EXHIBIT 1
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RIGHTS AGREEMENT
DATED AS OF NOVEMBER 6, 1997
BETWEEN
VARCO INTERNATIONAL, INC.
AND
▇▇▇▇▇▇ TRUST COMPANY OF CALIFORNIA
AS RIGHTS AGENT
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TABLE OF CONTENTS
Section Page
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1. Certain Definitions................................................ 1
2. Appointment of Rights Agent........................................ 7
3. Issuance of Rights Certificates.................................... 8
4. Form of Rights Certificates........................................ 9
5. Countersignature and Registration.................................. 10
6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates............................................ 11
7. Exercise of Rights, Exercise Price, Expiration Date of Rights...... 12
8. Cancellation and Destruction of Rights Certificates................ 14
9. Reservation, Registration and Listing.............................. 14
10. Preferred Shares Record Date...................................... 15
11. Adjustment of Exercise Price, Number and Kind of Shares or
Number of Rights............................................... 16
12. Certificate of Adjusted Exercise Price or Number of Shares........ 23
13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.......................................................... 23
14. Fractional Rights and Fractional Shares........................... 27
15. Rights of Action.................................................. 28
16. Agreement of Right Holders........................................ 28
17. Rights Holder Not Deemed a Shareholder............................ 29
18. Concerning the Rights Agent....................................... 29
19. Merger or Consolidation or Change of Name of Rights Agent......... 30
20. Duties of Rights Agent............................................ 31
21. Change of Rights Agent............................................ 33
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22. Issuance of New Rights Certificates.............................. 34
23. Redemption and Termination....................................... 34
24. Exchange......................................................... 35
25. Notice of Certain Events......................................... 37
26. Notices.......................................................... 37
27. Supplements and Amendments....................................... 38
28. Successors....................................................... 38
29. Determinations and Actions by the Board of Directors, etc........ 38
30. Benefits of this Agreement....................................... 39
31. Severability..................................................... 39
32. Governing Law.................................................... 39
33. Counterparts..................................................... 39
34. Descriptive Headings............................................. 40
EXHIBITS
Exhibit A Form of Certificate of Determination
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
ii
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of November 6, 1997 (the "Agreement"), between
VARCO INTERNATIONAL, INC., a California corporation (the "Company"), and ▇▇▇▇▇▇
TRUST COMPANY OF CALIFORNIA (the "Rights Agent").
On November 6, 1997 (the "Rights Dividend Declaration Date") the Board of
Directors of the Company (a) authorized and declared a dividend of one Preferred
Stock purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on November 25, 1997 (the "Record Date"), each Right representing the right to
purchase one one-thousandth (as such number may be adjusted pursuant to the
provisions of this Agreement) of a Preferred Share (as hereinafter defined),
upon the terms and subject to the conditions hereinafter set forth, and (b)
further authorized and directed the issuance of one Right (as such number may be
adjusted pursuant to the provisions of this Agreement) with respect to each
Common Share that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined) and in certain circumstances after the Distribution Date
and prior to the Expiration Date;
On November 6, 1997, the Board of Directors of the Company also declared a
two-for-one split of the Common Shares to be effected in the form of a 100%
stock dividend, payable on December 4, 1997, to the holders of record of the
Common Shares as of the close of business on November 20, 1997, which action was
taken into account in determining the Exercise Price (as defined below) and the
other terms and provisions of the Rights and this Agreement and, accordingly, no
adjustment of any kind shall be made under this Agreement as a result of such
stock split;
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, without the prior approval of the
Board of Directors of the Company, shall be the Beneficial Owner of 15% or more
of the Common Shares then outstanding (other than as a result of a Permitted
Offer), or was such a Beneficial Owner at any time after the date hereof,
whether or not such Person continues to be the Beneficial Owner of 15% or more
of the Common Shares then outstanding, but shall not include an Exempt Person.
Notwithstanding the foregoing, no Person shall be deemed an "Acquiring Person"
as the result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of the Common Shares of
the Company then outstanding; provided, however, that if a Person (other than an
Exempt Person) shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share acquisitions by the
Company and shall, after such share acquisitions by the Company, become the
Beneficial Owner of any additional Common
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Shares of the Company (other than pursuant to a dividend or distribution paid or
made by the Company on the outstanding Common Shares in Common Shares or
pursuant to a split or subdivision of the outstanding Common Shares), and,
immediately after becoming the Beneficial Owner of such additional Common Shares
of the Company, such Person shall be the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding, then such Person shall be deemed
to be an "Acquiring Person". Notwithstanding the foregoing, (i) 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 (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such Person
to be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), or (B) such Person was aware of the extent of the Common
Shares it beneficially owned but had no actual knowledge of the consequences of
such beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests within five (5) Business Days after such determination of the Board of
Directors of the Company a sufficient number of Common Shares 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 or to have become an "Acquiring Person" for any purposes of this
Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial
Owner of 15% or more of the Common Shares outstanding, such Person shall not be
or become an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the outstanding
Common Shares) unless, upon becoming the Beneficial Owner of such additional
Common Shares, such Person is not then the Beneficial Owner of 15% or more of
the Common Shares of the Company then outstanding.
(b) "Adjustment Fraction" shall have the meaning set forth in Section
11(a)(i) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly for purposes of Section 13(d) of the
Exchange Act and Rule 13d-3 thereunder (or any comparable successor law or
regulation);
(ii) which 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
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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 the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made 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 (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of such Person's Affiliates
or Associates) if such agreement has been approved by the Board of Directors of
the Company at a time prior to there being any Acquiring Person; or (B) the
right to vote pursuant to any agreement, arrangement or understanding, whether
or not in writing; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this Section
1(d)(ii)(B) as a result of an agreement, arrangement or understanding to vote
such security (1) which 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 rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any affiliate or associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding, whether or not in writing (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 Section 1(d)(ii)(B)) or
disposing of any securities of the Company provided, however, that in no case
shall an officer or director of the Company be deemed (x) the Beneficial Owner
of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of California or the State of
Illinois are authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 p.m., Los Angeles
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 p.m., Los Angeles time, on the next succeeding Business Day.
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(g) "Common Shares" shall mean the shares of Common Stock of the Company
except that "Common Shares" when used with reference to any Person other than
the Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, or if such Person is a Subsidiary of
another Person, the Person who ultimately controls such first-mentioned Person.
(h) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
(i) "Company" shall mean Varco International, Inc., a California
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "Current Per Share Market Price" of any security (a "Security" for
purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the Current Per Share Market Price of the Security is determined during a period
following the announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of the applicable
thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, 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
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Security, the fair value of such
shares on such date as determined in good faith by the Board of Directors of the
Company shall be used. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(j), as appropriately adjusted
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to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof, multiplied by 1,000. If the Security is not publicly held
or so listed or traded, Current Per Share Market Price shall mean the fair value
per share as determined in good faith by 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.
(k) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(l) "Distribution Date" shall mean the earlier of (i) the Shares
Acquisition Date or (ii) the Close of Business on the tenth Business Day (or
such later date as may be determined by action of the Board of Directors of the
Company) after the date that a tender or exchange offer by any Person (other
than an Exempt Person) is first published or sent or given within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if,
assuming the successful consummation thereof, such Person would be an Acquiring
Person.
(m) "Equivalent Shares" shall mean Preferred Shares and any other class or
series of capital stock of the Company that is entitled to participate in
dividends and other distributions, including distributions upon the liquidation,
dissolution or winding up of the Company, on a proportional basis with the
Common Shares. In calculating the number of any class or series of Equivalent
Shares for purposes of Section 11 of this Agreement, the number of shares, or
fractions of a share, of such class or series of capital stock that is entitled
to the same dividend or distribution as a whole Common Share shall be deemed to
be one share.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(p) "Exempt Person" shall mean the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any Person or entity holding Common Shares for or pursuant to the terms of any
such plan.
(q) "Exercise Price" shall have the meaning set forth in Section 4(a)
hereof.
(r) "Expiration Date" shall mean the earliest of (i) the Close of Business
on the Final Expiration Date, (ii) the Redemption Date, (iii) the time at which
the Board of Directors of the Company orders the exchange of the Rights as
provided in Section 24 hereof or (iv) the consummation of any transaction
contemplated by Section 13(f) hereof.
(s) "Final Expiration Date" shall mean November 5, 2007.
(t) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotations System.
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(u) "Permitted Offer" shall mean a tender or exchange offer for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of any shares under such tender or exchange offer, by a majority of the
members of the Board of Directors of the Company who are not officers of the
Company and who are not Acquiring Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person, to be fair and otherwise in the best
interests of the Company and its shareholders, taking into account such factors
as such members of the Board of Directors of the Company may deem pertinent.
(v) "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(w) "Post-Event Transferee" shall have the meaning set forth in Section
7(e) hereof.
(x) "Preferred Shares" shall mean shares of Series A Participating
Preferred Stock of the Company, having the rights, preferences and privileges
set forth in the form of Certificate of Determination of Rights, Preferences and
Privileges of Series A Participating Preferred Stock attached hereto as Exhibit
A.
(y) "Pre-Event Transferee" shall have the meaning set forth in Section 7(e)
hereof.
(z) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(aa) "Record Date" shall have the meaning set forth in the recitals at the
beginning of this Agreement.
(bb) "Redemption Date" shall have the meaning set forth in Section 23(a)
hereof.
(cc) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(dd) "Rights" shall have the meaning set forth in the recitals at the
beginning of this Agreement.
(ee) "Rights Agent" shall mean ▇▇▇▇▇▇ Trust Company of California or its
successor or replacement as provided in Sections 19 and 21 hereof.
(ff) "Rights Certificate" shall mean a certificate substantially in the
form attached hereto as Exhibit B.
(gg) "Rights Dividend Declaration Date" shall have the meaning set forth in
the recitals at the beginning of this Agreement.
(hh) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
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(ii) "Section 13 Event" shall mean any event described in clause (i), (ii)
or (iii) of Section 13(a) hereof.
(jj) "Securities Act" shall mean the Securities Act of 1933, as amended.
(kk) "Shares Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such provided
that if such Person is determined not to have become an Acquiring Person
pursuant to Section 1(a) hereof, then no Shares Acquisition Date shall be deemed
to have occurred.
(ll) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(mm) "Subsidiary" of any Person shall mean any corporation or other entity
of which securities or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors or other Persons
performing similar functions of such corporation or other entity are
beneficially owned, directly or indirectly, by such Person or any corporation or
other entity that is otherwise controlled by such Person.
(nn) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(oo) "Summary of Rights" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(pp) "Total Exercise Price" shall have the meaning set forth in Section
4(a) hereof.
(qq) "Trading Day" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security is
not listed or admitted to trading on any national securities exchange, a
Business Day.
(rr) A "Triggering Event" shall be deemed to have occurred upon any Person
becoming an Acquiring Person provided that if such Person is determined not to
have become an Acquiring Person pursuant to Section 1(a) hereof, then no
Triggering Event shall be deemed to have occurred.
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 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable. Any actions which may be taken
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by the Rights Agent pursuant to the terms of this Agreement may be taken by any
such Co-Rights Agent.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be evidenced (subject
to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
evidencing the Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates, and (ii) the Rights (and the right to receive
Rights Certificates) will be transferable only in connection with the transfer
of Common Shares. Until the earlier of the Distribution Date or the Expiration
Date, the surrender for transfer of such certificates for Common Shares shall
also constitute the surrender for transfer of the Rights associated with the
Common Shares represented thereby. 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
will, if requested, send at the expense of the Company) by first-class, postage-
prepaid mail, to each record holder of the Common Shares 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; evidencing one Right
for each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Close of Business on the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates and may be transferred by the transfer of the Rights Certificates
as permitted hereby, separately and apart from any transfer of Common Shares,
and the holders of such Rights Certificates as listed in the records of the
Company or any transfer agent or registrar for the Rights shall be the record
holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the Company
will send (or cause to be sent) a copy of a Summary of Rights by first-class,
postage-prepaid mail, to each record holder of the Common Shares as of the Close
of Business on the Record Date, at the address of such holder shown on the
records of the Company's transfer agent and registrar. With respect to
certificates for Common Shares 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 the Summary of Rights. Until
the Distribution Date (or if earlier, the Expiration Date) the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights, shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby.
(c) Unless the Board of Directors of the Company by resolution adopted at
or before the time of issuance (including pursuant to the exercise of rights
under benefit plans of the Company) of any Common Shares specifies to the
contrary, Rights shall be issued in respect of all Common Shares that are issued
after the Record Date but prior to the earlier of
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the Distribution Date or the Expiration Date or, in certain circumstances
provided for in Section 22 hereof, after the Distribution Date. Certificates
issued for Common Shares (including, without limitation, certificates issued
upon original issuance or transfer or exchange of Common Shares) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date (or, in certain circumstances as provided in Section 22 hereof, after the
Distribution Date) shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Varco International, Inc.
and ▇▇▇▇▇▇ Trust Company of California, as the Rights Agent, dated as of
November 6, 1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Varco International, Inc. 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. Varco International, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently held by or on
behalf of such person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone, the registered holders of the Common Shares shall also
be the registered holders of the associated Rights, and the surrender for
transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common Shares
after the Record Date but prior to the Distribution Date, any Rights associated
with such Common Shares shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the Common
Shares which are no longer outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) when, as and if issued, shall
be substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or a national market system on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates,
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whenever distributed, shall be dated as of the Record Date (or in the case of
Rights issued with respect to Common Shares issued by the Company after the
Record Date, as of the date of issuance of such Common Shares) and on their face
shall entitle the holders thereof to purchase such number of one-thousandths of
a Preferred Share as shall be set forth therein at the price set forth therein
(such exercise price per one one-thousandth of a Preferred Share being herein
referred to as the "Exercise Price" and the aggregate exercise price of all
Preferred Shares issuable upon exercise of one Right being herein referred to as
the "Total Exercise Price"), but the amount and type of securities purchasable
upon the exercise of each Right and the Exercise Price shall be subject to
adjustment as provided herein.
(b) Notwithstanding any other provision of this Rights Agreement, any
Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that
represents Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
(whether or not for consideration) which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof (and the Board of
Directors of the Company shall promptly notify the Rights Agent of any such
determination), and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall bear (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of the Rights Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President, or any Vice President, either manually or
by facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the
10
person who signed such Rights Certificates on behalf of the Company had not
ceased to be such officer of the Company; and any Rights Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or at its office designated for such purposes,
books for registration and transfer of the Rights Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 7(e), 14 and 24 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 Rights
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates, entitling the registered holder to
purchase a like number of one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder (or former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer any Rights Certificate shall surrender the Rights
Certificate at the office of the Rights Agent designated for such purpose with
the form of assignment on the reverse side thereof duly endorsed or enclose with
such Rights Certificate a written instrument of transfer in form satisfactory to
the Company and the Rights Agent, duly executed by the registered holder thereof
or his attorney duly authorized in writing, in either case with such signature
duly guaranteed. Any registered holder desiring to split up, combine or
exchange any Rights Certificate or Rights Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be split up, combined or exchanged at the
office or offices of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company or the Rights Agent shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e), 14 and 24 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 a Rights
Certificate.
11
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS, EXERCISE PRICE, EXPIRATION DATE OF RIGHTS.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the close of Business on the Expiration Date by
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed with such signature duly guaranteed, to
the Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the Exercise Price for each one-thousandth of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) as to which the Rights are then being
exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Shares
issuable pursuant to the exercise of a Right shall initially be $140.00, shall
be subject to adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Exercise Price for the number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) to be purchased 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(e) hereof, the Rights Agent shall, subject to Section 20(j) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of one-
thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) to be purchased and the
Company hereby irrevocably authorizes and directs its transfer agent to comply
with all such requests or (B) if the Company shall have elected to deposit the
total number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one-thousandths
of a Preferred Share (or, following a Triggering Event, other securities, cash
or other assets, as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby
12
directs the depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof, (iii) after receipt
of such certificates or depositary receipts, cause the same to be delivered to
or upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder and (iv)
when appropriate, after receipt thereof, deliver such cash to or upon the order
of the registered holder of such Rights Certificate. The payment of the Exercise
Price (as such amount may be reduced (including to zero) pursuant to Section
11(a)(iii) hereof) 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(e) hereof, may be made in cash or by certified bank check, cashier's check or
bank draft payable to the order of the Company. In the event that the Company is
obligated to issue securities of the Company other than Preferred Shares, pay
cash and/or distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Rights Certificate or to his or
her duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Triggering Event, any Rights beneficially owned
by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person;
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such (a "Post-Event
Transferee"), or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer (whether or not for
consideration) which the Board of Directors of the Company has determined is
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e) (a "Pre-Event Transferee") (and the
Board of Directors of the Company shall promptly notify the Rights Agent of any
such determination), or (iv) any subsequent transferee receiving transferred
rights from a Post-Event Transferee or a Pre-Event Transferee, either directly
or through one or more intermediate transferees, shall become null and void
without any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Rights Certificates or to any
other Person as a result of any of its failure to make any determinations with
respect to any Acquiring Person or any of such Acquiring Person's Affiliates,
Associates or transferees hereunder.
13
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall, in addition to
having complied with the requirements of Section 7(a), have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION, REGISTRATION AND LISTING.
(a) The Company covenants and agrees that it will use its best efforts to
cause to be reserved and kept available out of and to the extent of its
authorized and unissued Preferred Shares not reserved for another purpose (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares or other securities), the number of Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares or other
securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on a
national securities exchange, then so long as the Preferred Shares (and
following the occurrence of a Triggering Event, Common Shares or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable (but
only to the extent it is reasonably likely that the rights will be exercised),
all shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(ii)
or Section 11(a)(iii) hereof or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement
14
under the Securities Act with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Securities Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities and (B) the Expiration Date. The Company will also take all action as
may be appropriate under, or to ensure compliance with, the securities or "blue
sky" laws of the various states in connection with the exercisability of the
Rights. The Company may temporarily suspend, for a period of time not to exceed
ninety (90) days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit the same to become effective. Upon any
such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement and notification to the
Rights Agent at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
that jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law, or a registration statement under the
Securities Act (if required) shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or other securities of the
Company) delivered upon exercise of Rights shall, at the time of delivery of the
certificates therefor and subject to payment of the Exercise Price, be duly and
validly authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay or cause to
be paid when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the original issuance or delivery of
the Rights Certificates or of any Preferred Shares (or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
other securities, as the case may be) in a name other than that of, the
registered holder of the Rights Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts for
Preferred Shares (or other securities, as the case may be) 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.
SECTION 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for a number of one-thousandths of a Preferred Share (or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares (or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Total Exercise
15
Price with respect to which the Rights have been exercised (and any applicable
transfer taxes) was made; provided, however, that if the date of such surrender
and payment is a date upon which the Preferred Shares (or other securities, as
the case may be) transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Shares
(or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a holder of Preferred
Shares (or other securities, as the case may be) 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 EXERCISE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Exercise Price, the number and kind of shares or other
property 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) Anything in this Agreement to the contrary notwithstanding, in the
event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide
the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
(by reverse stock split or otherwise) into a smaller number of Preferred Shares,
or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11 and Section 7(e) hereof: (1) the Exercise Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Exercise Price thereafter shall equal the result obtained by dividing the
Exercise Price in effect immediately prior to such time by a fraction (the
"Adjustment Fraction"), the numerator of which shall be the total number of
Preferred Shares (or shares of capital stock issued in such reclassification of
the Preferred Shares) outstanding immediately following such time and the
denominator of which shall be the total number of Preferred Shares outstanding
immediately prior to such time; 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, if any, of the shares of capital stock of the Company
issuable upon exercise of such Right; and (2) the number of one-thousandths of a
Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the occurrence of the event described in clauses (A)
- (D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided,
however, that, no such adjustment shall be made pursuant to this Section
11(a)(i) to the extent that there shall have simultaneously occurred an event
described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder. Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this Section 11(a)(i)
shall have associated with it the number of Rights, exercisable at the Exercise
Price
16
and for the number of one-thousandths of a Preferred Share (or shares of such
other capital stock) as one Common Share has associated with it immediately
following the adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the result obtained by multiplying the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event by the
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or would have been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event, and dividing
that product by 50% of the Current Per Share Market Price for Common Shares on
the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof to reflect any events occurring in respect
of the Common Shares of the Company after the occurrence of the Triggering
Event.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Board of Directors of the Company
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Amended and Restated Articles of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such issuance
has not been obtained by the Company, the Company shall: (A) determine the
excess of (1) the value of the Common Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Exercise Price (such excess, the
"Spread") and (B) with respect to each Right, make adequate provision to
substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Exercise Price, (3) other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
Preferred Stock which the Board of Directors of the Company has deemed to have
the same value as Common Shares (such shares or units of shares of Preferred
Stock being herein called "Common Stock Equivalents")), except to the extent
that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance, (4) debt securities of the Company, except to the
extent that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the first occurrence of a
Triggering Event ("Section 11(a)(ii) Trigger Date"), then the Company shall
17
be obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Exercise Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
shareholder or regulatory approval for such issuance, and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. If
the Board of Directors of the Company shall determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights or that any necessary regulatory approval
for such issuance will be obtained, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per Preferred Share or
Equivalent Share (or having a conversion price per share, if a security
convertible into Preferred Shares or Equivalent Shares) less than the then
Current Per Share Market Price of the Preferred Shares or Equivalent Shares on
such record date, then, in each such case, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of Preferred Shares or
Equivalent Shares, as the case may be, which the aggregate offering price of the
total number of Preferred Shares or Equivalent Shares, as the case may be, to be
offered or issued (and/or the aggregate initial conversion price of the
convertible securities to be offered or issued) would purchase at such current
market price, and the denominator of which shall be the number of Preferred
Shares and Equivalent Shares (if any) outstanding on such record date, plus the
number of additional Preferred Shares or Equivalent Shares, as the case may be,
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of
18
one Right be less than the aggregate par value, if any, of the shares of capital
stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares and Equivalent Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights, options or warrants are not so issued, the
Exercise Price shall be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or cash or non-cash assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Preferred Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)),
then, in each such case, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Per Share Market Price of a Preferred Share or an Equivalent Share on
such record date, less the fair market value per Preferred Share or Equivalent
Share (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of Rights) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share or
Equivalent Share, as the case may be, and the denominator of which shall be such
Current Per Share Market Price of a Preferred Share or Equivalent Share on such
record date; 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, if
any, of the shares of capital stock of the Company issuable upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed, and in the event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(d) 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 one ten-thousandth of a Common Share or other share or
one hundred-thousandth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(d), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which requires such adjustment or
(ii) the Expiration Date.
19
(e) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right shall be entitled to receive upon
exercise any shares of capital stock other than Preferred Shares, thereafter the
number of such other shares so receivable upon exercise of any Right and, if
required, the Exercise Price thereof, shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provision with respect to the Preferred Shares contained in Sections 11(a),
11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k), and 11(l), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares; provided, however, that the
Company shall not be liable for its inability to reserve and keep available for
issuance upon exercise of the Rights pursuant to Section 11(a)(ii) a number of
Common Shares greater than the number then authorized by the Amended and
Restated Articles of Incorporation of the Company but not outstanding or
reserved for any other purpose.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 11(b) and 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth of a share) obtained by
(i) multiplying (x) the number of Preferred Shares covered by a Right
immediately prior to this adjustment by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(h) The Company may elect, on or after the date of any adjustment of the
Exercise Price as a result of the calculations made in Section 11(b) or (c), to
adjust the number of Rights, in substitution for any adjustment in the number of
one-thousandths of a Preferred Share purchasable upon the exercise of a Right.
Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of one-thousandths of a Preferred Share 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 hundred-thousandth)
obtained by dividing the Exercise Price in effect immediately prior to
adjustment of the Exercise Price by the Exercise Price in effect immediately
after adjustment of the Exercise Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Exercise
Price is adjusted or any date thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have
20
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein, may bear, at the option of the Company, the adjusted
Exercise 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.
(i) Irrespective of any adjustment or change in the Exercise Price or the
number of Preferred Shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Exercise Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the
Exercise Price below the then par value, if any, of the number of one-
thousandths of a Preferred Share, Common Shares or other securities issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue as fully paid and nonassessable shares such number of
one-thousandths of a Preferred Share, Common Shares or other securities at such
adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due ▇▇▇▇ or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, prior to
the Distribution Date, the Company shall be entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred Shares or Common Shares, (ii) issuance wholly for cash of any
Preferred Shares or Common Shares at less than the current market price, (iii)
issuance wholly for cash of any Preferred Shares, Common Shares or securities
which by
21
their terms are convertible into or exchangeable for Preferred Shares or Common
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Shares or Common Shares shall not be taxable to such shareholders.
(m) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit
to be taken) 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.
(n) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller number of Common
Shares, or (D) issue any shares of its capital stock in a reclassification of
the Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11 and Section 7(e) hereof: (1) each Common Share (or shares of capital
stock issued in such reclassification of the Common Shares) outstanding
immediately following such time shall have associated with it the number of
Rights as were associated with one Common Share immediately prior to the
occurrence of the event described in clauses (A) - (D) above; (2) the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A) - (D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; 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, if any, of the shares of capital stock of the Company
issuable upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event. Each
Common Share that shall become outstanding after an adjustment has been made
pursuant to this Section 11(n) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of one-thousandths
of a Preferred Share (or shares of such other capital stock) as one Common Share
has associated with it immediately following the adjustment made pursuant to
this Section 11(n). If an event occurs which would require an adjustment under
both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(n) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
SECTION 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company
22
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be obligated or responsible for calculating any
adjustment, nor shall it 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) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and into, any
other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company or which complies with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such merger,
all or part of the Common Shares shall be changed into or exchanged for stock or
other securities of any other Person (or the Company); or
(iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), 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) to any
other Person or Persons (other than the Company or one or more of its wholly-
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) 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
a price equal to the Total Exercise Price applicable immediately prior to the
occurrence of the Section 13 Event in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a
23
Right shall be subject to further adjustment as appropriate in accordance with
Section 11(e) hereof;
(B) 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;
(C) 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;
(D) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; and
(E) upon the subsequent occurrence of any consolidation, merger, sale
or transfer of assets or other extraordinary transaction in respect of such
Principal Party, each holder of a Right shall thereupon be entitled to receive,
upon exercise of a Right and payment of the Total Exercise Price as provided in
this Section 13(a), such cash, shares, rights, warrants and other property which
such holder would have been entitled to receive had such holder, at the time of
such transaction, owned the Common Shares of the Principal Party receivable upon
the exercise of such Right pursuant to this Section 13(a), and such Principal
Party shall take such steps (including, but not limited to, reservation of
shares of stock) as may be necessary to permit the subsequent exercise of the
Rights in accordance with the terms hereof for such cash, shares, rights,
warrants and other property.
(F) For purposes hereof, the "earning power" of the Company and its
Subsidiaries shall be determined in good faith by the Board of Directors of the
Company on the basis of the operating earnings of each business operated by the
Company and its Subsidiaries during the three fiscal years preceding the date of
such determination (or, in the case of any business not operated by the Company
or any Subsidiary during three full fiscal years preceding such date, during the
period such business was operated by the Company or any Subsidiary).
(b) For purposes of this Agreement, the term "Principal Party" shall mean:
(i) in the case of any transaction described in clause (i) or (ii) of
Section 13(a) hereof: (A) the Person that is the issuer of the securities into
which the Common Shares are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer the Common Shares of which have
the greatest aggregate market value of shares outstanding, or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
if such Person survives said merger, or, if there is more than one such Person,
the Person the Common Shares of which have the greatest aggregate market value
of shares outstanding or (y) if the Person that is the other party to the merger
does not survive
24
the merger, the Person that does survive the merger (including the Company if it
survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such transaction
or transactions receives the same portion of the assets or earning power so
transferred and each such portion would, were it not for the other equal
portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and (b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal party will:
(i) prepare and file a registration statement under the Securities Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, use its best efforts to cause such registration
statement to become
25
effective as soon as practicable after such filing and use its best efforts to
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the Expiration Date,
and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national
securities exchange or to meet the eligibility requirements for quotation on
NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a Triggering
Event some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b) hereof has
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of the
Common Shares of such Principal Party pursuant to the provisions of Section 13
hereof, then, in such event, the Company hereby agrees with each holder of
Rights that it 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 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 Company covenants and agrees that it shall not, at any time after
the Distribution Date, effect or permit to occur any Section 13 Event, if (i) at
the time or immediately after such Section 13 Event there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (ii) prior to, simultaneously with, or immediately
after such Section 13 Event, the shareholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
26
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
(f) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in clauses (i) and (ii) of
Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired Common Shares pursuant to a Permitted Offer (or a wholly-owned
Subsidiary of any such Person or Persons), (ii) the price per Common Share
offered in such transaction is not less than the price per Common Share paid to
all holders of Common Shares whose shares were purchased pursuant to such
Permitted Offer, and (iii) the form of consideration being offered to the
remaining holders of Common Shares pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this Section 13(f), all
Rights hereunder shall expire.
(g) The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Date immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-thousandth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, 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 Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-thousandth of a Preferred
Share, the Company shall pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Preferred Share. For
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the one thousand times the closing price of a Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof) for the
Trading Day immediately prior to the date of such exercise.
27
(c) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares upon the
exercise or exchange of Rights. In lieu of such fractional Common Shares, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of a Common Share. For purposes of this
Section 14(c), the current market value of a Common Share shall be the closing
price of a Common Share (as determined pursuant to the second sentence of
Section 1(j) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Right expressly waives
his or her right to receive any fractional Rights or any fractional shares
(other than fractions that are integral multiples of one one-thousandth of a
Preferred Share) upon exercise of a Right.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her 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 will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement. Nothing in this Section 15 is intended to modify or limit the
authority of the Board of Directors of the Company under Section 29 hereof.
SECTION 16. AGREEMENT OF RIGHT 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 not be evidenced by a
Rights Certificate and will be transferable only in connection with the transfer
of the Common Shares;
(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 purpose, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate certificates fully
executed;
28
(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 the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company, the Rights Agent, nor the Board of Directors of the Company shall have
any liability to any holder of a Right or other Person as a result of the
inability of the Company or the Rights Agent to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company shall use its best efforts to have
any such order, decree or ruling lifted or otherwise overturned as soon as
possible.
SECTION 17. RIGHTS HOLDER NOT DEEMED A SHAREHOLDER. No holder, as such,
of any Right (whether or not then evidenced by a Rights Certificate) shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the Preferred Shares or any other securities of the Company which may at any
time be issuable on the exercise of the Rights, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Right, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. The indemnification provided for herein shall
survive the expiration of the Rights, the termination of this Agreement, and the
resignation and removal of the Rights Agent. The
29
costs and expenses of enforcing such right of indemnification shall also be paid
by the Company.
(b) The Rights Agent may conclusively rely upon and shall be protected and
shall incur no liability for, or in respect of, any action taken, suffered or
omitted by it in connection with, its administration of this Agreement in
reliance upon any Rights Certificate or certificate for Preferred Shares or
Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
(c) Notwithstanding anything in this Agreement to the contrary, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.
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 shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor 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 Right 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.
30
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement (and no implied duties or
obligations shall be read into this Agreement against the Rights Agent) 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) Before the Rights Agent acts or refrains from acting, the Rights Agent
may consult with legal counsel (who may be legal counsel for the Company), and
the written opinion or advice 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 written opinion or
advice.
(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 Per Share Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the President, any Vice President, or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder 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 (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment in the
terms of the Rights (including the manner, method or amount thereof) provided
for in Sections 3, 11, 13, 23 or 24 hereof 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 a certificate furnished pursuant to Section 12 describing such
change or adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or other securities to be issued pursuant to this
31
Agreement or any Rights Certificate or as to whether any Preferred Shares or
other securities will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, or the
Secretary 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 by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for such instructions
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent under this Rights Agreement and the
date on or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five (5) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
(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 Person.
(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) 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 the form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause (1) and/or (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
32
(k) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for its believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(l) The Rights Agent shall not be required to take notice or be deemed to
have notice of any fact, event or determination (including, without limitation,
any dates or events defined in this Agreement or the designation of any Person
as an Acquiring Person, Affiliate or Associate) under this Agreement unless and
until the Rights Agent shall be specifically notified in writing by the Company
of such fact, event or determination.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and, after the Distribution Date, to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or
any successor Rights Agent (with or without cause) upon thirty (30) days' notice
in writing, mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Preferred Shares and the Common Shares
by registered or certified mail, and, after the Distribution Date, to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. Notwithstanding the
foregoing provisions of this Section 21, in no event shall the resignation or
removal of a Rights Agent be effective until a successor Rights Agent shall have
been appointed and have accepted such appointment. If the Company shall fail to
make such appointment within a period of thirty (30) days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the registered
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then the incumbent Rights Agent or
the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be
either (a) a bank or corporation organized and doing business under the laws of
the United States or any State of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or shareholder services
powers in California and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate of a
bank or corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the 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 Preferred Shares and the
Common Shares, and, after the Distribution
33
Date, mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates, evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption, exchange or expiration of the Rights, the Company (a)
shall, with respect to Common Shares 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 other securities outstanding at the date
hereof or issued by the Company hereafter, and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, 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 and this sentence shall be null and void ab initio
if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued or would
create a significant risk of or result in such options' or employee benefit
plans' or arrangements' failing to qualify for otherwise available special tax
treatment and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
SECTION 23. REDEMPTION AND TERMINATION. (a) The Company may, at its
option and with the approval of the Board of Directors of the Company, at any
time prior to the Close of Business on the earlier of (i) the Shares Acquisition
Date or (ii) the Final Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $.01 per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors of the Company in
its sole discretion may establish. The date on which the Board of Directors of
the Company elects to make the redemption effective shall be referred to as the
"Redemption Date".
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holder of Rights shall be to receive the Redemption Price for each Right so
held. The Company shall promptly give public
34
notice of any such redemption, provided, however, that failure to give or any
defect in, any such notice shall not affect the validity of such redemption.
Promptly after the action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. 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, and other than in connection with the
purchase or acquisition of shares of Common Shares prior to the Distribution
Date.
SECTION 24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations, and subject to
subsection (c) of this Section 24, the Company may, at its option, by action of
its Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Shares at an exchange ratio of one Common Share per
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 "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall 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 shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
35
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a), the Company shall either take
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights or alternatively, at the option of Board of
Directors of the Company, with respect to each Right (i) pay cash in an amount
equal to the Current Value (as hereinafter defined), in lieu of issuing Common
Shares in exchange therefor, or (ii) issue debt or equity securities or a
combination thereof, having a value equal to the Current Value in lieu of
issuing Common Shares in exchange for each such Right, where the value of such
securities shall be determined by a nationally recognized investment banking
firm selected by the Board of Directors of the Company, or (iii) deliver any
combination of cash, property, Common Shares and/or other securities having a
value equal to the Current Value in exchange for each Right. For purposes of
this Section 24(c) only, the Current Value shall mean the product of the Current
Per Share Market Price of Common Shares on the date of the occurrence of the
event described above in subparagraph (a) multiplied by the number of Common
Shares for which the Right otherwise would be exchangeable if there were
sufficient shares available. To the extent that the Company determines that
some action need be taken pursuant to clauses (i), (ii) or (iii) of this Section
24(c), the Board of Directors of the Company may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common Shares
or distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Common Shares would
otherwise be issuable, an amount in cash equal to the same fraction of the
Current Per Share Market Value of a whole Common Share (as determined pursuant
to the second sentence of Section 1(j) hereof).
(e) The Company may, at its option, with the approval of the Board of
Directors of the Company, at any time before any Person has become an Acquiring
Person, exchange all or part of the then outstanding Rights for rights of
substantially equivalent value, as determined reasonably and in good faith by
the Board of Directors of the Company, based upon the advice of one or more
nationally recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (e) 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 rights in exchange therefor as has
been determined by the Board of Directors of the Company in accordance with
subsection (e) above. The Company shall 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 shall mail a
notice of any such exchange
36
to the Rights Agent and to all of the holders of such Rights at each holder's
last address as it appears upon the registry books of the transfer agent for the
Common Shares of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Rights will be effected.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or to permit to occur any
Triggering Event or any Section 13 Event, the Company shall give notice thereof
to each holder of Rights in accordance with Section 26 hereof at least twenty
(20) days prior to occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur, then, in
any such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Varco International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President-Finance
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
▇▇▇▇▇▇ Trust Company of California
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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 each holder of a certificate representing Common
Shares) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder (or if prior to the Distribution Date to such
holder of Common Shares) at the address of such holder as shown on the registry
books of the Company.
37
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Company may in its sole and absolute discretion supplement or amend this
Agreement in any respect without the approval of any holders of Rights and the
Rights Agent shall, if the Company so directs, execute such supplement or
amendment. From and after the Distribution Date, the Company and the Rights
Agent may from time to time supplement or amend this Agreement without approval
of any holders of Rights in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or (iii) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, this Agreement may not be supplemented or amended to lengthen
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights or not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or benefits to, the holders of Rights (other than an Acquiring Person or
an Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
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, ETC.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board 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 to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to supplement or amend this Agreement and whether any
proposed supplement or amendment is permitted by Section 27). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights and all other parties,
and (y) not subject the Board to any liability to the holders of the Rights or
any other Person. Nothing in Section 15 hereof is intended to modify or limit
this Section 29.
38
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, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).
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;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors of
the Company.
SECTION 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California 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 except that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
Illinois.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
39
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
VARCO INTERNATIONAL, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Finance
▇▇▇▇▇▇ TRUST COMPANY OF CALIFORNIA,
as Rights Agent
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
___________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Assistant Vice President
40
EXHIBIT A
FORM OF CERTIFICATE OF DETERMINATION
CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES
AND PRIVILEGES
OF
SERIES A PARTICIPATING PREFERRED STOCK
OF
VARCO INTERNATIONAL, INC.
The undersigned, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ do hereby
certify:
1. That they are the duly elected and acting Vice President-Finance and
Secretary, respectively, of Varco International, Inc., a California corporation
(the "Corporation").
2. That pursuant to the authority conferred upon the Board of Directors
by the Amended and Restated Articles of Incorporation of the said Corporation,
the said Board of Directors on November 6, 1997 adopted the following
resolutions creating a series of 80,000 shares of Preferred Stock designated as
"Series A Participating Preferred Stock":
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Amended and Restated Articles of Incorporation, the
Board of Directors does hereby provide for the creation of a series of Preferred
Stock of the Corporation, to be designated "Series A Participating Preferred
Stock," initially consisting of 80,000 shares, and does hereby fix and herein
state and express such designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series of Preferred
Stock shall be designated as "Series A Participating Preferred Stock," and the
number of shares constituting such series shall be 80,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Participating Preferred Stock to less than the number of shares then issued
and outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the
A-1
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of January, April, July and October in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the then applicable Adjustment Number (as hereinafter defined) times the
aggregate per share amount of all cash dividends, and the then applicable
Adjustment Number times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock of the
Corporation (the "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 any share or fraction of a share of Series A
Participating Preferred Stock. The "Adjustment Number" shall initially be 1,000.
In the event the Corporation shall at any time after November 6, 1997 (the
"Rights Dividend Declaration Date") (i) declare and pay any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect immediately prior
to such event shall be adjusted by multiplying such Adjustment Number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event provided, however, that no such adjustment shall be made in connection
with the two-for-one split of the Common Stock to be effected in the form of a
100% stock dividend declared by the Board of Directors of the Company on
November 6, 1997, and payable on December 4, 1997, to the holders of record of
the Common Stock as of the close of business on November 20, 1997.
(b) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
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 from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A
A-2
Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall entitle
the holder thereof to a number of votes equal to the then Applicable Adjustment
Number on all matters submitted to a vote of the shareholders of the
Corporation.
(b) Except as otherwise provided herein or required by law, the
holders of shares of Series A Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(c) Except as otherwise provided herein or required by law, holders of
Series A Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration,
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.
(b) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating 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 shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with Series A Participating Preferred
Stock, except dividends paid ratably on the Series A Participating Preferred
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
A-3
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Participating Preferred 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 the Series A Participating Preferred Stock or to
such holders and holders of any shares ranking on a parity therewith 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 and
equitable treatment among the respective series or classes.
(c) 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 A Participating
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 retirement become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in the Amended and Restated Articles of Incorporation, as then
amended.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, voluntary or otherwise, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received an amount per share equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (1) $1,000, provided
that in the event the Corporation does not have sufficient assets, after payment
of its liabilities and distribution to holders of Preferred Stock ranking prior
to the Series A Participating Preferred Stock, available to permit payment in
full of the $1,000 per share amount, the amount required to be paid under this
Section 6(a)(1) shall, subject to Section 6(b) hereof, equal the value of the
amount of available assets divided by the number of outstanding shares of Series
A
A-4
Participating Preferred Stock or (2) the then applicable Adjustment Number times
the aggregate per share amount to be distributed to the holders of Common Stock
(the greater of (1) or (2), the "Series A Liquidation Preference").
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Participating Preferred Stock in
respect thereof, then the assets available for such distribution shall be
distributed ratably to the holders of the Series A Participating Preferred Stock
and the holders of such parity shares in proportion to their respective
liquidation preferences.
(c) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to the then applicable
Adjustment Number times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
SECTION 8. NO REDEMPTION. The shares of Series A Participating Preferred
Stock shall not be redeemable.
SECTION 9. RANKING. The Series A Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, unless the terms of any such series shall provide
otherwise.
SECTION 10. AMENDMENT. At any time that any shares or fractions of shares
of Series A Participating Preferred Stock are outstanding, the Amended and
Restated Articles of Incorporation of the Corporation shall not be further
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Participating Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of a
majority of the outstanding shares of Series A Participating Preferred Stock,
voting separately as a class.
SECTION 11. FRACTIONAL SHARES. Series A Participating Preferred Stock may
be issued in fractions of a share which 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 A Participating Preferred Stock.
A-5
SECTION 12. CONSENT FOR CERTAIN REPURCHASES OF COMMON STOCK. Each holder
of outstanding shares of Series A Participating Preferred Stock shall be deemed
to have consented, for the purposes of Sections 502, 503 and 506 of the
California General Corporation Law, to distributions made by the Corporation in
connection with the repurchase of shares of Common Stock of the Corporation
issued to or held by employees, consultants, officers and directors of the
Corporation upon termination of their employment or services with the
Corporation pursuant to agreements providing for the rights of repurchase
between the Corporation and such persons.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the number of shares constituting the Series A Participating
Preferred Stock is 80,000. Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, however, that no decrease
shall reduce the number of shares of Series A Participating Preferred Stock to
less than the number of shares then issued and outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
4. None of the shares of the Series A Participating Preferred Stock has
been issued.
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at Orange, California on November 6, 1997.
_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President-Finance
_______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary
A-6
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER NOVEMBER 5, 2007 OR EARLIER IF TERMINATED BY THE COMPANY
OR IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL
AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTON 7(e) OF SUCH AGREEMENT.]/*/
Rights Certificate
VARCO INTERNATIONAL, INC.
This certifies that ________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of November 6, 1997, as the same may be amended from time to
time (the "Rights Agreement"), between Varco International, Inc., a California
corporation (the "Company"), and ▇▇▇▇▇▇ Trust Company of California (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 p.m., Los
Angeles time, on November 5, 2007 at the office of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one one-
thousandth of a fully paid nonassessable share of Series A Participating
Preferred Stock (the "Preferred Shares") of the Company, at an exercise price of
$140.00 per one one-thousandth of a Preferred Share (the "Exercise Price"), upon
presentation and surrender of this Rights Certificate with the Form of
--------------------------
/*/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
B-1
Election to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above are
the number and Exercise Price as of November 6, 1997, based on the Preferred
Shares as constituted at such date. As provided in the Rights Agreement, the
Exercise Price and the number and kind of Preferred Shares or other securities
which may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate (i) may be redeemed by the Company, at its option, at a
redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
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 Rights entitling the holder to purchase a like aggregate
amount of securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred Share
will be issued upon the exercise of any Right or Rights evidenced hereby 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 the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or
B-2
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ________________________.
ATTEST: VARCO INTERNATIONAL, INC.
_____________________________ By: _______________________________
Secretary President
Countersigned:
▇▇▇▇▇▇ TRUST COMPANY OF CALIFORNIA
as Rights Agent
By: _________________________
Authorized Signature
B-3
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and
transfers unto _______________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: ___________________ __________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to SEC Rule 17Ad-15.
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 Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: ___________________ __________________________________________
Signature
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to SEC Rule 17Ad-15.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
TO: _________________________
The undersigned hereby irrevocably elects to exercise _____________________
Rights represented by this Rights Certificate to purchase the number of one-
thousandths of a Preferred Share issuable upon the exercise of such Rights and
requests that certificates for such number of one-thousandths of a Preferred
Share be issued in the name of:
Please insert social security
or other identifying number
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
Dated: ___________________ _______________________________________
Signature
B-5
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to SEC Rule 17Ad-15.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ___________________ _________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to SEC Rule 17Ad-15.
NOTICE
The signature in the foregoing Forms of Assignment and Election 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.
B-6
EXHIBIT C
VARCO INTERNATIONAL, INC.
SHAREHOLDER RIGHTS PLAN
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME
NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS
Distribution and On November 6, 1997, the Board of Directors (the
Transfer of Rights; "Board") of Varco International, Inc. (the
Rights Certificate: "Company") declared a dividend of one Preferred
Stock purchase right (a "Right") for each share
of Common Stock of the Company outstanding at
the close of business on November 25, 1997.
Unless otherwise determined by the Board, Rights
will attach to shares of Common Stock issued
thereafter until the Distribution Date (as
defined below) and in certain circumstances, to
shares of Common Stock issued after the
Distribution Date. Prior to the Distribution
Date, the Rights will be evidenced by and trade
with the certificates for the Common Stock.
After the Distribution Date, the Company will
mail Rights certificates to the Company's
shareholders and the Rights will become
transferable apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock and
become exercisable on the date (the
"Distribution Date") which is the earlier of (a)
the date of public announcement (the "Shares
Acquisition Date") that a person or group has,
without the prior approval of the Board,
acquired beneficial ownership of 15% or more of
the Company's Common Stock other than pursuant
to a Permitted Offer (as hereinafter defined)
and (b) the tenth business day (or such later
date as may be determined by the Board) after a
person or group commences a tender or exchange
offer, the consummation of which would result in
ownership by a person or group of 15% or more of
the Company's Common Stock.
---------------------------------------------------------------------------------
C-1
Preferred Stock After the Distribution Date and until the
Purchasable Upon occurrence of one of the events described
Exercise of Rights: below, each Right will entitle the holder
to purchase, for $140.00, (the "Exercise
Price") one one-thousandth of a share of
the Company's Series A Participating
Preferred Stock, which has economic terms
similar to those of one share of the Company's
Common Stock.
Flip-In: If any person (an "Acquiring Person") becomes
the beneficial owner of 15% or more of the
Company's Common Stock without the prior
approval of the Board and other than pursuant to
a tender or exchange offer deemed adequate and
in the best interests of the Company and its
shareholders by a majority of the members of the
Board who are not officers of the Company or
Acquiring Persons or affiliates thereof (a
"Permitted Offer"), then each Right (other than
Rights owned by an Acquiring Person or its
affiliates), will entitle the holder thereof to
purchase, for the Exercise Price, a number of
shares of the Company's Common Stock (or, in
certain circumstances, cash, property, or other
securities of the Company) having a then current
market value equal to twice the Exercise Price.
Flip-Over: If, after any person becomes an Acquiring
Person, (a) the Company merges into another
entity, (b) an acquiring entity merges into the
Company or (c) the Company sells more than 50%
of the Company's assets or earning power, then
each Right (other than Rights owned by an
Acquiring Person or its affiliates), will
entitle the holder thereof to purchase, for the
Exercise Price, a number of shares of Common
Stock of the person engaging in the transaction
having a then current market value of twice the
Exercise Price (unless the transaction satisfies
certain conditions and is consummated with a
person who acquired shares pursuant to a
Permitted Offer, in which case the Rights will
expire.)
Redemption of Rights will be redeemable at the Company's
the Rights: option for $0.01 per Right, payable in cash or,
at the option of the Company, in shares of
Common Stock, at any time prior to the Shares
Acquisition Date.
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C-2
Exchange Provision: At any time after the date any person becomes an
Acquiring Person and prior to the acquisition by
any person and its affiliates of 50% or more of
the outstanding Common Stock, the Company may,
by action of the Board, exchange the Rights
(other than Rights owned by the Acquiring Person
or its affiliates), in whole or in part, for
shares of the Company's Common Stock at an
exchange ratio (subject to adjustment) of one
share of Common Stock per Right (or in certain
circumstances, cash, property, or other
securities of the Company).
Expiration of The Rights expire on the earliest of (a)
the Rights: November 5, 2007 (b) exchange or redemption of
the Rights as described above or (c)
consummation of a merger, consolidation or sale
of assets resulting in expiration of the Rights
as described above.
Amendment of The terms of the Rights and the Rights Agreement
Terms of Rights: may be amended by the Company in any respect
without the consent of the Rights holders on or
prior to the Distribution Date. Thereafter, the
terms of the Rights and the Rights Agreement may
be amended by the Company without the consent of
the Rights holders in order to cure any
ambiguities, to correct any provision which may
be defective or inconsistent, or to make changes
which do not adversely affect the interests of
Rights holders (other than any Acquiring Person).
Voting and Other Rights: Prior to the exercise of the Rights, the holders
of Rights will not have any voting or other
rights as a shareholder of the Company.
Anti-Dilution: The Rights will have the benefit of certain
customary anti-dilution provisions in the event
of stock dividends, stock splits or
combinations, reclassifications or similar
events affecting the Series A Participating
Preferred Stock or the Common Stock.
Taxes: The Rights distribution should not be taxable
for federal income tax purposes. However,
following an event which renders the Rights
exercisable or upon redemption of the Rights,
shareholders may recognize taxable income.
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The foregoing is a summary of certain principal terms of the Shareholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of November 6, 1997, between the Company and
▇▇▇▇▇▇ Trust Company of California as the Rights Agent. A copy of the Rights
Agreement is available free of charge upon request to the Company.
C-3