PROPOSALS TO AMEND RESTATED CERTIFICATEAND BYLAWS
INTRODUCTION
The Board of Directors has unanimously approved and recommends that shareholders of the Corporation authorize the
amendments (the "Amendments") to the Corporation's Restated Certificate and Bylaws described in proposals 3
through 8 set forth below.
Proposals 3 and 4 request shareholder approval to increase the Corporation's authorized Common Stock and eliminate
certain preemptive rights to purchase shares of the Corporation's Common Stock. The purpose of these amendments is
to ensure the availability of Common Stock for issuance in the future and permit the Corporation the flexibility t o issue
Common Stock without being required to first offer the shares to existing shareholders.
Proposals 5 through 8 involve related amendments to the Corporation's Restated Certificate and Bylaws designed to
promote conditions of continuity and stability in the Corporation's management and policies and to preserve the
integrity of the investment of the Corporation's shareholders, large and small, by assisting them in obtaining fair and
equitable treatment in the event of an attempted takeover of the Corporation. These proposals include elim ination of
cumulative voting in the election of directors, classification of the Board of Directors and related amendme nts, the
addition of a "fair price" provision to regulate business combinations with any person or group beneficially owning 5%
or more of the Corporation's Common Stock, and the addition of an 8070 vote requirement to amend certain provisions
of the Corporation's Restated Certificate.
Proposals 3 through 8 are not in response to any effort, of which the Corporation is aware, to accumulate the
Corporation's Common Stock or to obtain control of the Corporation. The Board of Directors has, however, observed
an increase in corporate takeover activity in recent years and the use of certain takeover tactics, i ncluding the
accumulation of substantial common stock positions as a prelude to a threatened takeover or corporate restructuring,
proxy fights, and partial tender offers and the related use of "two-tier pricing," discussed below in connection with the
proposal to amend the Restated Certificate to include a fair price provision, which have become relative ly common in
corporate takeover practice. The Board believes that these tactics can place undue pressure on boards of direc tors and
shareholders to act hastily and on incomplete information, and therefore can be highly disruptive to a company and can
result in unfair differences in treatment of some shareholders who act immediately in response to announcement of
takeover activity and those who choose to act later, if at all. Proposals 3 to 8 are being submitted for shareholder
approval in response to the development of such tactics. The Board of Directors believes that it is appropriate t o act on
these proposed Amendments when they can be considered carefully rather than during an unsolicited bid for control.
At present the Board of Directors does not intend to propose further amendments to the Corporation's Restated
Certificate or Bylaws that might affect attempts to take over or change control of the Corporation. The Boa rd of
Directors believes that the Restated Certificate and Bylaws do not currently contain any provisions which would det er
an unsolicited attempt to take over or change control of the Corporation.
The Board believes-that proposals 5 through 8 are desirable notwithstanding the protections afforded by the Public
Utility Holding Company Act of 1935, as amended (the "Holding Company Act"), which requires approval by the
Securities and Exchange Commission (the "Commission") of the fairness of the price, as well as other terms and
conditions, of certain stock and asset acquisitions involving registered holding companies such as the Corporation.
Several measures have been introduced in Congress to repeal or reduce the scope of the Holding Company Act.
Moreover, the Holding Company Act as now constituted does not preclude a tender offer or other unnegotiated
business combination for consideration that is less than the Board considers desirable, or that the Board feels is
otherwise not in the best interests of shareholders (e.g., the market price of the Corporation's stock may be depressed
by circumstances not directly affecting its business). The only condition imposed by the Holding Company Act on
such business combinations is that the offered consideration is reasonably related to the value of the underlying util ity
assets.
The Board of Directors recognizes that a takeover might in some circumstances be beneficial to shareholders. Ta ken
together, Proposals 5 through 8 are intended to provide the Board of Directors and the shareholders with means to
counter takeover tactics the Board of Directors deems essentially unfair, and to enhance the ability of the Board, and
ultimately the shareholders, to negotiate with any potential acquiring company or group from the strongest practical
position in the interests of all shareholders, large and small.
Under Delaware law, each of the proposed amendments to the Corporation's Restated Certificate described i n
Proposals 3 through 8 requires the affirmative vote of the holders of a majority of the outstanding shares 6f Common
Stock of the Corporation entitled to vote at the meeting. All of the proposals are permitted by law and are consiste nt
with the rules of the New York and Midwest Stock Exchanges on which the Corporation's shares of Common Stock
are listed. If shareholders approve any of the Amendments, the Corporation will cause a Second Restated Certifica te of
Incorporation, reflecting the amendments which have been approved, to be filed with the Secretary of State of t he State
of Delaware. The Amendments would be expected to become effective on or about April 20, 1990. Each Amendment
adopted by shareholders will become effective regardless of whether any of the other Amendments to be acted upon at
the meeting is adopted, except that Proposal 8 will only be adopted if either Proposal 6 or 7 is approved. Each
Amendment is subject to authorization by the Commission under the Holding Company Act.
The full text of each Amendment for which approval is sought in Proposals 3 through 8 is set forth in either Exhibit A,
which sets forth the text of the Corporation's Restated Certificate as proposed to be amended and restated, or Exhibit B,
which sets forth the text of the proposed amendments to the Corporation's Bylaws. Shareholders are urged to read
carefully the following description and discussion of the proposals and Exhibits A and B to this Proxy Statement before
voting on the proposals.
(3) PROPOSED AMENDMENT TO INCREASE AUTHORIZED COMMON STOCK
This proposal is to authorize amendment of the Restated Certificate to increase its authorized Com mon Stock, $3.50
par value, from 120,000,000 shares to 150,000,000 shares. As of March 1, 1990, there remained available for issuance
25,912,478 shares of Common Stock. An aggregate amount of 6,522,800 shares were reserved for future issuance
under the Company's dividend reinvestment and employee stock plans, leaving a balance of 19,389,678 shares
unissued and unreserved.
Your Board of Directors believes that the proposed increase in the number of shares of Common Stock that the
Corporation is authorized to issue is desirable in order to ensure that the Corporation will have a sufficient number of
authorized shares available in the future to provide it with the desired flexibility to meet its requirem ents for new
equity capital and avail itself of opportunities which may arise. If this proposal is approved, the additional shares
would be available to raise additional capital which could be used for, among other things, investments in the equit y of
the Corporation's subsidiaries to finance their construction programs and other requirements; for use in connection
with acquisitions if the Corporation should desire to expand or diversify its business; for stock dividends, stock splits
and other stock distributions to holders; for dividend reinvestment or employee stock plans; and for possible future
transactions of a currently undetermined nature.
If the proposed amendment is adopted, the Corporation would be permitted to issue the authorized shares without
further shareholder approval, except to the extent otherwise required by law, by a securities exchange on which the
Common Stock is listed at the time, or by the Restated Certificate. See Proposal 4 for information wit h respect to the
proposed elimination of shareholder's preemptive rights to subscribe to additional Common Stock. The New York
Stock Exchange, on which the Corporation's Common Stock is now listed, currently requires shareholder approval as a
prerequisite to listing shares in certain instances, including acquisition transactions where the issuance could increase
the number of outstanding shares by 20 percent or more. Because the Corporation is subject to the jurisdiction of the
Commission under the Holding Company Act, no issuance and sale can take place unless the Corporation has received
approval of the Commission under the Holding Company Act.
Depending upon the nature and terms thereof, the issuance of additional shares of Common Stock could, under certain
circumstances, render more difficult or discourage an attempt to obtain control of the Corporation. For example, the
issuance of shares of Common Stock in a public or private sale, merger, or similar transaction would increase the
number of the Corporation's outstanding shares, thereby diluting the interest of a party seeking to take over the
Corporation. Furthermore, many companies have recently issued warrants or other rights to acquire additional shares
to the holders of common stock to discourage or defeat unsolicited stock accumulation programs and acquisition
proposals. The Board of Directors has not in the past and has no present intention to issue warrants or other rights to
acquire additional shares for any such purposes. If the proposed amendment is adopted, however, more Common Stock
of the Company would be available for such purposes than is currently available.The Board of Directors recommends that shareholders vote FOR the proposed increase in authorized Common
Stock.
(4) ELIMINATION OF PREEMPTIVE RIGHTS
This proposal is to authorize amendment of the Restated Certificate to eliminate certain pre emptive rights and state
explicitly that the holders of the Corporation's Common Stock shall have no preemptive rights to subscribe to any issue
of shares or other securities of any class of the Corporation. Under Delaware law, unless specifically provided in a
corporation's charter, shareholders do not have preemptive rights. Prior to 1967, Delaware law provided for preemptive
rights unless a corporation's charter provided otherwise, but in that year the presumption in favor of preemptive rights
was reversed.
Article Fourth of the Corporation's Restated Certificate provides that shares of Common Stock, and any securities
convertible into Common Stock, may be issued, without first being offered to shareholders, (a) in payment of
dividends on common stock; (b) if sold for money either in a public offering or to or through underwriters or
investment bankers who agree to make a public offering thereof; (c) in payment for property; (d) in exchange for debt
of the Corporation if approved by a majority of outstanding shares of Common Stock; (e) to employees of the
Corporation and its affiliates; and (f) to shareholders of the Corporation pursuant to certain reinvestment plans. Under
other circumstances, shareholders are granted preemptive rights. The Board of Directors believes that elimina tion of
preemptive rights will give the Board of Directors greater flexibility and reduce the cost of financings, such as the sa le
of new shares of Common Stock, or senior securities convertible into Common Stock, through private placements,
where the Corporation would be required to first offer shares to existing shareholders. Under certain conditions, such
forms of financing enable companies to fund their capital requirement at a savings in time, expense and overall cost
when compared with other forms of financing. The Board of Directors believes that the advantages to the Corporation
of elimination of preemptive rights derived from having such private forms of financing available outweigh the
benefits of preemptive rights to shareholders. The Board of Directors has no plans at this time for any new issues of
Common Stock or senior securities convertible into Common Stock.
Preemptive rights originated to permit a shareholder to maintain his proportionate interest in a corporation and t o
protect his voting rights from dilution through disproportionate sales of additional shares to other shareholders. The
principal of preemptive rights originated at a time when companies were small, had relatively few sha reholders, whose
shares were not widely traded, and with respect to which there was little opportunity to purchase additional shares,
except when a new issue of common stock was offered. In small, closely-held corporations it was, and may still be,
desirable to provide a means for shareholders to preserve their proportionate interests and voting rights against
possible dilution when additional shares are issued. In the case of large companies, like the Corporation, which had on
January 1, 1990, 94,095,441 shares of Common Stock outstanding and listed on the New York Stock Exchange, the
Board of Directors believes preemptive rights are of little significance. While the elimination of pree mptive rights
removes a protection against dilution of a shareholder's interest in the Corporation, the Board of Directors does not
believe that the elimination of the preemptive rights provision will result in a significant reduction in the ability of the
Corporation's shareholders to preserve their proportionate interest in the Corporation's Common Stock, should they so
desire. If this proposal is approved, the cost to shareholders of maintaining their proportionate interest may increase
because of the need for interested shareholders to make corresponding purchases on the open market. Shareholders
should, however, still be able to maintain their respective proportionate ownership percentages by purchasing
additional shares on the open market by utilizing a broker and paying a brokerage commission. Thus, holders of
Common Stock need not rely on preemptive rights to protect their proportionate interests and voting rights.
The elimination of preemptive rights of the holders of the Corporation's Common Stock, particularly in light of the
proposal to increase the Corporation's authorized Common Stock, could be construed as having an anti-takeover effect
since, in the absence of preemptive rights, the Board of Directors would have the power to issue, subject to obtaining
any required regulatory approvals, a substantial number of shares of Common Stock for cash to a third party. A third
party could either facilitate or hinder a proposed change in control of the Corporation, and shareholders would not
have the automatic right to acquire such shares in order to maintain their proportionate ownership interests.
The Board of Directors recommends that shareholders vote FOR the elimination of preemptive rights.
(5) ELIMINATION OF CUMULATIVE VOTING
This proposal is to authorize amendment of the Restated Certificate and the Corporation's Bylaws to elimina te the
requirement of cumulative voting in the election of directors. The Delaware General Corporation Law ("GCL") provides that
the certificate of incorporation of a Delaware corporation may provide for cumulative voting at elections of di rectors or
under other specified circumstances. Article Fourth of the Corporation's Restated Certificate currently provides t hat at the
election of directors each share of Common Stock shall entitle the holder to as many votes as the number of his shares
multiplied by the number of directors to be elected and that the holder may cast his votes for a single director or di stribute
them among two or more candidates as he may see fit. Cumulative voting is not required by the GCL.
The elimination of cumulative voting will enable the holders of a majority of the shares entitled to vote i n an election
of directors to elect all of the directors being elected at that time, and consequently will ma ke it more difficult for a
holder of a minority of outstanding shares to obtain representation on the Board of Directors. While the Board of
Directors does not consider the elimination of cumulative voting to be an anti-takeover measure, the elim ination might
also, under certain circumstances, render more difficult or discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Corporation's securities, or the removal of incumbent
management.
Advantages of Elimination of Cumulative Voting. The Board of Directors believes that the benefits of cumulative
voting are much less important today than they were when cumulative voting was first included in the Corporation's
Restated Certificate. In the past, minority shareholders had few Federal and state remedies to protect the m from
overreaching by majority shareholders and therefore had a greater need for board representation. Today, the Board of
Directors believes that the disadvantages of cumulative voting outweigh the advantages for a large, extensively
regulated and widely held corporation such as the Corporation, notwithstanding the fact that no shareholder today
owns greater than 5% of its outstanding Common Stock, due to the increase in takeover activity and the use of abusive
takeover tactics in recent years. For example, cumulative voting may allow a minority of shareholders to obta in
representation on a company's board of directors against the wishes of the majority to further objectives which may be
contrary to those of the majority of the shareholders. Furthermore, cumulative voting may enable a minority to elect a
director who represents interests intent on a takeover of the Corporation or similar action on terms not equally
beneficial to all shareholders. For a board of directors to work effectively for all of the shareholders, each director
should feel a responsibility to the shareholders as a whole and not to any special group of minority shareholders. If the
proposed amendment is passed, no director will be elected by any special interest group of minority shareholders.
Disadvantages of Elimination of Cumulative Voting. The proposed amendment to eliminate cumulative voting in the
election of directors may render more difficult and discourage the removal of incumbent directors and manageme nt. In
addition, if a board of directors is unwilling to nominate or appoint to the board a representative of a substantial
minority of its shareholders, cumulative voting might permit that minority to obtain board representation. Elimi nation
of cumulative voting, particularly where a board of directors is large in number, substantially increases the perce ntage
of shares required to gain representation on the board. In the case of the Corporation, under the present cumulative
voting provision, assuming that 94,000,000 shares of Common Stock were outstanding and were voted at a meeting of
shareholders held for the election of directors, a minimum of 18,800,001 shares would be required to assure a
shareholder's ability to elect one Director if the Board of Directors were classified and a class of four Directors was up
for election. If the Board of Directors were not classified and thirteen directors were up for election, a minimum of
6,714,287 shares would be required to assure election of one director. If cumulative voting were eliminated, based on
the above assumptions, over 47,000,000 shares would be required to ensure election of one director.Since the removal of cumulative voting could discourage accumulations of large blocks of the Corporation's Common
Stock by purchasers seeking representation on the Board of Directors, the adoption of this amendment could tend to
reduce the temporary fluctuations in the market price of shares of the Corporation's Common Stock which could be
caused by such accumulations. Accordingly, shareholders could be deprived of certain opportunities to sell their shares
at a temporarily higher market price.
The Board of Directors recommends the elimination of cumulative voting because it believes that non-cumul ative
voting is more likely to lead to representation of the shared interests of the shareholders.
The Board of Directors recommends that shareholders vote FOR the proposed elimination of cumulative voting
(6) CLASSIFICATION OF THE BOARD OF DIRECTORS
AND OTHER MATTERS RELATING TO DIRECTORS
This proposal is to approve amendments to Article Seventh of the Corporation's Restated Certificate of Incorporation
(together with conforming amendments to Article III, Section 1 of the Corporation's Bylaws) (the "Classified Board
Amendments"). The Classified Board Amendments would (1) classify the Board of Directors into three classes as nearly
equal in number as possible, each of which, after an interim arrangement, will serve for three years with one class bei ng
elected each year; (2) provide that directors may be removed by shareholders only for cause and only with the approval of
holders of eighty percent (80%) of the outstanding shares; (3) provide that the number of directors constituting the Board of
Directors shall be not less than nine (9) and not more than fifteen (15) and shall be set by the Board of Directors from time
to time; and (4) provide that any vacancy on the Board of Directors may be filled by a majority of the remaining direct ors
then in office though less than a quorum and that a director elected to fill a vacancy shall serve until the ne xt annual meeting
of shareholders and until his or her successor shall have been duly elected and qualified.
Under existing provisions of the Corporation's Restated Certificate and Bylaws, directors of the Corporation are ele cted
annually for terms of one year and may be removed from office with or without cause by the vote of the holders of a
majority of the Common Stock. The Bylaws currently provide that the number of directors shall be not less than nine (9) nor
more than fifteen (15), as the Board shall by resolution determine from time to time, which number may be increase d or
decreased by a majority vote of shareholders, and that vacancies on the Board of Directors may be filled by a majority of t he
directors then in office.
Classified Board
The Classified Board Amendments will divide the directors into three approximately equal classes. The direc tors of each
class will serve three-year terms and the term of one class will expire each year.
To implement the classified board, the Classified Board Amendments would permit Class I, Class II and Class III di rectors
initially to be elected at the 1990 Annual Meeting for terms of one year, two years and three years, respectively. See
Proposal 1, "Election of Directors", above. If the Classified Board Amendments are adopted, Class I directors elected at the
1990 Annual Meeting will hold office until the 1991 annual meeting; Class II directors elected at the meeting will hold
office until the 1992 annual meeting; and Class III directors elected at the meeting would hold office until the 1993 annual
meeting; and, in each case, until their successors are duly elected and qualified or until earlier dea th, resignation or removal.
At each annual meeting commencing with the 1991 annual meeting, directors elected to succee d those in the class whose
terms then expire will be elected for three-year terms so that the terms of one class of directors will expire each year. Thus,
after 1990, shareholders will elect only one-third of the directors at each annual meeting. Each director will se rve until a
successor is elected and qualified or until earlier death, resignation or removal. Delaware law provides that t he certificate of
incorporation of a corporation may provide that the directors be divided into one, two or three classes, the terms of office of
the directors initially classified to be as follows: the first class to expire at the annual meeti ng of shareholders next ensuing,
the second class one year thereafter and the third class two years thereafter. The number of directors to be elect ed at the
1990 Annual Meeting is thirteen. The Board of Directors presently has no plans, arrangements, commitments or
understandings with respect to increasing or decreasing the size of the Board or any class of directors.For information regarding the nominees for election to the Board of Directors at the 1990 Annual Meeting and the class of
directors in which each director will initially serve if the Classified Board Amendments are adopted, see Proposa l 1
"Election of Directors", above.
Advantages of a Classified Board. The Board of Directors believes that dividing the directors into three classes is
advantageous to the Corporation and its shareholders because by providing that directors will serve three-year terms rather
than one-year terms, the likelihood of continuity and stability in the policies formulated by the Board will be enhanced.
While management has not experienced any problems with continuity in the past, it wishes to ensure that this e xperience
will continue and believes that the staggered election of directors will promote continuity because only one-t hird of the
directors will be subject to election each year.
The amendment would significantly extend the time required to make any change in control of the Board and will t end to
discourage any hostile takeover bid for the Corporation. Presently, a change in control of the Board can be made by the
holders of a majority of the Corporation's shares at a single annual meeting. Under the proposed amendment, it will take at
least two annual meetings for such shareholders to make a change in control of the Board, since only a minority of the
Directors will be elected at each meeting. Staggered terms would guarantee that approximately two-thirds of the Directors,
or more, at any one time have at least one year's experience as Directors of the Corporation.
Disadvantages of a Classified Board. The amendment will make it more difficult for shareholders to change the composition
of the Board even if shareholders believe such a change would be desirable. Also, because of the additional time required to
change control of the Board, the amendment will tend to perpetuate incumbent management. Since the a mendment will
increase the amount of time required for a takeover bidder to obtain control of the Corporation without the cooperation of
the Board, even if the takeover bidder were to acquire a majority of the Corporation's outstanding stock, it will tend to
discourage certain tender offers, perhaps including some tender offers which shareholders might feel would be in their best
interests. As a result, shareholders may be deprived of opportunities to sell some or all of their shares in a tender offer.
Tender offers for control usually involve a purchase price higher than the current market price and may involve a bidding
contest between competing takeover bidders. The amendment could also discourage open market purchases by a potenti al
takeover bidder. Such purchases could temporarily increase the market price of the Corporation's stock, enabling
shareholders to sell their shares at a price higher than that which would otherwise prevail. In addition, the amendme nts could
decrease the market price of the Corporation's Common Stock by making the stock less attractive to persons who invest in
securities in anticipation of an increase in price if a takeover attempt develops.
Size of Board, Removal of Directors and Filling Vacancies
The proposed amendment to the Restated Certificate provides that the number of directors which shall constitut e the entire
Board shall be not less than nine (9) nor more than fifteen (15), and shall be fixed from time to time by resolution adopted
by the Board of Directors; that directors may be removed from office by shareholders only for cause and only by the
affirmative vote of holders of eighty percent (80%) of the Corporation's Common Stock and that vacancies on the Board
may be filled by the vote of a majority of the remaining Directors then in office, although less than a quorum. Persons so
elected to fill a vacancy on the Board would not initially be elected to any class and would hold office only unt il the next
annual meeting of shareholders.
Advantages of Provisions Concerning Removal of Directors and Filling Vacancies. The primary purpose of these
amendments is to preclude the removal of any director or directors by a takeover bidder or otherwise, unless removal is
warranted for reasons other than control of the Board. For a takeover bidder to obtain effective control of the Company, it
presently would need to control at least a majority of the Board votes. One popular method for a takeover bidder to obtain
control is to acquire a majority of the outstanding shares of a company through a tender offer or open market purchases and
to use that voting power to remove the existing directors and replace them with persons chosen by the takeover bidder.
Requiring cause in order to remove a director would defeat this strategy, thereby encouraging potential takeover bidde rs to
obtain the cooperation of the existing Board before attempting a takeover. Permitting directors to fill vacancies is a further
deterrent to the strategy of removing existing directors and replacing them with persons chosen by the takeover bidder.
Under these amendments, directors can still be removed but only by a vote of eighty percent (80%) of the shareholders at an
Annual Meeting or a special meeting of the shareholders called by a majority of the Board of Directors for such purpose,
and only for cause. The proposal is not being made as a result of any prior effort to remove a director. These amendments
are consistent with, and supportive of, the concept of a classified board in that they tend to moderate the pace of change in
the Board of Directors. The Board believes that the amendments will properly condition a director's continued servi ce upon
his ability to serve rather than his position relative to a dominant shareholder.
Disadvantages to Provisions Concerning Removal of Directors and Filling Vacancies. The amendment will make the
removal of any director more difficult, even if such removal is believed by the shareholders to be in their best interests, a nd
will eliminate the shareholder's ability to remove a Director at will. Since the amendment will make the removal of Directors
more difficult, it will increase the Directors' security in their positions and, since the Board has the power t o retain and
discharge management, could perpetuate incumbent management.
The proposed amendment permits removal of directors only for "cause." While what constitutes "cause" has not been
conclusively established by the Delaware courts, actions such as embezzlement, disclosure of trade secrets, or other
violations of fiduciary duty have been found to constitute cause for removal. Courts have indicated that the desire t o take
over management of a company or the failure to cooperate in management's plans for a company do not constitute cause for
removal. One effect of the proposed amendment may be to make it more difficult for the holders of a majority of the share s
of the Corporation to remove directors, should they deem it to be in their best interests to do so. The proposed amendment
would render more difficult, and may discourage, an attempt to acquire control of the Corporation without the approval of
the Corporation's management. Shareholders seeking to remove a director for cause could be forced to initiate a lawsuit to
clarify the exact meaning of "cause," which could be costly and time-consuming. Shareholders should recognize that the
amendment will make more difficult the removal of a director in circumstances which do not constitute a takeover attempt
and where, in the opinion of the holders of a majority of the Corporation's outstanding shares, cause for such removal may
exist. Moreover, the proposed amendment may have the effect of delaying an ultimate change in existing manageme nt
which might be desired by a majority of the shareholders.
Effect of the Classified Board Amendments
The adoption of the Classified Board Amendments would make more difficult or discourage a proxy contest or the
assumption of control by a holder of a substantial block of the Corporation's Common Stock or the removal of incumbent
directors or the change of control of the Board and could thus have the effect of entrenching incumbent management. At the
same time, the Classified Board Amendments would serve to ensure that the Board and management, if confronted by a
surprise proposal from a third party who has acquired a block of the Corporation's Common Stock, will have sufficient time
to review the proposal and appropriate alternatives to the proposal and to attempt to negotiate a better tra nsaction, if
possible, for the shareholders.
The Classified Board Amendments are being presented to shareholders for their adoption as a single proposal. As discussed
above, the Board of Directors believes the Classified Board Amendments, taken together, would, if adopted, effective ly
reduce the possibility that a third party could effect a sudden or surprise change in majority control of the Company's Board
of Directors without the support of the incumbent Board. Adoption of the amendments may have significant effects on the
ability of shareholders of the Company to change the composition of the incumbent Board of Directors and to benefit from
certain transactions which are opposed by the incumbent Board.
There has been a recent trend towards the accumulation of substantial stock positions in public companies by third pa rties as
a prelude to proposing a takeover or a restructuring or sale of all or part of a company or other similar extraordinary
corporate action. Such actions are often undertaken by the third party without advance notice to or consultation with
management or the directors of such a company. In many cases, the purchaser seeks representation on the company's Board
of Directors in order to increase the likelihood that its proposal will be implemented by the company. If the com pany resists
the efforts of the purchaser to obtain representation on the company's board, the purchaser may commence a proxy contest to
have its nominees elected to the board in place of certain directors, or to obtain control by electing its nom inees to a majority
of the directorships.
The Board of Directors of the Corporation believes that if such a purchaser were to purchase a significant or controlling
interest in the Corporation, its ability to remove the Corporation's directors and obtain control of the Board a nd thereby to
remove the Corporation's management would severely curtail the Corporation's ability to negotiate effectivel y with such
purchaser. The threat of obtaining control of the Board would deprive the Board of the time and information necessary to
evaluate the proposal, to study alternative proposals and to help ensure that the best price is obtained in any --transaction
involving the Corporation which may ultimately be undertaken.
The proposed amendments are intended to encourage persons seeking to acquire control of the Corporation to initiate suc h
an acquisition through arms-length negotiations with the Company's management and Board of Directors. Such
amendments, if they are adopted, could also have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Corporation, even though such an attempt might be beneficial to the
Corporation and its shareholders. In addition, since the amendments may discourage accumulations of large blocks of the
Corporation's stock, adoption of the amendments could tend to reduce the temporary fluctuations in the market price of the
Corporation's Common Stock which are caused by such accumulations. Accordingly, shareholders could be deprived of
certain opportunities to sell their shares at a temporarily higher market price. The amendments would also ma ke it more
difficult for the Corporation's shareholders to replace the Board or management even if a majority of the shareholders
believe such replacement to be in the best interests of the Company. As a result, the amendments, if adopted, would t end to
perpetuate the incumbent Board and management.
The Board of Directors of the Corporation is asking shareholders to consider and adopt the Classified Board Amendments in
order to discourage the types of transactions, described above, which involve an actual or threatened change of control of the
Corporation. The proposed amendments are designed to make it more difficult and time-consuming to change majority
control of the Board and thus to reduce the vulnerability of the Corporation to an unsolicited takeover proposal, particula rly
a proposal that does not contemplate the acquisition of all of the Corporation's outstanding shares, or an unsolicited proposa l
for the restructuring or sale of all or part of the Corporation, The Board believes that adoption by shareholders of the
Classified Board Amendments will serve to encourage any person intending to attempt such a takeover or restructuring t o
first try to negotiate with the Board and management of the Corporation and that the Board and management will t herefore
be better able to protect the interest of all shareholders.
The Board of Directors recommends that shareholders vote FOR the Classified Board Amendments.
(7) FAIR PRICE PROVISION
This proposal is to authorize amendment of the Restated Certificate to add a "fair price" provision (the "Fair Pric e
Amendment"). The Fair Price Amendment would require that certain minimum price and procedural requirements, i ntended
for the protection of the Corporation and its shareholders as a whole, be observed by any party which acquires more than
five percent of the Corporation's Common Stock and then seeks to accomplish a merger or other business combination or
transaction which would eliminate or could significantly change the interests of the remaining shareholders, unless approve d
by a majority of Continuing Directors (as defined below). If the specified requirements of the Fair Price Amendment are not
observed by such an acquiring party, an increased shareholder vote would be required as a condition for a subsequent
business combination. Adoption of the Fair Price Amendment may significantly affect a third party's interest in ac quiring a
substantial or controlling position in shares of Common Stock of the Corporation, as well as enhance the ability of the B oard
of Directors to take action in the light of such an acquisition by a third party. Accordingly, shareholders should read
carefully the following description of this proposed amendment, its purpose and effects, and Exhibit A hereto, Article
Twelfth of which sets forth the full text of the Fair Price Amendment, before voting on this proposal.
The Board of Directors has observed that it has become relatively common in corporate takeover practice for a third pa rty to
pay cash to acquire a substantial or controlling equity interest in a corporation and then to acquire the remaining e quity
interest by paying the balance of the shareholders a price for their shares that is lower than the price paid to acquire control
and/or is in a less desirable form of consideration, such as securities of the acquiring party that do not have an established
trading market at the time of issue.
In these two-tier acquisitions, arbitrageurs and professional investors may be in a better position to take advanta ge of a more
lucrative first-step acquisition than many long-term shareholders, who may have to accept a lower price in the sec ond step.
Recent changes in the Federal securities laws have reduced, but have not eliminated, advantages enj oyed by such
arbitrageurs and professional investors. Moreover, in two-tier transactions, even shareholders who tender their shares in
response to a higher first-step cash tender offer may not be assured that all of their shares will be accepted, since there a re
often proration provisions limiting the number of shares which the acquiring party is obliged to accept at the higher pric e. As
a result, many shareholders may receive only the average price offered by the acquiring party for all of the shares of the
corporation. In many cases this average price might not be high enough to have caused a majority of a corporation's
shareholders to tender their shares if the acquiring party's offer had been to purchase all of the corporation's shares for that
average pride per share.In addition, while Federal securities laws and regulations applicable to business combinations govern the disc losure required
to be made to shareholders in order to consummate such a transaction, they do not assure shareholders that the terms of the
business combination will be fair from a financial point of view or that minority shareholders effectively can preve nt the
consummation of a business combination that is opposed by its board of directors. Although the Commission amended its
tender offer rules to require the pro rata acceptance of all shares tendered prior to the expiration of a tende r offer, the
Commission recognized that this amendment is not intended to deal with two-tier pricing.
The Board considers that such two-tier pricing tactics are unfair to a corporation's shareholders. By their very nat ure, such
tactics tend (and are often designed) to cause concern on the part of shareholders that, if they do not act promptly, they risk
either being relegated to the status of minority shareholders in a controlled corporation or being forced to accept a l ower
price for all of their shares. Thus, such tactics may pressure shareholders into selling as many of their shares as possible
either to the acquiring party or in the open market without having the opportunity to make a considered investment c hoice
between remaining shareholders of the corporation or disposing of their shares. Moreover, their very actions in selling their
shares might facilitate an acquiring party's acquisition of a controlling interest, at which point an acquiring pa rty may be able
to force the exchange of the remaining shares in a business combination for a lower price. The problems caused by partial
offers and two-tier pricing are so serious that several states have adopted or proposed legislation addressing them in various
respects. For example, some states have enacted corporate statutes which require an acquiror to purchase more than a
majority of a company's shares and also require that a statutorily defined "fair price" be paid by the acquiror for his shares
(usually defined as the highest price the acquiror paid for any of the shares). Other states have adopted freeze-out or
moratorium statutes which prohibit a merger or certain other types of transactions for a period (usually three or five years)
after an acquiror acquires a "substantial interest" (usually defined as ten to fifteen percent of the common stock) i n a
company unless certain special voting and/or other conditions are satisfied. The substantial rejuvenation of state anti-
takeover legislation since 1987 reflects growing recognition that partial offers and two-tier pricing often are unfair t o
shareholders.
The Fair Price Amendment is designed to deter an acquiring party from utilizing two-tier pricing and similar
inequitable tactics in an attempt to take over the Corporation. However, the amendment is not designed to pre vent or
deter all tender offers for shares of the Corporation. It does not affect an offer for all shares at the same price or
preclude offers at different prices. Nor does the amendment preclude an acquiring party from making a tender offer for
some of the shares of the Corporation without proposing a Business Combination (as defined below). Except for the
restrictions on Business Combinations, the amendment will not prevent a holder of a controlling interest in the
Corporation's Common Stock from exercising control over or increasing its interest in the Corporation.
It should be noted that while the Fair Price Amendment is designed to help assure fair treatment of all shareholde rs in
the event of a takeover attempt, it is not its purpose to provide assurance that shareholders will receive a premium price
for their shares in a takeover attempt. Accordingly, the Board of Directors is of the view that the adoption of the Fair
Price Amendment would not preclude the Board from opposing any future takeover proposal that it believes not to be
in the best interests of the Corporation and its shareholders, whether or not such a proposal satisfies the minimum price
criteria and procedural requirements of the amendment.
Description of Fair Price Amendment
Special Vote Required for Certain Combinations. Under Delaware law, mergers, consolidations, sales of
substantially all of the assets of the Corporation and the adoption of a plan of dissolution of the Corporation must be
approved by the holders of a majority of the outstanding shares entitled to vote thereon. Reclassification of securities
and recapitalizations of the Corporation involving amendments to the Restated Certificate of Incorporation m ust also
be approved by the holders of a majority of the outstanding shares entitled to vote thereon. Certain other mergers
involving wholly-owned subsidiaries of the Corporation, and reclassifications and recapitalizations not involving any
amendments to the Restated Certificate of Incorporation, do not require shareholder approval.
If adopted, the Fair Price Amendment would require the affirmative vote of the holders of at least eighty percent (80%)
of the outstanding shares of the Common Stock and a majority of the outstanding shares not beneficially owned by the
Interested Stockholder (as such term is defined in the Fair Price Amendment) to approve any Business Combinati on
(as defined below), except in cases in which either certain price criteria and procedural requirement s are satisfied or
the transaction is approved by a majority of the Continuing Directors. In the event the price criteria and procedural
requirements were to be met or the requisite approval of the Board were to be given with respect to a particular
Business Combination, the normal requirements of Delaware law would apply. Thus, depending upon the
circumstances, the Fair Price Amendment would require such special shareholder vote for a Business Combination in
cases in which a two-thirds vote for a business combination with an interested stockholder pursuant to §203 of the
Delaware GCL, a majority vote or no vote is presently required.
An "Interested Stockholder" is defined in the Fair Price Amendment as any person (other than the Corporation or any
Subsidiary, which for purposes of the definition of "Interested Stockholder" means a company of which a majority of
each class of equity security is beneficially owned, by the Corporation, or any profit-sharing, employee stock
ownership or other employee benefit or dividend reinvestment plan of the Corporation or any Subsidiary or any trustee
of or fiduciary with respect to any such plan when acting in such capacity), who (i) is the beneficial owner of Voting
Stock representing five percent or more of the votes entitled to be cast by the holders of all the outstanding shares of
Voting Stock; or (ii) is an Affiliate or Associate (as defined in the Fair Price Amendment) of the Corporation and who,
at any time within the two-year period immediately prior to the Announcement Date (as defined in the Fair Pri ce
Amendment), was the beneficial owner of Voting Stock representing five percent or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock.
A person shall be deemed a "beneficial owner" of any Common Stock (i) if such person or any of its Affiliates or
Associates has, directly or indirectly, the right to acquire or to vote such stock, or (ii) which is beneficially owned,
directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any
agreement to hold, vote or dispose of any shares of Common Stock. At present, the Corporation is not aware of the
existence of any shareholder or group of shareholders that would be an Interested Stockholder.
An "Affiliate" of a specified person is a person that directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, the person specified. The term "Associate", used to indicate a
relationship with any person, means (a) any company (other than the Corporation or any Subsidiary) of which such
person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities, (b) any trust or other estate in which such person has a substantial beneficial intere st or as to
which such person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or
any of its parents or Subsidiaries.
A "Business Combination" includes the following transactions: (a) any merger or consolidation of the Corporation or
any Subsidiary (which for purposes of the definition of "Business Combination" means any company*of which a
majority of any class of equity security is beneficially owned by the Corporation) with any Interested Stockholder or
with any other company which is, or after such merger or consolidation would be, an Affiliate or Associate of an
Interested Stockholder; or (b) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or with any
Interested Stockholder or any Affiliate or Associate of any Interested Stockholder of any assets or securities of the
Corporation, any Subsidiary or any Interested Stockholder or Affiliate or Associate thereof having an aggregate Fair
Market Value in excess of $25,000,000 or more; or (c) the adoption of any plan or proposal for the termination,
liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of
any Interested Stockholder; or (d) any reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries, or
any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) that has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of Common
Stock or any securities convertible into Common Stock or equity securities of any Subsidiary that is beneficially
owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (e) any tender
offer or exchange offer made by the Corporation for shares of Common Stock which may have the effect of increasing
an Interested Stockholder's percentage beneficial ownership so that following the completion of the tender offer or
exchange offer the Interested Stockholder's percentage beneficial ownership of the outstanding Common Stock may
exceed 110% of the Interested Stockholder's percentage beneficial ownership immediately prior to the commencement
of such tender offer or exchange offer; or (f) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder having an aggregate Fair Market Value in excess of $25,000,000.
A "Continuing Director" is any member of the Board of Directors who is not an Affiliate or Associate or representative
of, and not a nominee of, the Interested Stockholder, and was a member of the Board prior to the time that the
Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is not an
Affiliate or Associate or representative of an Interested Stockholder and is recommended to succeed a Continuing
Director by a majority of Continuing Directors.
The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock
on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United
States securities exchange on which such stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system
then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock
as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or
stock, the fair market value of such property on the date in question as determined in good faith by a majority of the
Continuing Directors.
Exceptions to Special Vote Requirements. The special shareholder vote described above would not be required (1) if
the transaction has been approved by a majority of the Continuing Directors or (2) if all of the minimum price criteria
and procedural requirements described in paragraphs (a) and (b) below are satisfied.
(a) Minimum Price Criteria. In general, in a Business Combination involving cash or other consideration being paid to
holders of outstanding Common Stock, the consideration would be required to be either in cash or in the same form as
the Interested Stockholder has previously paid for shares of such stock. In addition, the Fair Market Value of such
consideration as of the date of the consummation of the Business Combination (the "Consummation Date") would be
required to meet certain minimum price criteria described below.
In the case of payments to holders of the Corporation's Common Stock, the aggregate amount of the cash and the Fair
Market Value as of the date of consummation of consideration other than cash per share to be received by such holders
would have to be at least equal to the highest of (i) the highest per share price paid by the Interested Stockholder for
any shares of Common Stock acquired by it within the two years immediately prior to the first public announcement of
the proposed Business Combination (the "Announcement Date") or in the transaction in which it became an Interested
Stockholder, whichever is higher, (ii) the Fair Market Value per share of Common Stock on the Announcement Date
or on the Determination Date, whichever is higher, (iii) (if applicable) the price per share equal to the Fair Marke t
Value per share of the Common Stock determined pursuant to the immediately preceding clause (ii), multipl ied by the
ratio of (x) the highest price per share paid by the Interested Stockholder for any shares of Common Stock acquired by
it within the two years immediately prior to the Announcement Date, to (y) the Fair Market Value per share of the
Common Stock on the first day in such two-year period on which the Interested Stockholder acquired any shares of the
Common Stock, and (iv) the Corporation's net income per share of the Common Stock for the four full consecutive
fiscal quarters immediately preceding the Announcement Date, multiplied by the higher of the then price/ earnings
multiple (if any) of such Interested Stockholder or the highest price/earnings multiple of the Corporation within the
two-year period immediately preceding the Announcement Date.
The following example illustrates the operation of the minimum price mechanism in a transaction in which the
acquisition by an Interested Stockholder of shares was by cash purchases in open market transactions:
(i) highest price paid per share within the two-year period immediately prior to the Announcement
Date ($40) or in the transaction in which it became an Interested Stockholder ($30), whichever is higher: $40;
(ii) the Fair Market Value on the Announcement Date ($39) or on the Determination Date ($29),
whichever is higher: $39;
(iii) the Fair Market Value on the Announcement Date ($39) multiplied by the quotient of the highest
per share price in (i) above ($40) over the Fair Market Value on the date of the Interested Stockholder's first
purchase of shares ($25): $62.40; and
(iv) the net income per share for the four full consecutive fiscal quarters immediately prior to the
Announcement Date ($10) multiplied by the higher of the then price/earnings multiple of the Interested
Stockholder or the highest price/earnings ratio of the Corporation within the two-year period immediately
preceding the announcement date (6/1): $60. In this example, in order to comply with the Amendment's
minimum price criteria, the Interested Stockholder would be required to pay to holders of shares of Common
Stock in the Business Combination at least $62.40 per share (the highest of the four alternatives above). If, in
this example, the price/earnings multiple of the Interested Stockholder was twelve to one, compliance wi th the
Amendment's minimum price criteria would require the Interested Stockholder to pay to the Corporation's
shareholders $120.00 per share. The provisions of this paragraph (iv) could have the effect of thwarting a
bidder for the Corporation because it could, depending upon the circumstances, require an Interested
Stockholder with a high price/earnings ratio to pay a higher minimum price in a Business Combination than a
bidder with a lower price/earnings ratio to avoid being subject to the special shareholder vote. The provision is
not designed to discourage fair bids for the Corporation, but rather to protect the Corporation's shareholders in
the event that an Interested Stockholder's price/earnings ratio is artificially raised through the acti ons of the
Interested Stockholder or does not accurately reflect the value of the Interested Stockholder's holdings in a
proposed Business Combination which involves payment in stock of the Interested Stockholder. However, this
provision could thwart a proposed Business Combination which involves the payment of cash by an Interested
Stockholder with a high price/earnings ratio by making the transaction prohibitively expensive while providing
no additional protection to the Corporation's shareholders. The Board of Directors does not believe that this
provision should discourage fair bids for the Corporation since the special shareholder vote will not be
required if a majority of the Continuing Directors approve the transaction.
In the case of payments to holders of shares of any other class or series of Voting Stock, the Fair Market Value per
share of such payments would have to be at least equal to the higher of (a) the highest per share price determined wit h
respect to such class or series in the same manner as described in clauses (i), (ii), (iii) and (iv) of the preceding
paragraphs and (b) the highest preferential amount per share to which the holders of shares of such class or series are
entitled in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation. The
Corporation currently is authorized under the Restated Certificate to issue only Common Stock.
If the proposed Business Combination does not involve any cash or other property being received by any of the other
shareholders, such as a sale of assets or an issuance of the Corporation's securities to an Interested Stockholder, then
the price criteria discussed above would not apply and the special vote of shareholders would be required unless the
transaction were approved by a majority of the Continuing Directors.
(b) Procedural Requirements. Under the Fair Price Amendment, in order to avoid the special shareholder vote
requirement, after an Interested Stockholder becomes an Interested Stockholder it would have to comply with all of the
procedural requirements described below, as well as the minimum price criteria, unless the Business C ombination is
approved by a majority of the Continuing Directors.
(1) The Corporation, after the Interested Stockholder became an Interested Stockholder, must not have failed
to increase the quarterly rate of dividends on shares of Common Stock outstanding as necessary to reflect any
recapitalization, reorganization, or similar transaction which has the effect of reducing the number of
outstanding shares of Common Stock, or have reduced the quarterly rate of dividends paid on Common Stock
(except as necessary to reflect any subdivision of Common Stock), unless such failure or reduction was
approved by a majority of the Continuing Directors. This provision is designed to prevent an Interested
Stockholder who controls a majority of the Board of Directors (other than Continuing Directors) from
attempting to depress the market price of the Corporation's shares prior to proposing a Business Combination
by reducing dividends thereon and thereby reducing the consideration required to be paid pursuant to the
minimum price provisions of the Fair Price Amendment.
(2) The Interested Stockholder must not have acquired any additional shares of Common Stock directly from
the Corporation or otherwise in any transaction subsequent to the transaction pursuant to which it became an
Interested Stockholder, except upon conversion of convertible securities acquired by it prior to becoming an
Interested Stockholder or as a result of a pro rata stock dividend or stock split. This provision is intended to
prevent an Interested Stockholder from purchasing additional shares of Common Stock at prices that are lower
than those set by the minimum price criteria of the Fair Price Amendment.
(3) The Interested Stockholder must not have received (other than proportionately as a shareholder) at any
time after it became an Interested Stockholder, whether in connection with the proposed Business
Combination or otherwise, the benefit of any loans or other financial assistance or any tax advantages provided
by the Company. This provision is intended to deter an Interested Stockholder from self-dealing or otherwise
taking advantage of its equity position in the Corporation by using the Corporation's resources for its own
purposes in a manner not proportionately available to all shareholders.
(4) The Interested Stockholder must not have made any major change in the Corporation's business or capital
structure without the approval of a majority of the Continuing Directors. This provision is intended to prevent
the Interested Stockholder from attempting to depress the market price of the Corporation's stock prior to
proposing a Business Combination or to otherwise take advantage of its equity position in the Corporation to
the detriment of all other shareholders. Whether an Interested Stockholder has made a "major change in the
Corporation's business or capital structure" will be determined by the Continuing Directors after examination
of the facts and circumstances surrounding the actions of the Interested Stockholder. Shareholders should note
that the ability to determine whether an Interested Stockholder has complied with this procedural requirem ent
will provide the Continuing Directors with substantial discretion in connection with whether or not the
proposed Business Combination will be subject to a special shareholder vote.
(5) A proxy or information statement disclosing the terms and conditions of a proposed Business Combination
and complying with the requirements of the proxy rules promulgated under the Securities Exchange Act of
1934 must be mailed to all shareholders of the Corporation entitled to vote thereon at least 30 days prior to the
consummation of a Business Combination. This provision is intended to assure that the Corporation's
shareholders would be fully informed of the terms and conditi
