged with any knowledge to the contrary. 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 days' prior notice in writing mailed to the Company, and to each transfer agent of the Junior Preferred Stock and the Common Stock, by registered or certified mail, and to the registered holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty days' prior notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Junior Preferred Stock and the Common Stock, by registered or certified mail, and to the registered 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 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or any state of the United States in good standing, shall be authorized to do business as a banking institution in the State of New York, shall be authorized under such laws to exercise corporate trust or stock transfer powers, shall be subject to supervision or examination by federal or state authorities and shall have at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a corporation described in clause (a). 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 Junior Preferred Stock and the Common 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. 36 40 Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or the Rights Certificates to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by a majority of the Board of Directors of the Company to reflect any adjustment or change made in accordance with the provisions of this Agreement in the Purchase Price or the number or kind or class of shares or other securities or property that may be acquired under the Rights Certificates. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, 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 Conversion. (a) The Board of Directors of the Company may, within its sole discretion, at any time prior to such time as any Person becomes an Acquiring Person, redeem all, but not less than all, of the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, reverse stock split, stock dividend, or similar transaction occurring after the date hereof (such redemption price, as adjusted, being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors pursuant to this paragraph (a) may be made effective at such time, on such basis, and with such conditions as the Board of Directors in its sole discretion may establish. (b) Prior to the Distribution Date and prior to such time as any Person becomes an Acquiring Person, the Board of Directors of the Company may, within its sole discretion, in connection with the redemption or purchase (whether for cash or in exchange for property or other securities or any combination thereof) by the Company of shares of Class A Common Stock in accordance with the applicable provisions of the Restated Certificate of Incorporation of the Company, redeem the Class A Common Rights attached to the shares of Class A Common Stock so redeemed or purchased at a redemption price of $.01 per Class A Common Right, appropriately adjusted to reflect any stock split, reverse stock split, stock dividend, or similar transaction occurring after the date hereof (such redemption price, as adjusted, being hereinafter referred to as the "Class A Common Right Redemption Price"). The redemption of the Class A Common Rights by the Board of Directors pursuant to this 37 41 paragraph (b) may be made effective at such time, on such basis, and with such conditions as the Board of Directors in its sole discretion may establish. (c) Immediately upon the action of the Board of Directors of the Company ordering the redemption of Rights pursuant to paragraph (a) or (b) of this Section 23, and without any further action and without any notice, the right to exercise the Rights (if all outstanding Rights are redeemed pursuant to paragraph (a) hereof) or the Class A Common Rights (if Class A Common Rights are redeemed pursuant to paragraph (b) hereof) will terminate and the only right thereafter of the holders of Rights or the Class A Common Rights, as the case may be, shall be to receive the Redemption Price or the Class A Common Right Redemption Price, as the case may be. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors ordering the redemption of the Rights or Class A Common Rights, as the case may be, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights or to the holders of the Class A Common Rights so redeemed, as the case may be, at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice that 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 or the Class A Common Rights Redemption Price, as the case may be, will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire, or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, or other than in connection with the purchase of shares of Common Stock or the conversion or redemption of shares of Common Stock in accordance with the applicable provisions of Restated Certificate of Incorporation of the Company prior to the Distribution Date. (d) In the event that prior to the Distribution Date, the Class A Common Stock is converted, in whole or in part, into Company Common Stock (or other class or series of common stock of the Company (other than Class A Common Stock)) in accordance with the applicable provisions of the Restated Certificate of Incorporation of the Company, the Class A Common Rights attached to the shares of Class A Common Stock so converted shall be converted to Company Common Rights pursuant to a conversion ratio equivalent to the conversion ratio used for converting the Class A Common Stock to Company Common Stock. In the event that on or after the Distribution Date, all outstanding shares of Class A Common Stock are converted into shares of Company Common Stock (or other class or series of common stock of the Company (other than Class A Common Stock)) in accordance with the applicable provisions of the Restated Certificate of Incorporation of the Company, all Class A Common Rights then outstanding shall be converted to Company Common Rights pursuant to a conversion ratio equivalent to the conversion ratio used for converting the Class A Common Stock to Company Common Stock. 38 42 Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, (1) exchange all or part of the then outstanding and exercisable Company Common Rights (which shall not include Company Common Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Series 1 Preferred Stock at an exchange ratio of one Unit of Series 1 Preferred Stock per Company Common Right, appropriately adjusted to reflect any stock split, stock dividend, or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Company Common Rights Exchange Ratio") and/or (2) exchange all or part of the then outstanding and exercisable Class A Common Rights (which shall not include Class A Common Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Series 2 Preferred Stock at an exchange ratio of one Unit of Series 2 Preferred Stock per Class A Common Right, appropriately adjusted to reflect any stock split, stock dividend, or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Class A Common Rights Exchange Ratio;" the Company Common Rights Exchange Ratio and the Class A Common Rights Exchange Ratio being hereinafter referred to collectively as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any trustee or fiduciary holding shares of Voting Stock for, or pursuant to the terms of, any such plan, acting in such capacity), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of shares of Voting Stock representing 50% or more of the total Voting Power of the aggregate of all shares of Voting Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Junior Preferred Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Junior Preferred Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights that will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. 39 43 (c) In the event that there shall not be sufficient shares of Junior Preferred Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Junior Preferred Stock for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional shares of Junior Preferred Stock, the Board of Directors of the Company shall not order the exchange of any Rights. Section 25. 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 either series of Junior Preferred Stock or to make any other distribution to the holders of either series of Junior Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company); (ii) to offer to the holders of either series of Junior Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of such Junior Preferred Stock or shares of stock of any class or any other securities, rights or options; (iii) to effect any reclassification of either series of Junior Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of such series of Junior Preferred Stock); (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 or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or 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 registered holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Junior 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 ten (10) days prior to the record date for determining holders of the shares of Junior Preferred Stock for purposes of such action, and in the case of any such other action, at least ten (10) 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 Junior Preferred Stock whichever shall be the earlier; provided, however, that no such action shall be taken pursuant to this Section 25(a) that will or would conflict with any provision of the Certificate of Incorporation; provided further, that no such notice shall be required pursuant to this Section 25, if any Subsidiary of the Company effects a consolidation or merger with or into, or effects a sale or other transfer of assets or earnings power to, any other Subsidiary of the Company. 40 44 (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 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding Section 25(a) to Junior Preferred Stock shall be deemed to refer, if appropriate, to any other securities that may be acquired upon exercise of a Right. (c) In case any Section 13 Event shall occur, then the Company shall, as soon as practicable thereafter, give to each registered holder of a Right Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 13(a) hereof. Section 26. Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including by facsimile, telegram or cable) and mailed or sent or delivered, if to the Company, at its address at: CONECTIV 800 King Street Wilmington, Delaware 19899 Attention: Corporate Secretary And if to the Rights Agent, at its address at: Conectiv Resource Partners, Inc. 800 King St. Wilmington, Delaware 19899 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 or the Rights Agent, as the case may be. Section 27. Supplements and Amendments. Subject to the penultimate sentence of this Section 27, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, to shorten or lengthen any time period hereunder, or to make any 41 45 other provisions with respect to the Rights that the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner that would adversely affect the interests of the holders of Rights (other than Rights that have become void pursuant to Section 7(e) hereof). Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and the largest percentage of Voting Power represented by the then outstanding shares of Voting Stock then known by the Company to be Beneficially Owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any trustee or fiduciary holding shares of Voting Stock for, or pursuant to the terms of, any such plan, acting in such capacity), and (ii) 10%. Upon delivery of a certificate from an appropriate officer of the Company or, so long as any Person is an Acquiring Person hereunder, from the Board of Directors of the Company, that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, however, that no supplement or amendment may be made to Sections 18, 19, 20, or 21 hereof without the consent of the Rights Agent. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. 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 29. Determinations and Actions by the Board of Directors. For all purposes of this Agreement, any calculation of the number of shares of any class or series of Voting Stock outstanding at any particular time, including for purposes of determining the particular percentage of outstanding shares of Voting Stock of which any Person is the Beneficial Owner (or the particular percentage of total Voting Power of such outstanding shares of Voting Stock represented by shares of Voting 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 Exchange Act Regulations as in effect on the date hereof. Except as otherwise specifically provided herein, the Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power (i) to interpret the provisions of this Agreement, and (ii) to make all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of 42 46 Directors 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 of Directors or any member thereof to any liability to the holders of the Rights. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of 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 shares of Common Stock). Section 31. Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. Governing Law. This Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. Section 33. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. Section 34. Descriptive Headings. The headings contained in this Agreement are for descriptive purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 43 47 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date first above written. ATTEST: CONECTIV By By Name: /s/ M.K. Donoghue Name: /s/ H.E. Cosgrove Title: Secretary Title: Chairman and Chief Executive Officer ATTEST: CONECTIV RESOURCE PARTNERS, INC. By By Name: /s/ M.K. Donoghue Name: /s/ B.S. Graham Title: Secretary Title: Senior Vice President and Chief Financial Officer 44 48 EXHIBIT A-1 Certificate No. _____ ____ Rights NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. COMPANY COMMON RIGHTS CERTIFICATE CONECTIV This certifies that ______________, or registered assigns, is the registered holder of the number of Company Common Rights set forth above, each of which entitles the registered holder thereof, subject to the terms and conditions of the Rights Agreement dated as of [ ], 1998 (the "Rights Agreement"); (terms defined therein are used herein with the same meaning unless otherwise defined herein) between Conectiv, a Delaware corporation (the "Company"), and Conectiv Resource Partners, Inc., as Rights Agent (which terms shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company at any time after the Distribution Date and prior to the Expiration Date at the office of the Rights Agent, one one-hundredth of a fully paid and non-assessable share of Series 1 Junior Preferred Stock, par value $.01 per share (the "Series 1 Preferred Stock"), of the Company at the Purchase Price initially of $[ ] per one one-hundredth share (each such one one-hundredth of a share being a "Unit") of Preferred Stock, upon presentation and surrender of this Rights Certificate with the Election to Purchase and related certificate duly executed. The number of Company Common Rights evidenced by this Rights Certificate (and the number of Units which may be purchased upon exercise thereof) set forth above, the Purchase Price per Unit set forth above shall be subject to adjustment in certain events as provided in the Rights Agreement. Upon the occurrence of a Section 11(a)(ii) Event or Section 13 Event, if the Company Common Rights evidenced by this Company Common Rights Certificate are beneficially owned by an Acquiring Person or an Affiliate or Associate of any such Acquiring Person or, under certain circumstances described in the Rights Agreement, a transferee of any such Acquiring Person, Associate or Affiliate, such Company Common 49 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 or Section 13 Event. In certain circumstances described in the Rights Agreement, the Rights evidenced hereby may entitle the registered holder thereof to purchase capital stock of an entity other than the Company or receive common stock, cash or other assets of an entity other than the Company, all as provided in the Rights Agreement. The Rights Certificate is subject to all of the terms and conditions of the Rights Agreement applicable to a Company Common Right, which terms and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are available from the Company upon written request. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Company Common Rights not exercised. Subject to the provisions of the Rights Agreement, the Company Common Rights evidenced by this Certificate may be redeemed by the Company under certain circumstances at its option at a redemption price of $.01 per Company Common Right, payable at the Company's option in cash or other securities or property of the Company, subject to adjustment for certain events as provided in the Rights Agreement. No fractional shares of Series 1 Preferred Stock will be issued upon the exercise of any Company Common Right or Company Common Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a share of Series 1 Preferred Stock), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Series 1 Preferred Stock or of any other securities that may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any 2 50 meeting thereof, or to give or withhold consent to any corporate action, or to receive dividends or subscription rights, or otherwise, until the Company Common 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 signature of the proper officers of the Company and its corporate seal. Dated as of _________, ____.
ATTEST: CONECTIV By By ---------------------- ------------------------- Name: Name: Title: Title: Countersigned: CONECTIV RESOURCE PARTNERS, INC., as Rights Agent By ----------------------- Name: Title:
3 51 [Reverse Side of Company Common 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:______________, 199__ -------------------- Signature Signature Guaranteed: 52 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); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Company Common 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: , 199 ---------------------------------------- --------------- --- 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. Signatures must be guaranteed by an approved eligible financial institution acceptable to the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange Medallion Program. In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate. 53 FORM OF ELECTION TO PURCHASE (TO BE EXECUTED IF THE REGISTERED HOLDER DESIRES TO EXERCISE COMPANY COMMON RIGHTS REPRESENTED BY THE RIGHTS CERTIFICATE) To: CONECTIV The undersigned hereby irrevocably elects to exercise _______________ Company Common Rights represented by this Rights Certificate to purchase the Units of Series 1 Preferred Stock issuable upon the exercise of the Common Rights (or such other securities of the Company or of any other person or other property which may be issuable upon the exercise of the Company Common Rights) and requests that certificates for such Units of Series 1 Preferred Stock be issued and in the name of and delivered to: - ---------------------------------------------------- (Please print name and address - ---------------------------------------------------- Please insert social security or other identifying number:________________________ If such number of Company Common Rights shall not be all the Company Common Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Company Common Rights shall be registered in the name of and delivered to: - ----------------------------------------------------- (Please print name and address) - ----------------------------------------------------- Please insert social security or other identifying number:________________________ Dated:_____________, 199__ -------------------------- Signature Signature Guaranteed: 54 CERTIFICATE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not beneficially owned by an Acquiring Person or an Affiliate or an Associate thereof (as defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, the undersigned [ ] did [ ] did not acquire the Company Common Rights evidenced by this Rights Certificate from any person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof. Dated: , 199 --------------------------------------- ------------ ---- Signature Signature Guaranteed:
----------------------------------------- NOTICE ------ The signature in the foregoing Election to Purchase and Certificate must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. Signatures must be guaranteed by an approved eligible financial institution acceptable to the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange Medallion Program. In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate. 55 EXHIBIT A-2 Certificate No. _____ ____ Rights NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. CLASS A COMMON RIGHTS CERTIFICATE CONECTIV This certifies that ______________, or registered assigns, is the registered holder of the number of Class A Common Rights set forth above, each of which entitles the registered holder thereof, subject to the terms and conditions of the Rights Agreement dated as of [ ], 1998 (the "Rights Agreement"); (terms defined therein are used herein with the same meaning unless otherwise defined herein) between Conectiv, a Delaware corporation (the "Company"), and Conectiv Resource Partners, Inc., as Rights Agent (which terms shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company at any time after the Distribution Date and prior to the Expiration Date at the office of the Rights Agent, one one hundredth of a fully paid and non-assessable share of Series 2 Junior Preferred Stock, par value $.01 per share (the "Series 2 Preferred Stock"), of the Company at the Purchase Price, initially of $[ ] per one one-hundredth share (each such one one-hundredth of a share being a "Unit") of Series 2 Preferred Stock, upon presentation and surrender of this Rights Certificate with the Election to Purchase and related certificate duly executed. The number of Class A Common Rights evidenced by this Rights Certificate (and the number of Units which may be purchased upon exercise thereof) set forth above, the Purchase Price per Unit set forth above shall be subject to adjustment in certain events as provided in the Rights Agreement. Upon the occurrence of a Section 11(a)(ii) Event or Section 13 Event, if the Class A Common Rights evidenced by this Class A Common Rights Certificate are beneficially owned by an Acquiring Person or an Affiliate or Associate of any such Acquiring Person or, under certain circumstances described in the Rights Agreement, a transferee of any such Acquiring Person, Associate or Affiliate, such Class A Common Rights shall become null and void and no holder hereof shall have any right with respect to 56 such Rights from and after the occurrence of such Section 11(a)(ii) Event or Section 13 Event. In certain circumstances described in the Rights Agreement, the Rights evidenced hereby may entitle the registered holder thereof to purchase capital stock of an entity other than the Company or receive common stock, cash or other assets of an entity other than the Company, all as provided in the Rights Agreement. The Rights Certificate is subject to all of the terms and conditions of the Rights Agreement applicable to a Class A Common Right, which terms and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are available from the Company upon written request. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Class A Common Rights not exercised. Subject to the provisions of the Rights Agreement, the Class A Common Rights evidenced by this Certificate may be redeemed by the Company under certain circumstances at its option at a redemption price of $.01 per Class A Common Right, payable at the Company's option in cash or other securities or property of the Company, subject to adjustment in certain events as provided in the Rights Agreement. No fractional shares of Series 2 Preferred Stock will be issued upon the exercise of any Class A Common Right or Class A Common Rights evidenced hereby (other than fractions which are integral multiples of one one hundredth of a share of Series 2 Preferred Stock), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Series 2 Preferred Stock or of any other securities that may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive 2 57 dividends or subscription rights, or otherwise, until the Class A Common 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 signature of the proper officers of the Company and its corporate seal. Dated as of _________, ____.
ATTEST: CONECTIV By By ---------------------- ------------------------- Name: Name: Title: Title: Countersigned: CONECTIV RESOURCE PARTNERS, INC., as Rights Agent By ----------------------- Name: Title:
3 58 [Reverse Side of Class A Common 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:______________, 199__ ------------------------- Signature Signature Guaranteed: 59 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); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Class A Common 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: , 199 --------------------------------------- ------------ ---- 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. Signatures must be guaranteed by an approved eligible financial institution acceptable to the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange Medallion Program. In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate. 60 FORM OF ELECTION TO PURCHASE (TO BE EXECUTED IF THE REGISTERED HOLDER DESIRES TO EXERCISE CLASS A COMMON RIGHTS REPRESENTED BY THE RIGHTS CERTIFICATE) To: CONECTIV The undersigned hereby irrevocably elects to exercise _______________ Class A Common Rights represented by this Rights Certificate to purchase the Units of Series 2 Preferred Stock issuable upon the exercise of the Class A Common Rights (or such other securities of the Company or of any other person or other property which may be issuable upon the exercise of the Class A Common Rights) and requests that certificates for such Units of Series 2 Preferred Stock be issued and in the name of and delivered to: ____________________________________________________ (Please print name and address ____________________________________________________ Please insert social security or other identifying number:________________________ If such number of Class A Common Rights shall not be all the Class A Common Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Class A Common Rights shall be registered in the name of and delivered to: ____________________________________________________ (Please print name and address) _____________________________________________________ Please insert social security or other identifying number:________________________ Dated:_____________, 199__ ----------------------------- Signature Signature Guaranteed: 61 CERTIFICATE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not beneficially owned by an Acquiring Person or an Affiliate or an Associate thereof (as defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, the undersigned [ ] did [ ] did not acquire the Class A Common Rights evidenced by this Rights Certificate from any person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof. Dated: , 199 --------------------------------------- ------------ ---- Signature Signature Guaranteed:
----------------------------------------- NOTICE ------ The signature in the foregoing Election to Purchase and Certificate must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. Signatures must be guaranteed by an approved eligible financial institution acceptable to the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange Medallion Program. In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate. 62 EXHIBIT B-1 SUMMARY OF RIGHTS TO PURCHASE SERIES 1 JUNIOR PREFERRED STOCK On [ ], the Board of Directors of Conectiv (the "Company") declared a distribution of one Right (a "Company Common Right") for each outstanding share of Common Stock, par value $.01 per share (the "Company Common Stock"), to stockholders of record at the close of business on [ ] (the "Record Date") and for each share of Company Common Stock issued (including shares distributed from Treasury) by the Company thereafter and prior to the Distribution Date. Each Company Common Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-hundredth of a share (a "Unit") of Series 1 Junior Preferred Stock, par value $.01 per share (the "Series 1 Preferred Stock"), at a Purchase Price of $[ ] per Unit, subject to adjustment. The description and terms of the Company Common Rights are set forth in a Rights Agreement between the Company and Conectiv Resource Partners, Inc. as Rights Agent (the "Rights Agreement"). On [ ], the Board of Directors also declared a similar distribution of one Right (a "Class A Common Right") for each outstanding share of Class A Common Stock, par value $.01 per share (the "Class A Common Stock") to stockholders of record on the Record Date, each Class A Common Right entitling the holder thereof, subject to the terms of the Rights Agreement, to purchase from the Company a Unit of Series 2 Junior Preferred Stock, par value $.01 per share, at a Purchase Price of $[ ] per Unit, subject to adjustment. Copies of the Rights Agreement and the Certificate of Designation for the Series 1 Preferred Stock have been filed with the Securities and Exchange Commission as exhibits to a Registration Statement on Form 8-A and a Current Report on Form 8-K, each dated [ ], 1998 (respectively, the "Form 8-A" and "Form 8-K"). Copies of the Rights Agreement and the Certificate of Designation are available free of charge from the Company. This summary description of the Company Common Rights and Series 1 Preferred Stock does not purport to be complete and is qualified in its entirety by reference to all the provisions of the Rights Agreement and the Certificate of Designation, including the definitions therein of certain terms, which Rights Agreement and Certificate of Designation are incorporated herein by reference. The Rights Agreement Initially, the Company Common Rights will attach to all certificates representing shares of outstanding Company Common Stock, and no separate Rights Certificates will be distributed. The Company Common Rights will separate from the Company Common Stock and the "Distribution Date" will occur upon the earlier of (i) 10 63 days following a public announcement that a person or group of affiliated or associated persons (other than the Company, any subsidiary of the Company or any employee benefit plan of the Company or such subsidiary) (an "Acquiring Person") has acquired, obtained the right to acquire, or otherwise obtained beneficial ownership of an aggregate of 15% or more of the total voting power represented by all the then outstanding shares of Company Common Stock, Class A Common Stock and other voting securities of the Company (the "Voting Securities"), and (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning an aggregate of 15% or more of the total voting power represented by all the then outstanding shares of Voting Securities. Until the Distribution Date, (i) the Company Common Rights will be evidenced by Company Common Stock certificates and will be transferred with and only with such Company Common Stock certificates, (ii) new Company Common Stock certificates issued after the Record Date (including shares distributed from Treasury) will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates representing outstanding Company Common Stock will also constitute the transfer of the Company Common Rights associated with the Company Common Stock represented by such certificates. The Company Common Rights are not exercisable until the Distribution Date and will expire at the Close of Business on the tenth anniversary of the Rights Agreement unless earlier redeemed or exchanged by the Company as described below. As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of Company Common Stock as of the Close of Business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Company Common Rights. In the event that a Person becomes an Acquiring Person (a "Section 11(a)(ii) Event"), then each holder of a Company Common Right will thereafter have the right to receive, upon exercise, Units of Series 1 Preferred Stock (or, in certain circumstances, cash, property, or other securities of the Company) having a value equal to two times the exercise price of the Company Common Right. The exercise price is the Purchase Price multiplied by the number of Units of Series 1 Preferred Stock issuable upon exercise of a Right prior to the events described in this paragraph. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Company Common Rights that are, or under certain circumstances specified in the Rights Agreement were, beneficially owned by any Acquiring Person will be null and void. In the event that, at any time after a Person or group becomes an "Acquiring Person," (i) the Company is acquired in a merger or other business combination with another company and the Company is not the surviving corporation (other than a merger described in the preceding paragraph), (ii) another company consolidates or merges with the Company and all or part of the Company Common Stock or Class A Common Stock is converted or exchanged for other securities, cash, or property, or (iii) 50% or more of the 64 consolidated assets or earning power of the Company and its subsidiaries is sold or transferred to another company, each holder of a Company Common Right (except Rights that previously have been voided as described above) shall thereafter have the right to receive, upon exercise, common stock or other equity interest of the ultimate parent of such other company having a value equal to two times the exercise price of the Company Common Right. The Purchase Price payable, and the number of Units of Series 1 Preferred Stock (or other securities, as applicable) issuable, upon exercise of the Company Common Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series 1 Preferred Stock, (ii) if holders of the Series 1 Preferred Stock are granted certain rights or warrants to subscribe for Series 1 Preferred Stock or convertible securities at less than the current market price of the Series 1 Preferred Stock, or (iii) upon the distribution to the holders of the Series 1 Preferred Stock of evidences of indebtedness, cash or assets (excluding regular quarterly cash dividends or dividends payable in the Series 1 Preferred Stock) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. The Company is not required to issue fractional shares of Series 1 Preferred Stock (other than fractional shares that are integral multiples of one one-hundredth of a share). In lieu thereof, an adjustment in cash may be made based on the market price of the Series 1 Preferred Stock prior to the date of exercise. At any time prior to such time as any Person or group or affiliated or associated persons becomes an Acquiring Person, the Company's Board of Directors may redeem the Company Common Rights in whole, but not in part, at a price of $.01 per Right (subject to adjustment in certain events) (the "Redemption Price"). Immediately upon the action of the Company's Board of Directors ordering the redemption of the Company Common Rights, the Company Common Rights will terminate and the only right of the holders of such Rights will be to receive the Redemption Price. At any time after any Person or group of affiliated or associated Persons becomes an Acquiring Person and before any such Person or group shall become the beneficial owner of 50% or more of the total voting power of the aggregate of all shares of Voting Securities then outstanding, the Board of Directors, at its option, may exchange each Company Common Right (other than Rights that previously have become void as described above) in whole or in part, at an exchange ratio of one Unit of Series 1 Preferred Stock per Company Common Right (subject to adjustment in certain events). Until a Company Common Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Company Common Rights will not be taxable to stockholders or to the Company, stockholders may, depending 65 upon the circumstances, recognize taxable income in the event that the Company Common Rights become exercisable for Units of Preferred Stock (or other consideration). Any of the provisions of the Rights Agreement may be amended without the approval of the holders of Company Common Rights in order to cure any ambiguity, defect, inconsistency or to make any other changes that the Board may deem necessary or desirable. After any Person or group of affiliated or associated Persons becomes an Acquiring Person, the provisions of the Rights Agreement may not be amended in any manner that would adversely affect the interests of the holders of Company Common Rights excluding the interests of any Acquiring Person. Description of Series 1 Preferred Stock The Units of Series 1 Preferred Stock that may be acquired upon exercise of the Company Common Rights will not be redeemable and will rank junior to any other shares of preferred stock that may be issued by the Company with respect to the payment of dividends and as to distribution of assets in liquidation (except that Series 1 Preferred Stock will be in parity with the Series 2 Junior Preferred Stock). Each Share of Series 1 Preferred Stock will have a minimum preferential quarterly dividend of the greater of $1.00 per share or 100 times the aggregate per share amount of any cash dividend declared on the Company Common Stock since the immediately preceding quarterly dividend, subject to certain adjustments. In the event of liquidation, the holder of Series 1 Preferred Stock will be entitled to receive a preferred liquidation payment per share equal to the greater of $1.00 (plus accrued and unpaid dividends thereon) or 100 times the amount paid in respect of a share of Company Common Stock, subject to certain adjustments. Generally, each share of Series 1 Preferred Stock will vote together with the Company Common Stock, Class A Common Stock, and any other series of preferred stock entitled to vote in such a manner, and will be entitled to 100 votes per share, subject to certain adjustments. The holders of the Series 1 Preferred Stock, voting as a separate class, shall be entitled to elect two directors if dividends on the Series 1 Preferred Stock are in arrears in an amount equal to six quarterly dividends thereon. In the event of any merger, consolidation or other transaction in which shares of Company Common Stock are exchanged, each Share of Series 1 Preferred Stock will be entitled to receive 100 times the aggregate per share amount of stock, securities, cash or other property paid in respect of each share of Company Common Stock, subject to certain adjustments. The rights of holders of the Series 1 Preferred Stock to dividend, liquidation and voting rights are protected by customary anti-dilution provisions. 66 Because of the nature of the Series 1 Preferred Stock's dividend, liquidation and voting rights, the economic value of one Unit of Series 1 Preferred Stock is expected to approximate the economic value of one share of Company Common Stock. 67 EXHIBIT B-2 SUMMARY OF RIGHTS TO PURCHASE SERIES 2 JUNIOR PREFERRED STOCK On [ ], the Board of Directors of Conectiv (the "Company") declared a distribution of one Right (a "Class A Common Right") for each outstanding share of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), to stockholders of record at the close of business on [ ] (the "Record Date") and for each share of Class A Common Stock issued (including shares distributed from Treasury) by the Company thereafter and prior to the Distribution Date. Each Class A Common Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-hundredth of a share (a "Unit") of Series 2 Junior Preferred Stock, par value $.01 per share (the "Series 2 Preferred Stock"), at a Purchase Price of $[ ] per Unit, subject to adjustment. The description and terms of the Class A Common Rights are set forth in a Rights Agreement between the Company and Conectiv Resource Partners, Inc. as Rights Agent (the "Rights Agreement"). On [ ], the Board of Directors also declared a similar distribution of one Right (a "Company Common Right") for each outstanding share of Common Stock, par value $.01 per share (the "Company Common Stock") to stockholders of record on the Record Date, each Company Common Right entitling the holder thereof, subject to the terms of the Rights Agreement, to purchase from the Company a Unit of Series 1 Junior Preferred Stock, par value $.01 per share, at a Purchase Price of $[ ] per Unit, subject to adjustment. Copies of the Rights Agreement and the Certificate of Designation for the Series 2 Preferred Stock have been filed with the Securities and Exchange Commission as exhibits to a Registration Statement on Form 8-A and a Current Report on Form 8-K, each dated [ ], 1998 (respectively, the "Form 8-A" and "Form 8-K")). Copies of the Rights Agreement and the Certificate of Designation are available free of charge from the Company. This summary description of the Class A Common Rights and Series 2 Preferred Stock does not purport to be complete and is qualified in its entirety by reference to all the provisions of the Rights Agreement and the Certificate of Designation, including the definitions therein of certain terms, which Rights Agreement and Certificate of Designation are incorporated herein by reference. The Rights Agreement Initially, the Class A Common Rights will attach to all certificates representing shares of outstanding Class A Common Stock, and no separate Rights Certificates will be distributed. The Class A Common Rights will separate from the Class A Common Stock and the "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 68 (other than the Company, any subsidiary of the Company or any employee benefit plan of the Company or such subsidiary) (an "Acquiring Person") has acquired, obtained the right to acquire, or otherwise obtained beneficial ownership of an aggregate of 15% or more of the total voting power represented by all the then outstanding shares of Class A Common Stock, Company Common Stock and other voting securities of the Company (the "Voting Securities"), and (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning an aggregate of 15% or more of the total voting power represented by all the then outstanding shares of Voting Securities. Until the Distribution Date, (i) the Class A Common Rights will be evidenced by Class A Common Stock certificates and will be transferred with and only with such Class A Common Stock certificates, (ii) new Class A Common Stock certificates issued after the Record Date (including shares distributed from Treasury) will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates representing outstanding Class A Common Stock will also constitute the transfer of the Class A Common Rights associated with the Class A Common Stock represented by such certificates. The Class A Common Rights are not exercisable until the Distribution Date and will expire at the Close of Business on the tenth anniversary of the Rights Agreement unless earlier redeemed or exchanged by the Company as described below. As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of Class A Common Stock as of the Close of Business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Class A Common Rights. In the event that a Person becomes an Acquiring Person (a "Section 11(a)(ii) Event"), then each holder of a Class A Common Right will thereafter have the right to receive, upon exercise, Units of Series 2 Preferred Stock (or, in certain circumstances, cash, property, or other securities of the Company) having a value equal to two times the exercise price of the Class A Common Right. The exercise price is the Purchase Price multiplied by the number of Units of Series 2 Preferred Stock issuable upon exercise of a Class A Common Right prior to the events described in this paragraph. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Class A Common Rights that are, or under certain circumstances specified in the Rights Agreement were, beneficially owned by any Acquiring Person will be null and void. In the event that, at any time after a Person or group becomes an "Acquiring Person," (i) the Company is acquired in a merger or other business combination with another company and the Company is not the surviving corporation (other than a merger described in the preceding paragraph), (ii) another company consolidates or merges with the Company and all or part of the Class A Common Stock or Company Common Stock is converted or exchanged for other securities, cash, or property, or (iii) 50% or more of the 69 consolidated assets or earning power of the Company and its subsidiaries is sold or transferred to another company, each holder of a Class A Common Right (except Rights that previously have been voided as described above) shall thereafter have the right to receive, upon exercise, common stock or other equity interest of the ultimate parent of such other company having a value equal to two times the exercise price of the Class A Common Right. The Purchase Price payable, and the number of Units of Series 2 Preferred Stock (or other securities, as applicable) issuable, upon exercise of the Class A Common Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series 2 Preferred Stock, (ii) if holders of the Series 2 Preferred Stock are granted certain rights or warrants to subscribe for Series 2 Preferred Stock or convertible securities at less than the current market price of the Series 2 Preferred Stock, or (iii) upon the distribution to the holders of the Series 2 Preferred Stock of evidences of indebtedness, cash or assets (excluding regular quarterly cash dividends or dividends in the Series 2 Preferred Stock) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. The Company is not required to issue fractional Shares of Series 2 Preferred Stock (other than fractional shares that are integral multiples of one one-hundredth of a Share). In lieu thereof, an adjustment in cash may be made based on the market price of the Series 2 Preferred Stock prior to the date of exercise. At any time prior to such time as any Person or group of affiliated or associated Persons becomes an Acquiring Person, the Company's Board of Directors may redeem the Class A Common Rights in whole, but not in part, at a price of $.01 per Right (subject to adjustment in certain events) (the "Redemption Price"). In addition, prior to a Distribution Date and prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person, the Company may, in connection with the redemption or purchase by the Company of shares of Class A Common Stock in accordance with the applicable provisions of the Company's Restated Certificate of Incorporation, redeem the Class A Common Rights attached to the shares of Class A Common Stock so redeemed or purchased at a redemption price of $.01 per Right, subject to adjustment. Immediately upon the action of the Company's Board of Directors ordering the redemption of Class A Common Rights, the Rights so redeemed will terminate and the only right of the holders of such Rights will be to receive the Redemption Price. In the event that prior to the Distribution Date, the Class A Common Stock is converted, in whole or in part, into Company Common Stock in accordance with the applicable provisions of the Company's Restated Certificate of Incorporation, the Class A Class A Common Rights attached to the shares of Class A Common Stock so converted will be converted to Company Common Rights pursuant to a conversion ratio equivalent to the conversion ration used for converting the Class A Common Stock to Company Common Stock. After the Distribution Date, Class A Common Rights will be convertible 70 into Company Common Rights only if all outstanding shares of Class A Common Stock are converted into Company Common Stock, and such conversion will be pursuant to a conversion ratio equivalent to the conversion ration used for converting the Class A Common Stock to Company Common Stock. At any time after a Person or group of affiliated or associated Persons becomes an Acquiring Person and before any such Person or group shall become the beneficial owner of 50% or more of the total voting power of the Voting Securities then outstanding, the Board of Directors, at its option, may exchange each Class A Common Right (other than Rights that previously have become void as described above) in whole or in part, at an exchange rate of one Unit of Series 2 Preferred Stock per Right (subject to adjustment in certain events). Until a Class A Common Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Class A Common Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Class A Common Rights become exercisable for Units of Preferred Stock (or other consideration). Any of the provisions of the Rights Agreement may be amended without the approval of the holders of Class A Common Rights in order to cure any ambiguity, defect, inconsistency or to make any other changes that the Board may deem necessary or desirable. After a Person or a group of affiliated or associated Persons becomes an Acquiring Person, the provisions of the Rights Agreement may not be amended in any manner that would adversely affect the interests of the holders of Class A Common Rights (excluding the interests of any Acquiring Person). Description of Series 2 Preferred Stock The Units of Series 2 Preferred Stock that may be acquired upon exercise of the Class A Common Rights will be redeemable in certain events as described below, and will rank junior to any other shares of preferred stock that may be issued by the Company with respect to the payment of dividends and as to distribution of assets in liquidation (except that Series 2 Preferred Stock will be in parity with the Series 1 Junior Preferred Stock). Each Share of Series 2 Preferred Stock will have a minimum preferential quarterly dividend of the greater of $1.00 per share or 100 times the aggregate per share dividend declared on the Class A Common Stock since the immediately preceding quarterly dividend, subject to certain adjustments. In the event of liquidation, the holder of Series 2 Preferred Stock will be entitled to receive a preferred liquidation payment per share equal to the greater of $1.00 (plus accrued and unpaid dividends thereon) or 100 times the amount paid in respect of a share of Class A Common Stock, subject to certain adjustments. 71 The Series 2 Preferred Stock will be redeemable in certain instances upon substantially the same terms and conditions that shares of Class A Common Stock may be redeemed in accordance with the Company's Restated Certificate of Incorporation. Generally, each share of Series 2 Preferred Stock will vote together with the Company Common Stock, the Class A Common Stock, any other series of preferred stock entitled to vote in such a manner, and will be entitled to 100 votes per share, subject to certain adjustments. The holders of the Series 2 Preferred Stock, voting as a separate class, shall be entitled to elect two directors if dividends on the Series 2 Preferred Stock are in arrears in an amount equal to six quarterly dividends thereon. In the event of any merger, consolidation, or other transaction in which shares of Class A Common Stock are exchanged, each share of Series 2 Preferred Stock will be entitled to receive 100 times the aggregate per share amount of stock, cash, securities or other property paid in respect of each share of Class A Common Stock, subject to certain adjustments. The rights of holders of the Series 2 Preferred Stock to dividend, liquidation and voting rights are protected by customary anti-dilution provisions. Because of the nature of the Series 2 Preferred Stock's dividend, liquidation and voting rights, the economic value of one Unit of Series 2 Preferred Stock is expected to approximate the economic value of one share of Class A Common Stock. 72 EXHIBIT C-1 FORM OF CERTIFICATE OF DESIGNATION OF SERIES 1 JUNIOR PREFERRED STOCK OF CONECTIV ------------------------ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- Conectiv, a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: that, pursuant to authority conferred upon the Board of Directors of the Corporation by its Restated Certificate of Incorporation, and, pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, said Board of Directors, at a duly called meeting held on [ ], at which a quorum was present and acted throughout, adopted the following resolutions, which resolutions remain in full force and effect on the date hereof creating a class of [ ] shares of Preferred Stock having a par value of $.01 per share, designated as Series 1 Junior Preferred Stock. RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Restated Certificate of Incorporation of the Corporation, the Board of Directors does hereby create, authorize and provide for the issuance of a series of preferred stock, par value $.01 per share, of the Corporation, designated as Series 1 Junior Preferred Stock having the voting powers, designation, relative, participating, optional and other special rights, preferences, and qualifications, limitations and restrictions thereof that are set forth as follows: Section 1. Designation and Amount. The shares of such class shall be designated as "Series 1 Junior Preferred Stock" (the "Series 1 Preferred Stock") and the number of shares constituting such class shall be [ ]. Such number of shares may be 73 increased or decreased by resolution of the Board of Directors, provided that no such decrease shall reduce the number of shares of the Series 1 Preferred Stock to a number less than the number of shares then outstanding, plus the number reserved for issuance upon the exercise of options, rights or warrants, or upon conversion of any outstanding securities issued by the Corporation convertible into Series 1 Preferred Stock. All capitalized terms used herein have the meanings ascribed to them in the Restated Certificate of Incorporation of the Corporation (the "Certificate"), unless otherwise defined herein. Section 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any other class or series of Preferred Stock of the Corporation ranking prior and superior to the shares of Series 1 Preferred Stock with respect to dividends, each holder of a share (a "Share") of Series 1 Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, (i) quarterly dividends payable in cash on the last day of March, June, September, and December in each year (each such date being a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of such Share of Series 1 Preferred Stock, in an amount per Share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends declared on shares of the Company Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Share of Series 1 Preferred Stock, and (ii) subject to the provision for adjustment hereinafter set forth, quarterly distributions (payable in kind) on each Quarterly Dividend Payment Date in an amount per Share equal to 100 times the aggregate per share amount of all non-cash dividends or other distributions (other than a dividend payable in shares of Company Common Stock or a subdivision of the outstanding shares of Company Common Stock, by reclassification or otherwise) declared on shares of Company Common Stock since the immediately preceding Quarterly Dividend Payment Date, or with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Share of Series 1 Preferred Stock. In the event that the Corporation shall at any time after [ ] (the "Rights Declaration Date") (i) declare any dividend on outstanding shares of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide outstanding shares of Company Common Stock or (iii) combine outstanding shares of Company Common Stock into a smaller number of shares, then in each such case the amount to which the holder of a Share of Series 1 Preferred Stock was entitled immediately prior to such event pursuant to the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Company Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Company Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on Shares of Series 1 Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or 2 74 distribution on the shares of Company Common Stock (other than a dividend or distribution payable in shares of Company Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the Company Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Date, a dividend of $1.00 per Share on the Series 1 Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and shall be cumulative on each outstanding Share of Series 1 Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such Share of Series 1 Preferred Stock, unless the date of issuance of such Share is prior to the record date for the first Quarterly Dividend Payment Date, in which case, dividends on such Share shall begin to accrue from the date of issuance of such Share, or unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Shares of Series 1 Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on Shares of Series 1 Preferred Stock in an amount less than the aggregate amount of all such dividends at the time accrued and payable on such Shares shall be allocated pro rata on a share-by-share basis among all Shares of Series 1 Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Shares of Series 1 Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of Shares of Series 1 Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each Share of Series 1 Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the holders of Company Common Stock of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide outstanding shares of Company Common Stock or (iii) combine the outstanding shares of Company Common Stock into a small number of shares, then in each such case the number of votes per Share to which holders of Shares of Series 1 Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the number of shares of Company Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Company Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or in any other Certificate of Designation creating a series of preferred stock, or any similar stock, or by law, the holders of Shares of Series 1 Preferred Stock, the holders of shares of Company Common 3 75 Stock, and the holders of any other class or series of capital stock of the Corporation entitled to vote generally, together with the Company Common Stock, shall vote together as one class on all matters submitted to a vote of the holders of such stock. (C) (i) If at any time dividends on any Shares of Series 1 Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, then during the period (a "default period") from the occurrence of such event until such time as all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all Shares of Series 1 Preferred Stock then outstanding shall have been declared and paid or set apart for payment, the holders of the outstanding Shares of Series 1 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class), shall have the right to elect two Directors to the Board of Directors of the Corporation at the Corporation's next annual meeting of stockholders, and so long as such default period continues, shall have the right to elect a successor to each of the two Directors so elected upon the expiration of their respective terms, such right to be exercised at the subsequent annual meeting or meetings at which the respective terms of such Directors expire. Any Director who shall have been so elected pursuant to this paragraph may be removed only for cause. If the office of any Director elected by the holders of Shares of Series 1 Preferred Stock pursuant to this paragraph becomes vacant for any reason, the remaining Director elected pursuant to this paragraph may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred, and if the offices of both such Directors elected by the holders of Shares of Series 1 Preferred Stock pursuant to this paragraph become vacant for any reason, such vacancies may be filled for the unexpired term in respect of which such vacancy occurred only by the affirmative vote of the holders of the outstanding Shares of Series 1 Preferred Stock, together with the holders of the outstanding shares of any other class or series of stock upon which like voting rights have been conferred and are exercisable (voting together as a class). (ii) The voting rights vested pursuant to paragraph (C)(i) hereof in the holders of the outstanding Shares of Series 1 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class), may not be exercised at any annual meeting unless one-third of the outstanding shares of stock of the corporation upon which such voting rights have been conferred shall be present at such meeting in person or by proxy. The absence of a quorum of the holders of Company Common and Class A Common Stock shall not affect the exercise by the holders of Shares of Series 1 Preferred Stock of such rights. In connection with the election of Directors pursuant to paragraph (C)(i) hereof, each holder of Shares of Series 1 Preferred Stock shall be entitled to one vote for each one one-hundredth of a Share held (the holders of shares of any other class or series of preferred stock having like voting rights being entitled to such number of votes, if any, for each share of such stock held as may be granted to them). 4 76 (iii) During any default period, the holders of shares of Company Common Stock, Class A Common Stock, and Shares of Series 1 Preferred Stock, and other classes or series of stock of the Corporation, if applicable, shall continue to be entitled to elect (voting together as a class) all the Directors other than the two Directors to be elected pursuant to paragraph (C)(i) hereof by the holders of the outstanding shares of Series 1 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class). (iv) Immediately upon the expiration of a default period, (x) the right of the holders of Shares of Series 1 Preferred Stock to elect Directors pursuant to paragraph (C)(i) hereof shall cease (subject to re-vesting in the event of each and every subsequent default of the character mentioned in paragraph (C)(i) above), and (y) the term of any Directors elected by the holders of Shares of Series 1 Preferred Stock pursuant to paragraph (C)(i) hereof shall terminate. (D) Except as set forth herein, holders of Shares of Series 1 Preferred Stock shall have no special voting rights and their consents shall not be required (except to the extent they are entitled to vote with holders of share of Company Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on Shares of Series 1 Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding Shares of Series 1 Preferred Stock shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, or make any other distributions on, any shares of Junior Stock; (ii) declare or pay dividends on or make any other distributions on any shares of Parity Stock, except dividends paid ratably on Shares of Series 1 Preferred Stock and shares of all such Parity Stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of such Shares and all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any Junior Stock, provided, however, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such Junior Stock in exchange for shares of any Junior Stock; (iv) redeem or purchase or otherwise acquire for consideration any Shares of Series 1 Preferred Stock, or any Parity Stock except in accordance with a purchase offer made in writing or by publication (as determined by 5 77 the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates, and other relative rights and preferences of the respective series and classes, shall determine in good faith, will result in fair an equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any Shares of Series 1 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $.01 per share, and may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein, in the Certificate, or in any other Certificate of Designation creating series of Preferred Stock, per value $.01 per share, or any similar stock, or as otherwise restricted by law. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation no distribution shall be made (i) to the holders of shares of Junior Stock unless the holders of Shares of Series 1 Preferred Stock shall have received, subject to adjustment as hereinafter provided in paragraph (B), the greater of either (a) $1.00 per Share plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, or (b) the amount equal to 100 times the aggregate per share amount to be distributed to holders of shares of Company Common Stock, or (ii) to the holders of shares of Parity Stock, unless simultaneously therewith distributions are made ratably on Shares of Series 1 Preferred Stock and all other shares of such Parity Stock in proportion to the total amounts to which the holders of Shares of Series 1 Preferred Stock are entitled under clause (i)(a) of this sentence and to which the holders of shares of such Parity Stock are entitled, in each case upon such liquidation, dissolution or winding up. (B) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide outstanding shares of Company Common Stock, or (iii) combine outstanding shares of Company Common Stock into a smaller number of shares, then in each such case the aggregate amount to which holders of Shares of Series 1 Preferred Stock were entitled immediately prior to such event pursuant to clause (i)(b) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Company Common Stock that are outstanding immediately after such event and the 6 78 denominator of which shall be the number of shares of Company Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination, or other transaction in which the shares of Company Common Stock are exchanged for or converted into other stock, securities, cash, and/or any other property, then in any such case Shares of Series 1 Preferred Stock shall at the same time be similarly exchanged for or converted into an amount per Share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash, and/or other property (payable in kind), as the case may be, into which or for which each share of Company Common Stock is converted or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide outstanding shares of Company Common Stock, or (iii) combine outstanding Company Common Stock into a smaller number of shares, then in each such case the amount set forth in the immediately preceding sentence with respect to the exchange or conversion of Shares of Series 1 Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Company Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Company Common Stock that were outstanding immediately prior to such event. Section 8. Redemption. The Shares of Series 1 Preferred Stock shall not be redeemable. Section 9. Ranking. Except as provided below, the Series 1 Preferred Stock shall rank junior to all other series of Preferred Stock, par value $.01 per share, and to any other class of preferred stock that hereafter may be issued by the Corporation as to the payment of dividends and the distribution of assets, unless the terms of any such series or class shall provide otherwise. The Series 1 Preferred Stock shall rank prior, as to dividends and upon liquidation, dissolution, or winding up, to the Company Common Stock and the Class A Common Stock. Notwithstanding anything to the contrary in this Section 9, the Series 1 Preferred Stock shall rank on parity, as to dividends and upon liquidation, dissolution, and winding up, with the Series 2 Junior Preferred Stock. Section 10. Amendment. Except as set forth in Section 1 hereof, the Certificate, including, without limitation, this Certificate of Designation shall not hereafter be amended, either directly or indirectly, or through merger or consolidation with another corporation in any manner that would alter or change the powers, preferences or special rights of the Series 1 Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two thirds of the outstanding Shares of Series 1 Preferred Stock, voting separately as a class. 7 79 Section 11. Fractional Shares. The Series 1 Preferred Stock may be issued in fractions of one one-hundredth of a Share or other fractions of a share, which fractions shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions, and to have the benefit of all other rights of holders of Series 1 Preferred Stock. (A) The term "Company Common Stock" shall mean the class of stock designated as the Common Stock, par value $.01 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes or reclassification of such Company Common Stock. (B) The term "Class A Common Stock" shall mean the class of stock designated as the Class A Common Stock, par value $.01 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes of reclassification of such Class A Common Stock. (C) The term "Junior Stock" (i) as used in Section 4, shall mean the Company Common Stock, the Class A Common Stock, and any other class or series of capital stock of the Corporation hereafter authorized or issued over which the Series 1 Preferred Stock has preference or priority as to the payment of dividends and (ii) as used in Section 6, shall mean the Company Common Stock, the Class A Common Stock, and any other class or series of capital stock of the Corporation over which the Series 1 Preferred Stock has preference or priority in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. (D) The term "Parity Stock" (i) as used in Section 4, shall mean any class or series of stock of the Corporation hereafter authorized or issued ranking pari passu with the Series 1 Preferred Stock as to the payment of dividends, including the Series 2 Preferred Stock and (ii) as used in Section 6, shall mean any class or series of stock of the Corporation hereinafter authorized or issued and ranking pari passu with the Series 1 Preferred Stock as to the distribution of assets on any liquidation, dissolution, or winding up of the Corporation, including the Series 2 Preferred Stock. [SPACE INTENTIONALLY LEFT BLANK] 8 80 IN WITNESS WHEREOF, Conectiv has caused this Certificate to be signed by its Chairman and Chief Executive Officer this ___ day of ___________, 1998. CONECTIV By -------------------------------- Howard E. Cosgrove Chairman and Chief Executive Officer 9 81 EXHIBIT C-2 FORM OF CERTIFICATE OF DESIGNATION OF SERIES 2 JUNIOR PREFERRED STOCK OF CONECTIV ------------------------ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- Conectiv, a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: that, pursuant to authority conferred upon the Board of Directors of the Corporation by its Restated Certificate of Incorporation, and, pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, said Board of Directors, at a duly called meeting held on [ ], at which a quorum was present and acted throughout, adopted the following resolutions, which resolutions remain in full force and effect on the date hereof creating a class of [ ] shares of Preferred Stock having a par value of $.01 per share, designated as Series 2 Junior Preferred Stock. RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Restated Certificate of Incorporation of the Corporation, the Board of Directors does hereby create, authorize and provide for the issuance of a series of preferred stock, par value $.01 per share, of the Corporation, designated as Series 2 Junior Preferred Stock having the voting powers, designation, relative, participating, optional and other special rights, preferences, and qualifications, limitations and restrictions thereof that are set forth as follows: Section 1. Designation and Amount. The shares of such class shall be designated as "Series 2 Junior Preferred Stock" (the "Series 2 Preferred Stock") and the number of shares constituting such class shall be [ ]. Such number of shares may be 82 increased or decreased by resolution of the Board of Directors, provided that no such decrease shall reduce the number of shares of the Series 2 Preferred Stock to a number less than the number of shares then outstanding, plus the number reserved for issuance upon the exercise of options, rights or warrants, or upon conversion of any outstanding securities issued by the Corporation convertible into Series 2 Preferred Stock. All capitalized terms used herein have the meanings ascribed to them in the Restated Certificate of Incorporation of the Corporation (the "Certificate"), unless otherwise defined herein. Section 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any other class or series of Preferred Stock of the Corporation ranking prior and superior to the shares of Series 2 Preferred Stock with respect to dividends, each holder of a share (a "Share") of Series 2 Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, (i) quarterly dividends payable in cash on the last day of March, June, September, and December in each year (each such date being a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of such Share of Series 2 Preferred Stock, in an amount per Share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends declared on shares of the Class A Common Stock (other than a cash dividend declared pursuant to subsection 4.1(A)(1)(a) of Section II of Article IV of the Certificate) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Share of Series 2 Preferred Stock, and (ii) subject to the provision for adjustment hereinafter set forth, quarterly distributions (payable in kind) on each Quarterly Dividend Payment Date in an amount per Share equal to 100 times the aggregate per share amount of all non-cash dividends or other distributions (other than (x) a dividend payable in shares of Class A Common Stock, or a subdivision of the outstanding shares of Class A Common Stock, by reclassification or otherwise, or (y) a dividend declared pursuant to subsection 4.1(A)(1)(a) of Section II of Article IV of the Certificate) declared on shares of Class A Common Stock since the immediately preceding Quarterly Dividend Payment Date, or with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Share of Series 2 Preferred Stock. In the event that the Corporation shall at any time after [ ] (the "Rights Declaration Date") (i) declare any dividend on outstanding shares of Class A Common Stock payable in shares of Class A Common Stock, (ii) subdivide outstanding shares of Class A Common Stock or (iii) combine outstanding shares of Class A Common Stock into a smaller number of shares, then in each such case the amount to which the holder of a Share of Series 2 Preferred Stock was entitled immediately prior to such event pursuant to the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Class A Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Class A Common Stock that were outstanding immediately prior to such event. 2 83 (B) The Corporation shall declare a dividend or distribution on Shares of Series 2 Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the shares of Class A Common Stock (other than a dividend or distribution payable in shares of Class A Common Stock or a dividend declared pursuant to subsection 4.1(A)(1)(a) of Section II of Article IV of the Certificate); provided, however, that in the event no dividend or distribution shall have been declared on the Class A Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Date, a dividend of $1.00 per Share on the Series 2 Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and shall be cumulative on each outstanding Share of Series 2 Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such Share of Series 2 Preferred Stock, unless the date of issuance of such Share is prior to the record date for the first Quarterly Dividend Payment Date, in which case, dividends on such Share shall begin to accrue from the date of issuance of such Share, or unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Shares of Series 2 Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on Shares of Series 2 Preferred Stock in an amount less than the aggregate amount of all such dividends at the time accrued and payable on such Shares shall be allocated pro rata on a share-by-share basis among all Shares of Series 2 Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Shares of Series 2 Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of Shares of Series 2 Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each Share of Series 2 Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the holders of Class A Common Stock of the Corporation. In the event that the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Class A Common Stock payable in shares of Class A Common Stock, (ii) subdivide outstanding shares of Class A Common Stock or (iii) combine the outstanding shares of Class A Common Stock into a small number of shares, then in each such case the number of votes per Share to which holders of Shares of Series 2 Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the number of shares of Class A Common Stock outstanding immediately after such event and the 3 84 denominator of which shall be the number of shares of Class A Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or in any other Certificate of Designation creating a series of preferred stock, or any similar stock, or by law, the holders of Shares of Series 2 Preferred Stock, the holders of shares of Class A Common Stock, and the holders of any other class or series of capital stock of the Corporation entitled to vote generally, together with the Class A Common Stock, shall vote together as one class on all matters submitted to a vote of the holders of such stock. (C) (i) If at any time dividends on any Shares of Series 2 Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, then during the period (a "default period") from the occurrence of such event until such time as all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all Shares of Series 2 Preferred Stock then outstanding shall have been declared and paid or set apart for payment, the holders of the outstanding Shares of Series 2 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class), shall have the right to elect two Directors to the Board of Directors of the Corporation at the Corporation's next annual meeting of stockholders, and so long as such default period continues, shall have the right to elect a successor to each of the two Directors so elected upon the expiration of their respective terms, such right to be exercised at the subsequent annual meeting or meetings at which the respective terms of such Directors expire. Any Director who shall have been so elected pursuant to this paragraph may be removed only for cause. If the office of any Director elected by the holders of Shares of Series 2 Preferred Stock pursuant to this paragraph becomes vacant for any reason, the remaining Director elected pursuant to this paragraph may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred, and if the offices of both such Directors elected by the holders of Shares of Series 2 Preferred Stock pursuant to this paragraph become vacant for any reason, such vacancies may be filled for the unexpired term in respect of which such vacancy occurred only by the affirmative vote of the holders of the outstanding Shares of Series 2 Preferred Stock, together with the holders of the outstanding shares of any other class or series of stock upon which like voting rights have been conferred and are exercisable (voting together as a class). (ii) The voting rights vested pursuant to paragraph (C)(i) hereof in the holders of the outstanding Shares of Series 2 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class), may not be exercised at any annual meeting unless one-third of the outstanding shares of stock of the Corporation upon which such voting rights have been conferred shall be present at such meeting in person or by proxy. The absence of a quorum of the holders of Company Common and Class A Common Stock shall not affect the exercise by the 4 85 holders of Shares of Series 2 Preferred Stock of such rights. In connection with the election of Directors pursuant to paragraph (C)(i) hereof, each holder of Series 2 Preferred Stock shall be entitled to one vote for each one one-hundredth of a Share held (the holders of shares of any other class or series of preferred stock having like voting rights being entitled to such number of votes, if any, for each share of such stock held as may be granted to them). (iii) During any default period, the holders of shares of Company Common Stock, Class A Common Stock, and Shares of Series 2 Preferred Stock, and other classes or series of stock of the Corporation, if applicable, shall continue to be entitled to elect (voting together as a class) all the Directors other than the two Directors to be elected pursuant to paragraph (C)(i) hereof by the holders of the outstanding shares of Series 2 Preferred Stock, together with the holders of outstanding shares of any one or more other classes or series of stock of the Corporation upon which like voting rights have been conferred and are exercisable (voting together as a class). (iv) Immediately upon the expiration of a default period, (x) the right of the holders of Shares of Series 2 Preferred Stock to elect Directors pursuant to paragraph (C)(i) hereof shall cease (subject to re-vesting in the event of each and every subsequent default of the character mentioned in paragraph (C)(i) above), and (y) the term of any Directors elected by the holders of Shares of Series 2 Preferred Stock pursuant to paragraph (C)(i) hereof shall terminate. (D) Except as set forth herein, holders of Shares of Series 2 Preferred Stock shall have no special voting rights and their consents shall not be required (except to the extent they are entitled to vote with holders of share of Class A Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on Shares of Series 2 Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding Shares of Series 2 Preferred Stock shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, or make any other distributions on, any shares of Junior Stock; (ii) declare or pay dividends on or make any other distributions on any shares of Parity Stock, except dividends paid ratably on Shares of Series 2 Preferred Stock and shares of all such Parity Stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of such Shares and all such shares are then entitled; 5 86 (iii) redeem or purchase or otherwise acquire for consideration shares of any Junior Stock, provided, however, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such Junior Stock in exchange for shares of any Junior Stock; (iv) redeem or purchase or otherwise acquire for consideration any Shares of Series 2 Preferred Stock, or any Parity Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates, and other relative rights and preferences of the respective series and classes, shall determine in good faith, will result in fair an equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any Shares of Series 2 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $.01 per share, and may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein, in the Certificate, or in any other Certificate of Designation creating series of Preferred Stock, per value $.01 per share, or any similar stock, or as otherwise restricted by law. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation no distribution shall be made (i) to the holders of shares of Junior Stock unless the holders of Shares of Series 2 Preferred Stock shall have received, subject to adjustment as hereinafter provided in paragraph (B), the greater of either (a) $1.00 per Share plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, or (b) the amount equal to 100 times the aggregate per share amount to be distributed to holders of shares of Class A Common Stock, or (ii) to the holders of shares of Parity Stock, unless simultaneously therewith distributions are made ratably on Shares of Series 2 Preferred Stock and all other shares of such Parity Stock in proportion to the total amounts to which the holders of Shares of Series 2 Preferred Stock are entitled under clause (i)(a) of this sentence and to which the holders of shares of such Parity Stock are entitled, in each case upon such liquidation, dissolution or winding up. 6 87 (B) In the event that the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Class A Common Stock payable in shares of Class A Common Stock, (ii) subdivide outstanding shares of Class A Common Stock, or (iii) combine outstanding shares of Class A Common Stock into a smaller number of shares, then in each such case the aggregate amount to which holders of Shares of Series 2 Preferred Stock were entitled immediately prior to such event pursuant to clause (i)(b) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Class A Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Class A Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination, or other transaction (other than a conversion of Class A Common Stock into other shares of any class or series of capital stock of the Corporation pursuant to subsection 4, Section II of Article IV of the Certificate) in which the shares of Class A Common Stock are exchanged for or converted into other stock, securities, cash, and/or any other property, then in any such case Shares of Series 2 Preferred Stock shall at the same time be similarly exchanged for or converted into an amount per Share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash, and/or other property (payable in kind), as the case may be, into which or for which each share of Class A Common Stock is converted or exchanged. In the event that the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Class A Common Stock payable in shares of Class A Common Stock, (ii) subdivide outstanding shares of Class A Common Stock, or (iii) combine outstanding shares of Class A Common Stock into a smaller number of shares, then in each such case the amount set forth in the immediately preceding sentence with respect to the exchange or conversion of Shares of Series 2 Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Class A Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Class A Common Stock that were outstanding immediately prior to such event. Section 8. Conversion and Redemption. The Series 2 Preferred Stock shall be subject to conversion or redemption on the terms provided below in this Section 8. Except as provided in this Section 8, the Series 2 Preferred Stock shall not be redeemable. Section 8.1. Conversion or Redemption. (A) If the Board of Directors so declares, or in the event of any of the following: (x) the Disposition, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially 7 88 all of the properties and assets attributed to the Atlantic Utility Group (as defined in the Certificate) to one or more persons or entities (other than (1) the Disposition by the Corporation of its properties and assets in one transaction or a series of related transactions in connection with the dissolution or the liquidation or winding up of the Corporation and the distribution of assets to stockholders in Liquidation), (2) to any person or entity controlled (as determined by the Board of Directors) by the Corporation, or (3) pursuant to a Related Business Transaction, or (y) the purchase by the Corporation of all (but not less than all) of the outstanding shares of Class A Common Stock or the redemption or conversion of all (but not less than all) of the outstanding shares of Class A Common Stock pursuant to subsection 4.2 of Section II of Article IV of the Certificate, then each outstanding Share of the Series 2 Preferred Stock shall be converted, as of the Conversion Date provided by paragraph (A) of subsection 8.2 into the number of fully paid and nonassessable shares of Series 1 Preferred Stock (or if the Series 1 Preferred Stock is not Publicly Traded at such time and shares of any other class or series of junior preferred stock of the Corporation (other than Series 2 Preferred Stock) entitled to vote generally, together with the Common Stock, are then Publicly Traded, of such other class or series of junior preferred stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of conversion required by paragraph (A) of subsection 8.2) equal to the applicable percentage, on the Conversion Date, set forth below of the Market Value Ratio of the Series 2 Preferred Stock to the Series 1 Preferred Stock as of the fifth Trading Day prior to the date of the notice of such conversion required by such paragraph (A):
12 Month Period Prior to the Applicable Anniversary Percentage of of the Effective Date Market Value Ratio -------------------------- ------------------ First 125% Second 120% Third 115% Fourth and Thereafter 110%
(B) If the Corporation consummates (i) a tender offer made by the Corporation for all of the outstanding Shares of Series 2 Preferred Stock at an all cash price of at least 110% of the Time-Weighted Market Price of a share of Series 2 Preferred Stock as of the Trading Day immediately preceding the date of such offer or (ii) an exchange offer by the Corporation to exchange each outstanding Share of Series 2 Preferred Stock into a number of shares of Series 1 Preferred Stock (or if the Series 1 Preferred Stock is not Publicly Traded at such time and shares of any other class or series 8 89 of junior preferred stock of the Corporation (other than Series 2 Preferred Stock) entitled to vote generally, together with the Common Stock, are then Publicly Traded, of such other class or series of junior preferred stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of such offer) equal to at least 110% of the Market Value Ratio of the Series 2 Preferred Stock to the Series 1 Preferred Stock as of the Trading Day immediately preceding the date of such offer, which, in either case, is accepted by the holders of greater than 50% of the outstanding shares of Series 2 Preferred Stock, then the Board of Directors may either (x) provided that there are funds of the Corporation legally available therefor, redeem as of the Redemption Date provided in paragraph (B) of subsection 8.2 each Share of Series 2 Preferred Stock remaining outstanding in exchange for cash in an amount equal to the highest cash price paid per share by the Corporation pursuant to such tender offer or to the product of the highest number of shares of Series 1 Preferred Stock (or such other class or series of junior preferred stock of the Corporation) per share issued in exchange for any share of Series 2 Preferred Stock pursuant to such exchange offer and the Time-Weighted Market Price of a share of Series 1 Preferred Stock (or such other class or series of junior preferred stock of the Corporation) as of the Trading Day immediately preceding the date of such exchange offer, as the case may be, or (y) declare that each Share of Series 2 Preferred Stock remaining outstanding shall be converted as of the Conversion Date provided in paragraph (A) of subsection 8.2 into a number of fully paid and nonassessable shares of Series 1 Preferred Stock (or if the Series 1 Preferred Stock is not Publicly Traded at such time and shares of any other class or series of junior preferred stock of the Corporation (other than Series 2 Preferred Stock) entitled to vote generally, together with the Common Stock, are then Publicly Traded, of such other class or series of junior preferred stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of notice of such conversion required by such paragraph (A)) equal to the quotient of the highest cash price paid per share by the Corporation pursuant to such tender offer and the Time-Weighted Market Price of a share of Series 1 Preferred Stock (or such other class or series of junior preferred stock of the Corporation) as of the Trading Day immediately preceding the date of the notice of such conversion required by such paragraph (A) or to the highest number of shares of Series 1 Preferred Stock (or such other class or series of junior preferred stock of the Corporation) per share issued in exchange for any Share of Series 2 Preferred Stock pursuant to such exchange offer, as the case may be. (C) If any person (including the Corporation) makes a tender offer to purchase shares of Series 1 Preferred Stock for cash, property, or other securities, the holders of Shares of Series 2 Preferred Stock will be entitled to convert each and any such Share of Series 2 Preferred Stock into the number of fully paid and nonassessable shares of Series 1 Preferred Stock equal to 100% of the Market Value Ratio of the Series 2 Preferred Stock to the Series 1 Preferred Stock as of the Trading Day immediately preceding the date of such tender offer; provided, that (x) any election by such holder to make such conversion may be fully revoked by such holder with respect to any such Share of Series 2 Preferred Stock by giving written notice to the Corporation prior to the 9 90 consummation of such tender offer and (y) such conversion will only be effective only with respect to such shares of Series 1 Preferred Stock issuable upon such conversion which are actually accepted for purchase pursuant to such tender offer. (D) If any person (including the Corporation) consummates a tender offer for all of the outstanding shares of Series 1 Preferred Stock at an all cash price that is accepted by the holders of greater than 50% of the outstanding shares of Series 1 Preferred Stock, then the Board of Directors may either (x) redeem as of the Redemption Date provided by paragraph (B) of subsection 8.2 each Share of Series 2 Preferred Stock outstanding in exchange for cash in an amount equal to the product of the highest cash price paid per share by such person pursuant to such tender offer and the Market Value Ratio of the Series 2 Preferred Stock to the Series 1 Preferred Stock as of the fifth Trading Day prior to the date of such tender offer or (y) declare that each Share of Series 2 Preferred Stock outstanding shall be converted as of the Conversion Date provided by paragraph (A) of subsection 8.2 into a number of fully paid and nonassessable shares of Series 1 Preferred Stock equal to the quotient of the highest cash price paid per share by such person pursuant to such tender offer and the Time-Weighted Market Price of a share of Series 1 Preferred Stock as of the Trading Day immediately preceding the date of the notice of such conversion required by such paragraph (A). Section 8.2 Notice and Other Provisions. (A) If the Series 2 Preferred Stock is converted into Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation) pursuant to paragraph (A) of subsection 8.1 or if the Corporation determines to convert the Series 2 Preferred Stock into Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation) pursuant to paragraph (B), (C), or (D) of subsection 8.1, the Corporation shall, not earlier than the 35th Trading Day and not later than the 45th Trading Day prior to the Conversion Date, cause notice to be given to each holder of Shares of Series 2 Preferred Stock setting forth (1) a statement that all outstanding shares of Series 2 Preferred Stock shall be converted, (2) the Conversion Date (which, (x) in the case of a conversion after a Disposition, shall not be more than 85 Trading Days following the consummation of such Disposition, (y) in the case of a purchase by the Corporation or redemption or conversion of all of the outstanding shares of Class A Common Stock, shall not be fewer than 35 or more than 85 Trading Days following the consummation of such purchase, redemption, or conversion of Class A Common Stock, and (z) in the case of a conversion after a tender or exchange offer pursuant to paragraph (B), (C), or (D) of subsection 8.1, shall not be fewer than 35 or more than 85 Trading Days following the consummation of such offer), (3) the per share number of shares of Series 1 Preferred Stock, or another class or series of junior preferred stock of the Corporation, as the case may be, to be received with respect to each Share of Series 2 Preferred Stock, including details as to the calculation thereof, (4) the place or places where certificates for Shares of Series 2 Preferred Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares 10 91 of Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation), and (5) a statement to the effect that, except as otherwise provided by paragraph (D) of this subsection 8.2, dividends on such Shares of Series 2 Preferred Stock shall cease to be paid as of such Conversion Date. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (B) If the Corporation determines to redeem Series 2 Preferred Stock pursuant to subparagraph (B) or (D) of subsection 8.1, the Corporation shall, not earlier than the 35th Trading Day and not later than the 45th Trading Day prior to the Redemption Date, cause notice to be given to each holder of Shares of Series 2 Preferred Stock setting forth (1) a statement that all Shares of Series 2 Preferred Stock outstanding on the Redemption Date shall be redeemed, (2) the Redemption Date (which shall not be less than 35 or more than 85 Trading Days following the consummation of the applicable tender or exchange offer), (3) the redemption price for the Shares, (4) the place or places where certificates for Shares of Series 2 Preferred Stock, properly endorsed or assigned for transfer (unless the Corporation waives such requirement), are to be surrendered for delivery of cash, (5) the number of outstanding Shares of Series 2 Preferred Stock, and (6) a statement to the effect that, except a otherwise provided by paragraph (D) of this subsection 8.2, dividends on such Shares of Series 2 Preferred Stock shall cease to be paid as of such Redemption Date. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (C) The Corporation shall not be required to issue or deliver fractional shares of any capital stock or of any other securities (other than fractional shares of Series 1 Preferred Stock in integral multiples of one one-hundredths of a share) to any holder of Series 2 Preferred Stock upon any conversion or redemption pursuant to this Section 8. If more than one Share (or more than one fractional share) of Series 2 Preferred Stock shall be held at the same time by the same holder, the Corporation may aggregate the number of shares of any capital stock that shall be issuable or any other securities or property that shall be distributable to such holder upon any conversion or redemption (including any fractional shares). If there are fractional shares of any capital stock or of any other securities remaining to be issued or distributed to the holders of Series 2 Preferred Stock, the Corporation shall, if such fractional shares are not issued or distributed to the holder, pay cash in respect of such fractional shares in an amount equal to the Fair Value thereof on the fifth Trading Day prior to the date such payment is to be made (without interest). (D) No adjustments in respect of dividends shall be made upon the conversion or redemption of any Shares of Series 2 Preferred Stock; provided, however, that if the Conversion Date or Redemption Date, as the case may be, with respect to any Shares of Series 2 Preferred Stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto, the holders of Series 2 Preferred Stock at the close of business on such record date shall be entitled to receive the 11 92 dividend or other distribution payable on or with respect to such Shares on the date set for payment of such dividend or other distribution, in each case without interest, notwithstanding the subsequent conversion or redemption of such Shares. (E) Before any holder of Series 2 Preferred Stock shall be entitled to receive any cash payment and/or certificate or instruments representing shares of any capital stock and/or securities or property to be distributed to such holder with respect to Series 2 Preferred Stock pursuant to this Section 8, such holder shall surrender at such place as the Corporation shall specify certificates for Series 2 Preferred Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation shall as soon as practicable after receipt of certificates representing shares of Series 2 Preferred Stock deliver to the person for whose account such shares were so surrendered, or to such person's nominee or nominees, the cash and/or the certificates or instruments representing the number of shares (or fractional shares, if any) of the kind of capital stock and/or other securities or property to which such person shall be entitled as aforesaid, together with any payment in respect of fractional shares contemplated by paragraph (C) of this subsection 8.2, in each case without interest. If less than all of the Shares of Series 2 Preferred Stock represented by any one certificate are to be redeemed or converted, the Corporation shall issue and deliver a new certificate for the Shares of Series 2 Preferred Stock not redeemed. (F) From and after any applicable Conversion Date or Redemption Date, as the case may be, all rights of a holder of Shares of Series 2 Preferred Stock that were converted or redeemed shall cease except for the right, upon surrender of the certificates representing such shares as required by paragraph (E) of this subsection 8.2, to receive the cash and/or the certificates or instruments representing shares of the kind of capital stock and/or other securities or property for which such shares were converted or redeemed, together with any payment in respect of fractional shares contemplated by paragraph (C) of this subsection 8.2 and rights to dividends as provided in paragraph (D) of this subsection 8.2, in each case without interest. No holder of a certificate that immediately prior to the applicable Conversion Date represented Shares of Series 2 Preferred Stock shall be entitled to receive any dividend or other distribution or interest payment with respect to shares of any kind of capital stock or other security or instrument for which Series 2 Preferred Stock was converted until the surrender as required by this subsection 8 of such certificate in exchange for a certificate or certificates or instrument or instruments representing such capital stock or other security. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable on any class or series of capital stock of the Corporation as of a record date after the Conversion Date, but that were not paid by reason of the foregoing, with respect to the number of shares (or fractional shares, if any) of the kind of capital stock represented by the certificate or certificates issued upon such surrender. From and after a Conversion Date, the Corporation shall, however, be entitled to treat the certificates for Series 2 Preferred Stock that have not yet been surrendered for conversion as evidencing the ownership of the number of shares (or fractional shares, if any) of the kind or kinds of 12 93 capital stock of the Corporation for which the Shares of Series 2 Preferred Stock represented by such certificates shall have been converted, notwithstanding the failure to surrender such certificates. (G) The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of any shares of capital stock and/or other securities upon conversion or redemption of Shares of Series 2 Preferred Stock pursuant to this Section 8. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of any shares of capital stock and/or other securities in a name other than that in which the shares of capital stock and/or other securities in a name other than that in which the Shares of Series 2 Preferred Stock so converted or redeemed were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (H) Neither the failure to mail any notice required by this subsection 8.2 to any particular holder of Series 2 Preferred Stock nor any defect therein shall affect the sufficiency thereof with respect to any other holder of outstanding Shares of Series 2 Preferred Stock or the validity of any such conversion or redemption. (I) The Board of Directors may establish such rules and requirements to facilitate the effectuation of the transactions contemplated by this Section 8 as the Board of Directors shall determine to be appropriate. Section 8.3 Certain Definitions. As used in this Section 8, the following terms shall have the following meanings (with terms defined in the singular having comparable meaning in the plural, and vice versa), unless the context otherwise requires. All other capitalized terms used in this Section 8 have the meanings ascribed to them elsewhere in this Certificate of Designation or in Article IV of the Certificate. (A) the term "Conversion Date" shall mean the date fixed by the Board of Directors as the effective date for the conversion of shares of Series 2 Preferred Stock into shares of Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation) as shall be set forth in the notice to holders of shares of Series 2 Preferred Stock required pursuant to paragraph (A) of subsection 8.2 of this Section 8. (B) the term "Market Capitalization" with respect to any class or series of junior preferred stock on any date shall mean the product of (i) the Market Value of one share of such class or series of junior preferred stock on such date and (ii) the number of shares of such class or series of junior preferred stock outstanding on such date. (C) the term "Market Value Ratio of Series 2 Preferred Stock to Series 1 Preferred Stock" as of any date shall mean the fraction (which may be greater than 1/1), 13 94 expressed as a decimal (rounded to the nearest five decimal places), of a share of Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation, if so provided in subsection 8.1 because the Series 1 Preferred Stock is not then Publicly Traded) to be issued in respect of a Share of Series 2 Preferred Stock upon a conversion of Series 2 Preferred Stock into Series 1 Preferred Stock (or another class or series of junior preferred stock of the Corporation) in accordance with subsection 8.1, based on the market value of a Share of Series 2 Preferred Stock to the market value of a share of Series 1 Preferred Stock (or such other class or series of junior preferred stock) as of such date, determined by the fraction the numerator of which shall be the sum of (A) four times the average Market Value of one Share of Series 2 Preferred Stock over the period of five consecutive Trading Days ending on such date, (B) three times the average Market Value of one Share of Series 2 Preferred Stock over the period of five consecutive Trading Days ending on the fifth Trading Day prior to such date, (C) two times the average Market Value of one Share of Series 2 Preferred Stock over the period of five consecutive Trading Days ending on the tenth Trading Day prior to such date, and (D) the average Market Value of one Share of Series 2 Preferred Stock over the period of five consecutive Trading Days ending on the fifteenth Trading Day prior to such date, and the denominator of which shall be the sum of (A) four times the average Market Value of one share of Series 1 Preferred Stock (or such other class or series of junior preferred stock) over the period of five consecutive Trading Days ending on such date, (B) three times the average Market Value of one share of Series 1 Preferred Stock (or such other class or series of junior preferred stock) over the period of five consecutive Trading Days ending on the fifth Trading Day prior to such date, (C) two times the average Market Value of one share of Series 1 Preferred Stock (or such other class or series of junior preferred stock) over the period of five consecutive Trading Days ending on the tenth Trading Day prior to such date, and (D) the average Market Value of one share of Series 1 Preferred Stock (or such other class or series of junior preferred stock) over the period of five consecutive Trading Days ending on the fifteenth Trading Day prior to such date. (D) the term "Redemption Date" shall mean the date fixed by the Board of Directors as the effective date for a redemption of Shares of Series 2 Preferred Stock, as set forth in a notice to holders thereof required pursuant to paragraph (B) of subsection 8.2. (E) the term "Time-Weighted Market Price" as of any date with respect to any class or series of junior preferred stock shall mean an amount equal to (i) the sum of (A) four times the average Market Value of one share of such class or series of junior preferred stock over the period of five consecutive Trading Days ending on such date, (B) three times the average Market Value of one share of such class or series of junior preferred stock over the period of five consecutive Trading Days ending on the fifth Trading Day prior to such date, (C) two times the average Market Value of one share of such class or series of junior preferred stock over the period of five consecutive Trading Days ending on the tenth Trading Day prior to such date, and (D) the average Market Value of one share of such class or series of junior preferred stock over the period of five 14 95 consecutive Trading Days ending on the fifteenth Trading Day prior to such date, (ii) divided by ten (10). (F) the term "Trading Day" with respect to any class or series of junior preferred stock shall mean each weekday other than any day on which the relevant class or series of junior preferred stock of the Corporation is not traded on any national securities exchange or quoted in the NASDAQ National Market or in the over-the-counter market. Section 9. Ranking. Except as provided below, the Series 2 Preferred Stock shall rank junior to all other series of Preferred Stock, par value $.01 per share, and to any other class of preferred stock that hereafter may be issued by the Corporation as to the payment of dividends and the distribution of assets, unless the terms of any such series or class shall provide otherwise. The Series 2 Preferred Stock shall rank prior, as to dividends and upon liquidation, dissolution, or winding up, to the Company Common Stock and the Class A Common Stock. Notwithstanding anything to the contrary in this Section 9, the Series 2 Preferred Stock shall rank on parity, as to dividends and upon liquidation, dissolution, and winding up, with the Series 1 Junior Preferred Stock. Section 10. Amendment. Except as set forth in Section 1 hereof, the Certificate, including, without limitation, this Certificate of Designation, shall not hereafter be amended, either directly or indirectly, or through merger or consolidation with another corporation in any manner that would alter or change the powers, preferences, or special rights of the Series 2 Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two thirds of the outstanding Shares of Series 2 Preferred Stock, voting separately as a class. Section 11. Fractional Shares. The Series 2 Preferred Stock may be issued in fractions of one one-hundredth of a Share or other fractions of a share, which fractions shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions, redemptions, and conversions, and to have the benefit of all other rights of holders of Shares of Series 2 Preferred Stock. Section 12. Additional Definitions. (A) The term "Company Common Stock" shall mean the class of stock designated as the Common Stock, par value $.01 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes or reclassification of such Company Common Stock. (B) The term "Class A Common Stock" shall mean the class of stock designated as the Class A Common Stock, par value $.01 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes of reclassification of such Class A Common Stock. 15 96 (C) The term "Junior Stock" (i) as used in Section 4, shall mean the Company Common Stock, the Class A Common Stock, and any other class or series of capital stock of the Corporation hereafter authorized or issued over which the Series 2 Preferred Stock has preference or priority as to the payment of dividends and (ii) as used in Section 6, shall mean the Company Common Stock, the Class A Common Stock, and any other class or series of capital stock of the Corporation over which the Series 2 Preferred Stock has preference or priority in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. (D) The term "Parity Stock" (i) as used in Section 4, shall mean any class or series of stock of the Corporation hereafter authorized or issued ranking pari passu with the Series 2 Preferred Stock as to the payment of dividends, including the Series 1 Preferred Stock and (ii) as used in Section 6, shall mean any class or series of stock of the Corporation hereinafter authorized or issued and ranking pari passu with the Series 2 Preferred Stock as to the distribution of assets on any liquidation, dissolution, or winding up of the Corporation, including the Series 1 Preferred Stock. [SPACE INTENTIONALLY LEFT BLANK] 16 97 IN WITNESS WHEREOF, Conectiv has caused this Certificate to be signed by its Chairman and Chief Executive Officer this ___ day of ___________, 1998. CONECTIV By ------------------------------- Howard E. Cosgrove Chairman and Chief Executive Officer 17 -----END PRIVACY-ENHANCED MESSAGE-----