EXHIBIT 4.1
U.S. ENERGY CORP.
Issuer and Company
and
COMPUTERSHARE TRUST COMPANY, INC
Rights Agent
RIGHTS AGREEMENT
Rights Record Date: September 19, 2001
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TABLE OF CONTENTS
PAGE
Section 1. Definitions...................................................4
Section 2. Appointment of Rights Agent...................................7
Section 3. Definition of Distribution Date and Offer Date;
When Right Certificates Will Issue............................7
Section 4. Form of Right Certificates....................................8
Section 5. Countersignature and Registration.............................9
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates.....................................9
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights....................................10
Section 8. Cancellation and Destruction of Right Certificates...........11
Section 9. Reservation and Availability of Shares; Registration.........11
Section 10. Record Date..................................................12
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights
(Including Flip-In" Provision)...............................12
Section 12. Certification of Adjusted Purchase
Price or Number of Shares....................................17
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power
(Including "Flip-Over Provision")............................18
Section 14. Fractional Rights and Fractional Shares......................20
Section 15. Rights of Action.............................................21
Section 16. Agreement of Right Holders...................................21
Section 17. Right Certificate Holder Not Deemed a Stockholder............21
Section 18. Concerning the Rights Agent..................................21
Section 19. Merger or Consolidation or Change of
Name of Rights Agent.........................................22
Section 20. Duties of Rights Agent.......................................22
Section 21. Change of Rights Agent.......................................24
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Section 22. Issuance of New Right Certificates...........................24
Section 23. Redemption...................................................24
Section 24. Notice of Proposed Actions...................................25
Section 25. Notices in General ..........................................25
Section 26. Supplements and Amendments...................................26
Section 27. Exchange of Rights for
Shares of Common Stock Without Cash Payment..................27
Section 28. Successors...................................................27
Section 29. Determinations and Actions Taken by
the Board of Directors.......................................27
Section 30. Benefits of this Agreement...................................27
Section 31. Governing Law; Choice of Venue...............................27
Section 32. Counterparts.................................................28
Section 33. Section Headings.............................................28
Section 34. Severability.................................................28
Signature Page .............................................................28
Exhibit A Form of Right Certificate....................................29
Exhibit B Summary of Rights............................................34
Exhibit C Certificate of Designation for
Series P Preferred Stock.....................................37
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RIGHTS AGREEMENT
This RIGHTS AGREEMENT is dated as of September 19, 2001, and is entered
into by U.S. Energy Corp., a Wyoming corporation (the "COMPANY"), and
Computershare Trust Company, Inc. as the Rights Agent.
RECITALS
The board of directors of the Company has determined that provision
should be made to supplement Wyoming law, in a manner consistent with that law,
to protect the shareholders by facilitating obtaining a higher value for the
Company through negotiated transactions, in the event of an attempted unfair
takeover of the Company without the consent of the board of directors. Subject
to the express provisions of this Rights Agreement, Exhibit C to this Agreement,
and proceedings of the board of directors of the Company, the general purpose of
this Rights Agreement is to encourage a person or company to discuss a potential
acquisition of the Company through a Qualified Offer, before acquiring more than
15% of the total voting power of the stock of the Company. Under this Agreement,
the Rights would be redeemed in the event a Qualified Offer is made. Under
Section 31, if there is conflict between this Agreement and the Wyoming
Management Stability Act, that law will control.
Therefore, the board of directors has authorized and declared the
distribution of one Right for every share of Common Stock of the Company
outstanding at the Close of Business on September 19, 2001 (the "RIGHTS RECORD
DATE"), each Right representing the right to purchase one Unit, being (initially
and before any adjustments as provided for herein) one one-thousandth (1/1,000)
of a share of Series P Preferred Stock. Further, the board of directors has
authorized and declared this dividend to cover every additional share of Common
Stock which may become outstanding between the Rights Record Date and the first
to occur of the Distribution Date, or the Expiration Date, or the date, if any,
when the Rights may be redeemed, all upon the terms and subject to the
conditions stated below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
SECTION 1. DEFINITIONS.
(a) For purposes of this Agreement, the following terms have
the meanings indicated:
"ACQUIRING PERSON" means any Person who or which, alone or
together with all of the Affiliates and Associates of such Person, is the
Beneficial Owner of a Substantial Block of Voting Stock, but does not include
(I) an Exempt Person OR (II) any Person who or which acquires a Substantial
Block of Voting Stock in connection with a transaction or series of transactions
approved prior to such transaction or transactions by the board of directors of
the Company. However, no person shall become an Acquiring Person solely as a
result of a reduction in the number of shares of Voting Stock outstanding,
unless and until such Person thereafter becomes the Beneficial Owner of
additional shares constituting 1% or more of the general voting power of the
Company.
"AFFILIATE" and "ASSOCIATE" have the respective meanings
ascribed in rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
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"BENEFICIAL OWNER." A Person is deemed to be the Beneficial
Owner of any securities:
(i) which such Person or any of his or its Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of his or its
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or upon the
exercise of any conversion, exchange or purchase rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of 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 payment
or exchange; OR (B) the right to vote or to direct the voting of, pursuant to
any agreement, arrangement or understanding (whether or not in writing); OR (C)
the right to dispose or to direct the disposition of, pursuant to any agreement,
arrangement or understanding (whether or not in writing); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
(whether or not in writing) for the purpose of acquiring, holding, voting or
disposing of any securities of the Company; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to Beneficially Own, any
security if the agreement, arrangement or understanding to vote such security
(1) arises solely from the grant of a revocable proxy or consent given to such
Person in connection with a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations under the
Exchange Act, AND (2) is not also then reportable on Schedule 13(d) or successor
report under the Exchange Act; provided, further, that a Person engaged in
business as an underwriter of securities shall not be deemed the "Beneficial
Owner" of securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of the 40-day period
immediately following the date of such acquisition.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
day on which banking institutions in the State Wyoming are authorized or
obligated by law or executive order to close.
"CLOSE OF BUSINESS" means 5:00 p.m., Wyoming time, on a
Business Day; provided, however, that if such is not a Business Day it shall
mean 5:00 p.m., Wyoming time, on the next succeeding Business Day.
"COMMON STOCK" means the Company's Common Stock; and "common
stock" when used with reference to Persons other than the Company means: (I) for
Persons organized in corporate form, the capital stock or equity security with
the greatest voting power of such Person or, if such Person is a Subsidiary of
another Person, of the Person or Persons which ultimately control such Person;
AND (II) in the case of Persons not organized in corporate form, the units of
beneficial interest which (A) represent the right to participate generally in
the profits and losses of such Person (including without limitation any
flow-through tax benefits resulting from an ownership interest in such Person)
AND (B) are entitled to exercise the greatest voting power of such Person or, in
the case of a limited partnership, shall have the power to remove the general
partner or partners.
"DISTRIBUTION DATE" has the meaning assigned in Section 3(a).
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"EQUIVALENT STOCK" has the meaning assigned in Section 7(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and
its future amendments.
"EXEMPT PERSON" means the Company, any Subsidiary of the
Company and any employee benefit plan or employee stock plan of the Company or
of any Subsidiary of the Company, or any trust or other entity organized,
established or holding shares of Common Stock by, for or pursuant to, the terms
of any such plan.
"EXPIRATION DATE" has the meaning assigned in Section 7(a).
"OFFER DATE" has the meaning assigned in Section 3(a).
"PERSON" means any individual, firm, corporation, partnership,
trust or other entity and shall include any of their successors.
"PRINCIPAL PARTY" has the meaning assigned in Section 13(b).
"PURCHASE PRICE" means the price (initially $200.00) payable
for one Unit (1/1,000 share of Series P Preferred Stock) upon exercise of a
Right.
"QUALIFIED OFFER" means a tender or exchange offer for all
outstanding Common Stock at a price and on terms determined to be adequate and
otherwise in the best interests of the Company and its stockholders (other than
the Person or an Affiliate or Associate thereof on whose behalf the offer is
made) by at least a majority of the Directors who are not representatives of or
affiliated with the Person making such offer or any Affiliate or Associate of
such Person.
"REDEMPTION PRICE" has the meaning assigned in Section 23(a),
initially $0.01 per Right.
"RIGHT" has the meaning assigned in the Recitals to this
Agreement.
"RIGHTS RECORD DATE" is defined in the Recitals to this
Agreement.
"SUBJECT SHARES" means the class or series of shares then
issuable on exercise of the Rights.
"STOCK ACQUISITION DATE" means the date of the first public
announcement by the Company or an Acquiring Person (which for purposes of this
definition shall include, without limitation, a report filed pursuant to Section
13(d) under the Exchange Act) that an Acquiring Person has become such.
"SUBSIDIARY" means, with respect to any Person, a corporation
or other entity the securities or other ownership interests of which having
ordinary voting power sufficient to elect a majority of the board of directors
or other persons performing similar functions are at the time directly or
indirectly owned by such Person and any Affiliate of such Person.
"SUBSTANTIAL BLOCK" means a number of shares of Voting Stock
having in the aggregate 15 percent or more of the general voting power.
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"TRADING DAY" has the meaning assigned to it in Section 11(d).
"UNIT" means the shares or other securities issuable upon
exercise of one Right, initially one one-thousandth of a share of Series P
Preferred Stock of the Company having the rights and preferences stated in
Exhibit C, before any adjustment pursuant to Section 11(a)(ii) or Section 13.
"VOTING STOCK" means shares of the Company's capital stock the
holders of which have general voting power.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company 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 Agent or
Agents as it may deem necessary or desirable and determine the respective duties
of the Rights Agent and the Co-Rights Agent or Agents.
SECTION 3. DEFINITION OF DISTRIBUTION DATE AND OFFER DATE;
WHEN RIGHT CERTIFICATES WILL ISSUE.
(a) Until the Close of Business on the earlier of (I) the
tenth Business Day after a Stock Acquisition Date OR (II) the tenth Business Day
(or such later date as the Company's board of directors shall determine) after
the date of the commencement by any Person (other than an Exempt Person) of, or
the date of the first public announcement (such commencement date or
announcement is the "OFFER DATE") of the intent of any Person (other than an
Exempt Person) to commence a tender or exchange offer upon the successful
consummation of which such Person, together with its Affiliates and Associates,
would be the Beneficial Owner of 15 percent or more of the then outstanding
Voting Stock (regardless of whether any shares are actually purchased pursuant
to such offer) (the tenth Business Day after the first to occur of a Stock
Acquisition Date or an Offer Date is the "DISTRIBUTION DATE"),
(i) the Rights will automatically attach to, and be
evidenced by, the certificates for Common Stock registered in the names of the
holders of Common Stock (which certificates for Common Stock shall be deemed
also to be Right Certificates) and not by separate Right Certificates, and
(ii) each Right will be transferable only in
connection with the transfer of the underlying shares of Common Stock.
(b) As soon as practicable after the Rights Record Date, the
Company will send by first- class mail to each record holder of Common Stock as
of the Close of Business on the Rights Record Date a copy of the Summary of
Rights (see Exhibit B).
For certificates for Common Stock issued after the Rights
Record Date (including replacement certificates for shares of Common Stock
outstanding on or prior to the Rights Record Date), but prior to the earliest of
the Distribution Date, the Expiration Date and the date, if any, on which the
Rights may be redeemed, the Company will have printed on or otherwise affixed to
them the following legend:
"This certificate also entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between the Company and Corporate
Stock Transfer, Inc. as Rights Agent as the same shall be amended from time to
time (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 the Company. Under certain
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circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
Common Stock certificate. The Company 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 any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) or certain transferees of any thereof, whether
currently held by or on behalf of such Person or by any subsequent holder, may
be limited as provided in Section 7(f) of the Rights Agreement."
For certificates containing the legend, until the Distribution
Date, the Rights associated with Common Stock represented by such certificates
shall be evidenced only by such certificates; transfer of any such certificates
also shall constitute transfer of the Rights associated with the Common Stock.
(c) After the Distribution Date, the Rights will be evidenced
solely by the Right Certificates.
(d) As soon as practicable after the Distribution Date, the
Rights Agent will mail by first- class insured mail to each record holder of
Common Stock as of the Close of Business on the Distribution Date, as shown by
the records of the Company at the Close of Business on the Distribution Date, at
the address of such holder shown on such records, a Right Certificate, in
substantially the form attached hereto as Exhibit A, evidencing one Right for
each share of Common Stock so held.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the forms of assignment and
certification and of election to purchase shares to be printed on the reverse
thereof) shall be in substantially the form of Exhibit A hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements as are not inconsistent with this Agreement, or as may be required
to comply with any law or to conform to usage.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights Beneficially Owned by: (i) an Acquiring Person
or any Associate or Affiliate of any 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 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(f), and any Right Certificate
issued pursuant to Section 6 or Section 11 upon transfer, exchange, replacement
or adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible and reasonably identifiable as such) the
following legend:
"The Rights represented by this Right 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) or certain transferees thereof. Accordingly, under certain
circumstances as provided in the Rights Agreement, this Right Certificate and
the Rights represented hereby may be limited as provided in Section 7(f) of such
Agreement.
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SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any of its Vice
Presidents, manually or by facsimile signature, and have affixed thereto the
Company's seal or a facsimile thereof attested by the Secretary or an Assistant
Secretary, either manually or by facsimile. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer who shall have signed any
of the Right Certificates shall cease to be such officer before countersignature
by the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent, issued and
delivered with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Right Certificate, shall be a proper
officer (as specified above) of the Company to sign such Right 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 books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each Right Certificate, the date of each Right Certificate and
the number of each Right Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTI- FICATES.
(a) Subject to Sections 4(b), 7(f) and 14, at any time after
the Close of Business on the Distribution Date, and prior to the Close of
Business on the Expiration Date or the day prior to the day, if any, when the
Rights are to be redeemed under Section 23, any Right Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Right Certificate or Right Certificates, entitling the registered holder to
purchase such number of Units as the Right Certificate(s) surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificate(s) to be transferred, split up, combined or exchanged, with the form
of assignment on the reverse side(s) thereof duly completed and executed, at the
stock transfer office of the Rights Agent. The Rights Agent shall countersign
and deliver to the persons entitled thereto the Right Certificate(s) requested.
The Company may require payment of a sum sufficient to cover any tax or
government charge that may be imposed in connection therewith. However, neither
the Rights Agent nor the Company shall be obligated to take any action with
respect to the transfer of any such surrendered Right Certificate unless and
until the registered holder shall have completed and signed the certificate
contained in the form of assignment on the reverse side of such Right
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
(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 Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incident thereto,
and upon surrender to the Rights Agent and cancellation of the Right
Certificate, if mutilated, the Company will execute and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
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SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS.
(a) Subject to Section 7(f), and unless earlier redeemed as
provided in Section 23, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly completed and executed, to
the Rights Agent at the stock transfer office of the Rights Agent, together with
payment of the Purchase Price for each Unit as to which the Rights are
exercised, at or prior to the Close of Business on the tenth anniversary of the
Rights Record Date or such other date to which the Rights may be extended as
provided in this Agreement (the latest of such dates is the "EXPIRATION DATE").
If at any time after the Distribution Date but prior to the Expiration Date the
Company is unable, under its articles of incorporation, to issue the number and
class of shares required to be issued upon the exercise of all of the
outstanding Rights, the Company may issue upon exercise of any of the Rights
shares of capital stock or other securities of the Company of value equivalent
to the shares so required to be issued ("Equivalent Stock"), as determined by
the board of directors.
(b) The Purchase Price for each Unit pursuant to the exercise
of a Right initially shall be US$200.00, subject to adjustment from time to time
as provided in Sections 11 and 13.
(c) Upon receipt of a Right Certificate, with the form of
election to purchase duly executed, accompanied by payment of the Purchase Price
for the Units to be purchased and an amount equal to any applicable transfer tax
in cash, or by certified check, bank draft or money order payable to the order
of the Company, the Rights Agent shall thereupon promptly (i) requisition from
the Company or any transfer agent of the Company (if different from the Rights
Agent) a certificate for the number of shares to be purchased and the Company
will comply, and hereby irrevocably authorizes its transfer agent to comply,
with all such requests; (ii) requisition from the Company the amount of cash to
be paid in lieu of issuance of a fractional share, when appropriate, in
accordance with Section 14; AND (iii) promptly after receipt of such certificate
from any such transfer agent, cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in the
name(s) designated by such holder and cash for any fractional share. These same
procedures shall be followed if Rights are exercised for Equivalent Stock.
(d) The Company shall not be required to pay any transfer tax
which may be payable in respect of any transfer involved in the transfer or
delivery of Right Certificates, or the issuance or delivery of certificates in a
name other than the registered holder, or to issue or deliver any certificates
upon the exercise of any Rights, until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
(e) If the registered holder exercises less than all the
Rights, a new Right Certificate for the remaining unexercised Rights shall be
issued by the Rights Agent to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to Section 14.
(f) Notwithstanding any provision of this Agreement to the
contrary, upon the occurrence of any of the events described in any of clauses
(A), (B), (C) or (D) of Section 11(a)(ii), the adjustment and provision under
Section 11(a)(ii) SHALL NOT APPLY with respect to any Rights that are at the
time Beneficially Owned by (i) an Acquiring Person or by any Associate or
Affiliate of such Acquiring Person (which Acquiring Person or Affiliate or
Associate engages in, or realizes the benefit of, one or more of the
transactions described in clause (A) or (B) of Section 11(a)(ii), realizes the
benefits set forth in clause (C) of Section 11(a)(ii) or,
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alone or together, become the Beneficial Owner(s) of a number of shares of
Voting Stock which equals or exceeds the percentage of the general voting power
as provided in clause (D) of Section 11(a)(ii), as the case may be), OR (ii) a
transferee of an Acquiring Person or of any Associate or Affiliate of such
Acquiring Person (which engages in, or realizes the benefit of, one or more of
the transactions described in clause (A) or (B) of Section 11(a)(ii), or
realizes the benefits in clause (C) of Section 11(a)(ii), or, alone or together
with such Acquiring Person or Associate or Affiliate, become the Beneficial
Owner(s) of a number of shares of Voting Stock which equals or exceeds the
percentage of the general voting power as provided in clause (D) of Section
11(a)(ii), as the case may be) (A) who becomes a transferee after the Acquiring
Person becomes such, OR (B) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights EITHER BY (1) 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 (2) a transfer 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(f).
Upon the exercise of such Rights covered by this Section 7(f), the holders shall
be entitled to receive, upon payment of the Purchase Price, the number of Units
issuable upon exercise of such Rights WITHOUT GIVING EFFECT to the adjustment
provided for under Section 11(a)(ii). The Company shall use all reasonable
efforts to insure that the provisions of this Section 7(f) and Section 4(b) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its making or failing to make any determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(g) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right 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 RIGHT CERTIFICATES.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combi- nation or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any other Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all cancelled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES;
REGISTRATION.
(a) The Company covenants and agrees that it shall (i) on or
prior to the Rights Record Date, take all such action as shall be necessary to
cause to be reserved and kept available out of its authorized and unissued
capital stock, enough shares of Preferred Stock to permit the exercise in full
of all Rights to be outstanding as of the Rights Record Date, (ii) no later than
promptly following the Distribution Date, take all such action as shall be
necessary to cause to be reserved and kept available out of its authorized and
unissued
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capital stock, or its authorized and issued shares held in its treasury, the
number of shares of Common Stock that will, from time to time, be sufficient to
permit the exercise in full of all Rights from time to time outstanding; (iii)
take all such action as may be necessary to insure that all shares delivered
upon exercise of Rights shall be duly and validly authorized and issued and be
fully paid and nonassessable; AND (iv) pay when due any transfer taxes and
charges in respect of the issuance or delivery of the Right Certificates or of
any shares upon the exercise of Rights (except as otherwise provided in Section
7(d)).
(b) The Company agrees to use its best efforts as soon as
practicable following the Distribution Date, to file with the Securities and
Exchange Commission a registration statement to permit the issuance of shares on
exercise of the Rights under the Securities Act of 1933, and to take the steps
necessary to permit such issuance under the securities "blue sky" laws of the
states where registered holders reside. The Company may temporarily suspend for
up to 90 days the exercise of the Rights to file a registration statement and
other documents as needed to allow exercise of the Rights. At the start and end
of a suspension, the Company shall issue a public announcement and notify the
Rights Agent that exercise has been suspended and the end of the suspension.
(c) The Rights shall not be exercisable in any jurisdiction if
not there legal.
(d) The Company shall use its reasonable efforts to cause all
shares reserved for issuance upon exercise of Rights to be listed on the
Company's exchange or quotation market.
SECTION 10. RECORD DATE. Each Person in whose name any stock
certificate is issued upon exercise of Rights shall be deemed to have become the
holder of record of the shares represented thereby on, and such certificate
shall be dated, the date when the Right Certificate was surrendered and the
Purchase Price paid. Prior to exercise of the Rights, the holder of a Right
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including
without limitation the right to vote or to receive dividends or other
distributions, and such holder shall not be entitled to receive any notice of
any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS (INCLUDING "FLIP-IN" PROVISION). The Purchase Price,
number and kind of shares or other securities covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) If the Company shall at any time after the date of
this Agreement (A) declare and pay a dividend on the shares which are subject to
the Rights ("Subject Shares") payable in shares of stock of the Company, (B)
subdivide or split the Subject Shares, (C) combine or consolidate the Subject
Shares into a smaller number of shares or effect a reverse stock split of the
Subject Shares, OR (D) issue any shares of its capital stock in a
reclassification of the Subject Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), THEN, AND IN EACH SUCH EVENT, except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for dividend or subdivision, split, reverse split, combination,
consolidation or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the transfer
books of the Company were open, he would have received upon such exercise and
been entitled to receive. If an event occurs which would require an adjustment
under
12
both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) If at any time after the date of this Agreement
(A) any Acquiring Person, or any Associate or
Affiliate of any Acquiring Person, directly or indirectly (1) shall merge into
the Company or any of its Subsidiaries or otherwise combine with the Company or
any of its Subsidiaries and the Company or such Subsidiary shall be the
continuing or surviving corporation of such merger or combination and the Common
Stock shall remain outstanding and the outstanding shares thereof shall not be
changed into or exchanged for stock or other securities of the Company or of any
other Person or cash or any other property, OR (2) shall sell or otherwise
transfer in one or more transactions, assets to the Company or any of its
Subsidiaries in exchange for 15 percent or more of the shares of any class of
capital stock of the Company or any of its Subsidiaries, and the Common Stock
shall remain outstanding and unchanged, OR
(B) directly or indirectly, any Acquiring Person,
or any Associate or Affiliate of any Acquiring Person, shall (1) in one or more
transactions, transfer assets to the Company or any of its Subsidiaries in
exchange (in whole or in part) for shares of any class of capital stock of the
Company or any of its Subsidiaries or for securities exercisable for or
convertible into shares of any class of capital stock of the Company or any of
its Subsidiaries or otherwise obtain from the Company or any of its
Subsidiaries, with or without consideration, any additional shares of any class
of capital stock of the Company or any of its Subsidiaries or other securities
exercisable for or convertible into shares of any class of capital stock of the
Company or any of its Subsidiaries (other than as part of a pro rata
distribution by the Company or such Subsidiary to all holders of Common Stock),
OR (2) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise
dispose (in one or more transactions), to, from or with, as the case may be, the
Company or any of its Subsidiaries, assets on terms and conditions less
favorable to the Company or such Subsidiary than the Company or such Subsidiary
would be able to obtain in arm's-length negotiation with an unaffiliated third
party, OR (3) receive any compensation from the Company or any of the Company's
Subsidiaries other than compensation for full-time employment as a regular
employee, or fees for serving as director, at rates in accordance with the
Company's (or its Subsidiaries') past practices, OR (4) receive the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance provided by the
Company or any of its Subsidiaries, on terms and conditions less favorable to
the Company or such Subsidiary than the Company or such Subsidiary would be able
to obtain in arm's-length negotiation with an unaffiliated third party, OR
(C) during any such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other similar transaction or
series of transactions involving the Company or any of its Subsidiaries (whether
or not with or into or otherwise involving an Acquiring Person or any Affiliate
or Associate of such Acquiring Person) which has the effect, directly or
indirectly, of increasing by more than one percent the proportionate share of
the outstanding shares of any class of equity securities, or of securities
exercisable for or convertible into equity securities, of the Company or any of
its Subsidiaries which is directly or indirectly owned by any Acquiring Person
or any Associate or Affiliate of any Acquiring Person, OR
(D) any Person shall become an Acquiring Person
otherwise than pursuant to a Qualified Offer,
13
THEN, AND IN EACH SUCH CASE, but subject to
Section 27 (covering exchange of Rights for shares of Common Stock, without
requiring exercise of Rights), proper adjustment and provision shall be made so
that each holder of a Right (except as provided below and in Section 7(f))
shall, on and after the later of (I) the date of the occurrence of an event
described in clause (A), (B), (C) or (D) of this Section 11(a)(ii), OR (II) the
expiration of the period within which the Rights may be redeemed under Section
23 (as the same may have been amended under Section 26), have the right to
receive, upon exercise thereof at the then current Purchase Price, the number of
shares of Common Stock equal to the result obtained by (X) multiplying the then
current Purchase Price by the then number of Units for which a Right is then
exercisable and dividing that product by (Y) 50 percent of the current market
price per share of Common Stock (determined in accordance with Section 11(d)) on
the date of the occurrence of the relevant event listed above in clause (A),
(B), (C) or (D) of this subparagraph (ii); PROVIDED, HOWEVER, that if the
transaction that would otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13, then only the provisions of Section 13
("flip-over" provisions) shall apply and no adjustment shall be made pursuant to
this Section 11(a)(ii). The Company shall not consummate any such merger,
combination, transfer or transaction referred to in any of such clauses (A), (B)
and (C) unless prior thereto there shall be sufficient authorized but unissued
Common Stock to permit the exercise in full of the Rights in accordance with the
foregoing sentence, unless the Board of Directors has determined to issue
Equivalent Stock in accordance with Section 7(a); PROVIDED, HOWEVER, that in no
case may the Company consummate any such merger, combination, transfer or
transaction if at the time of or immediately after such transaction 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.
If the Company issues Equivalent Stock upon the exercise of any Rights
pursuant to the immediately preceding paragraph, then, upon any such exercise,
proper provision shall be made so that the holder of a Right (except as provided
in Section 7(f)) shall have the right to receive, upon such exercise at the then
current Purchase Price, such number of shares or other units of Equivalent Stock
of the Company as shall equal the result obtained by (X) multiplying the then
current Purchase Price by the number of Units for which a Right is then
exercisable and dividing that product by (Y) 50 percent of the current market
price per share or other unit of the Equivalent Stock of the Company (determined
on substantially the same basis as is prescribed by Section 11(d) with respect
to the valuation of Common Stock) on the date of occurrence of the relevant
event listed above in clause (A), (B), (C) or (D) of this subparagraph (ii). If
at any time the Company should be prohibited by law, by any provision of its
articles of incorporation, or by any instrument or agreement to which the
Company is a party or by which it is bound, from issuing, or should be unable
under its articles of incorporation to issue, sufficient Equivalent Stock to
permit the exercise of all outstanding Rights in accordance with the foregoing
sentence, then, in lieu of issuing such Equivalent Stock upon such exercise, the
Company shall pay to each holder of a Right (except as provided in Section 7(f))
upon surrender of the Right as provided herein but without payment of the
Purchase Price, an amount in cash for each Right equal to the Purchase Price.
(b) If after the Rights Record Date the Company sets a record
date for the issuance of rights or warrants to all holders of Common Stock or
Subject Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Common Stock or Subject
Shares or securities convertible into Common Stock or Subject Shares at a price
per share (or having a conversion price per share, if a security convertible
into Common Stock) less than the current market price per share (determined with
Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction; the numerator shall be the
total number of shares of Common Stock and Subject Shares outstanding on such
record date plus the number of shares of Common Stock which the aggregate
offering price of the
14
total number of shares so to be offered (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at such
current market price, and the denominator shall be the total number of shares of
Common Stock and Subject Shares outstanding on such record date plus the number
of additional shares to be offered for subscription or purchase (or into which
the convertible securities to be offered are initially convertible). In case
such subscription or purchase price may be paid, in whole or in part, 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. 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 if such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been set.
(c) If the Company at any time after the Rights Record Date
sets a record date for making a distribution on shares of Common Stock or the
Subject Shares, whether by way of a dividend, distribution, reclassification of
stock, recapitalization, reorganization or partial liquidation of the Company or
otherwise (and including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation), of
subscription rights or warrants (excluding those referred to in Section 11(b)),
evidences of indebtedness or other assets (other than (i) regular periodic cash
dividends, (ii) a dividend payable in Common Stock OR (iii) a distribution which
is part of or is made in connection with a transaction to which Section
11(a)(ii) or Section 13 applies), then the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, of which the numerator
shall be the current market price per share of Common Stock (determined with
Section 11(d)) on such record date, less the fair market value applicable to one
share of Common Stock (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) of such assets or evidences of indebtedness or of such
subscription rights or warrants so to be distributed, and of which the
denominator shall be such current market price per share of Common Stock. Such
adjustments shall be made successively whenever such a record date is fixed; and
if such distribution is not so made, the Purchase Price shall again be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d) The "CURRENT MARKET PRICE" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices per share
of such Common Stock for the 30 consecutive Trading Days (defined below)
immediately prior to such date; provided, however, that if the current market
price per share of Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of a dividend or distribution on
such Common Stock payable in shares of such Common Stock or securities
convertible into shares of Common Stock (other than the Rights), and prior to
the expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, then, and in each such case, the current market price shall be
appropriately adjusted to reflect the current market price per share of Common
Stock in connection with ex-dividend trading. The closing price for each day
shall be the last sale price, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, in either case as reported in
the principal consolidated transaction reporting system of the principal market
where the shares of Common Stock are listed or admitted to trading. If the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, then closing price will be determined with reference to the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ"). If on any such date the shares of Common Stock are
not quoted by any such organization, the fair market value of such shares on
such date as determined in good faith by the board of directors shall be used.
Any such determination of current market price shall be described in a statement
filed with the Rights Agent.
15
For the purpose of any computation hereunder, the "CURRENT
MARKET PRICE" of a Unit shall be deemed to be equal to the current market price
per share of Common Stock, and the "current market price" of a Subject Share
shall be deemed to be equal to the current market price per share of Common
Stock divided by the number of Subject Shares which comprise a Unit.
For purposes of this Agreement, the term "TRADING DAY" shall
mean a day on which the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day.
(e) No adjustment in the Purchase Price shall be required
unless the adjustment would require an increase or decrease of at least one
percent in Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be. Notwithstanding the proviso to the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of three years from the date of the transaction which
gives rise to such adjustment or the date of the expiration of the Rights.
(f) If at any time, as a result of an adjustment made pursuant
to Section 11(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than shares
of Common Stock, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions, with
respect to such shares, contained in Sections 11(a) through (c), inclusive. The
provisions of Sections 7, 9, 10, 13 and 14 with respect to the shares of Common
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall represent the right to
purchase, at the adjusted Purchase Price, the number of shares purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election under
Section 11(i), when there is an adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares
(calculated to the nearest one-thousandth) obtained by (i) multiplying (x) the
number of shares covered by a Right immediately prior to such adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the result by the Purchase Price in effect
immediately after such adjustment.
(i) The Company may elect, on or after the date of adjustment
of the Purchase Price, to adjust the number of Rights, in substitution for any
adjustment in the number of shares purchasable upon the exercise of each Right.
Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of Units 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-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust
16
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights the Company shall cause to be
distributed to holders of record of Right Certificates on such record date,
Right Certificates to show (subject to Section 14) the additional Rights to
which the holders shall be entitled as a result of such adjustment. However, at
its option, the Company may shall cause to be distributed in substitution and
replacement for the Right Certificates held by the holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates to evidence all the Rights to which the holders are entitled after
the adjustment.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of shares issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) If this Section 11 requires that an adjustment in the
Purchase Price be made effective as of the record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the additional
shares or securities of the Company, if any, issuable as a consequence of such
adjustment; provided, however, that the Company shall deliver to such holder a
due ββββ or other appropriate instrument evidencing such holder's right to
receive such additional shares or securities upon the occurrence of such event.
(l) Notwithstanding the other provisions of this Section 11,
the Company shall be entitled to make such adjustments in the number of shares
which may be acquired upon exercise of the Rights, and such adjustments in the
Purchase Price, in addition to those adjustments expressly required by the other
subsections of this Section 11, as and to the extent that the Company, in its
sole discretion, shall determine to be advisable, in order that (x) the holders
of the Rights shall be treated equitably and in accordance with the purpose and
intent of this Agreement, AND (y) to the extent reasonably possible, such event
shall not, in the opinion of counsel for the Company, result in the stockholders
of the Company being subject to any United States federal income tax liability
by such adjustments. The events which would enable the Company to make such
further adjustments include (i) any reclassification, consolidation or
subdivision of the Common Stock; (ii) any reorganization or partial liquidation
of the Company or similar transaction; (iii) any issuance wholly for cash of any
Common Stock at less than the current market price; (iv) any issuance wholly for
cash of Common Stock or securities which by their terms are convertible into or
exchangeable for Common Stock; (v) any stock dividends; OR (vi) any issuance of
rights, options or warrants to holders of Common Stock.
SECTION 12. CERTIFICATION OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES. If an adjustment is made under Section 11 or 13, the Company shall
(i) promptly prepare a certificate setting forth such adjustment, and a brief
statement of the facts accounting for such adjustment; (ii) promptly file with
the Rights Agent and any different transfer agent for the Common Stock a copy of
such certificate; AND (iii) mail a brief summary to each holder of a Right
Certificate in accordance with Section 25. Notwithstanding the foregoing
sentence, the failure of the Company to give such notice shall not affect the
validity of, or the force or effect of, the requirement for such adjustment.
17
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER (INCLUDING "FLIP-OVER PROVISION).
(a) If, at any time after an Acquiring Person has become such,
(i) the Company shall consolidate with, or merge with
and into, any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, OR
(ii) any other Person(s) shall consolidate or merge
with and into the Company, the Company shall be the continuing or surviving
corporation of such merger, and in connection with such consolidation or merger,
all or part of the Common Stock shall be changed into or exchanged for stock or
other securities of the Company or of any other Person or cash or any other
property, 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 more than 50 percent of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person, (other than a pro rata distribution by the Company
of assets (including securities) of the Company or any of its Subsidiaries to
all holders of the Company's Common Stock), THEN, on and after the later of (I)
the date of the occurrence of an event described in clause (i), (ii) or (iii) of
this Section 13(a), OR (II) the date of the expiration of the period within
which the Rights may be redeemed pursuant to Section 23 (as the same may have
been amended as provided in Section 26):
(A) proper provision shall be made so that each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, such number of shares of common
stock of the Principal Party as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of Units for which a
Right is then exercisable and dividing that product by (y) 50 percent of the
current market price per share of the common stock of the Principal Party
(determined in the same manner as the current market price of Common Stock is
determined under Section 11(d)) on the date of consummation of such
consolidation, merger, sale or transfer;
(B) the Principal Party shall thereafter be
liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement, provided that the Principal Party shall, prior to the first
occurrence of an event described in clause (i), (ii) or (iii) of this Section
13(a), have caused to be reserved out of its authorized and unissued shares of
common stock (or its authorized and issued shares of common stock held in its
treasury), for issuance pursuant to this Agreement, the number of shares of
common stock that will be sufficient to permit the exercise in full of the
Rights after the occurrence of such event;
(C) the term "Company" wherever used in this
Agreement shall thereafter be deemed to refer to such Principal Party; AND
(D) the Principal Party shall, in addition to
the reservation of shares of its common stock as provided in the proviso to
clause (B) above, take such steps (including without limitation compliance with
the Company's other obligations as set forth in Section 9) in connection with
such consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its common stock thereafter deliverable upon the exercise of the
Rights; provided, however, that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all assets, recapitalization,
reclassification of shares, reorganization or other extraordinary
18
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
Purchase Price, 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 shares of common stock of the Principal Party
purchasable upon the exercise of a Right, 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.
(b) For purposes of this Agreement, "Principal Party" shall
mean
(i) in the case of any transaction described in
clause (i) or (ii) of Section 13(a), (A) the Person that is the issuer of the
securities into which shares of Common Stock are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the common
stock of which has the greatest market value, OR (B) if no securities are so
issued, (X) the Person that is the other party to the merger or consolidation
and that survives said merger or consolidation, or, if there is more than one
such Person, the Person the common stock of which has the greatest market value
OR (Y) if the Person that is the other party to the merger or consolidation does
not survive the merger or consolidation, the Person that does so survive
(including the Company if it survives); and
(ii) in the case of any transaction described in
clause (iii) of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same 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 stock having the greatest market value of shares outstanding;
PROVIDED, HOWEVER, that in any such case, (1) if the common stock of such Person
is not at such time and has not been continuously over the preceding 12- month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another corporation the common stock of which
is and has been so registered, "Principal Party" shall refer to such other
corporation; (2) if the common stock of such Person is not and has not been so
registered and such Person is not a direct or indirect Subsidiary of another
corporation the common stock of which is and has been so registered, "Principal
Party" shall refer to the corporation which ultimately controls such Person; (3)
in case such Person is a Subsidiary, directly or indirectly, of more than one
corporation, the common stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such corporations is the issuer of
common stock having the greatest market value of shares held by the public; and
(4) if the common stock of such Person is not and has not been so registered and
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), (2) and (3) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such Person
were a "Subsidiary" of both or all of such joint venturers and the Principal
Party in each such chain shall bear the obligations set forth in this Section 13
in the same ratio as its direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and the Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement making valid provision for the results described in clause (A) of
Section 13(a) and confirming that the Principal Party will perform its
obligations under this Section 13(a); provided, however, that in no case may the
Company consummate any such consolidation, merger, sale or transfer if (I) at
the time of or immediately after such transaction there are any rights, warrants
or other instruments or securities outstanding or agreements in effect which
would substantially diminish or otherwise eliminate the benefits
19
intended to be afforded by the Rights OR (II) prior to, simultaneously with or
immediately after such transaction, the stockholders of the Person which
constitutes, or would constitute, the Principal Party for purposes of this
Section 13 shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. This Section
13 shall not be applicable to a transaction described in Subparagraphs (i), (ii)
or (iii) of Subsection (a) of this Section if (I) such transaction is
consummated with a Person or Persons who acquired Common Stock pursuant to a
Qualified Offer (or a wholly owned subsidiary of any such Person or Persons);
(II) the price per share of Common Stock offered in such transaction or
distributable to stockholders upon conclusion of such transaction is not less
than the price per share of Common Stock paid to all holders of Common Stock
whose shares were purchased pursuant to such Qualified Offer; AND (III) the form
of consideration being offered to the remaining holders of Common Stock pursuant
to such transaction or distributable to stockholders upon conclusion of such
transaction is the same as the form of consideration paid pursuant to such
Qualified Offer. Upon conclusion of any transaction described in the foregoing
sentence, all Rights shall expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights or distribute Right Certificates which evidence fractional Rights. If the
Company shall elect not to issue such fractional Rights, in lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such Fractional Rights would otherwise be
issuable, 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 Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ.
If on any such date the Rights are not quoted by any such organization, the fair
value of the Rights on such date as determined in good faith by the board of
directors of the Company shall be used. Any such determination of current market
value shall be described in a statement filed with the Rights Agent.
(b) The Company shall not be required to issue fractions of
shares upon exercise of a Right or to distribute certificates which evidence
fractional shares. In lieu of fractional shares, the Company shall pay to the
registered holders of Right Certificates at the time such Right Certificates are
exercised, cash equal to the same fraction of the current market value of a
share of Common Stock. For purposes of this Section 14, the current market value
of a share of Common Stock shall be the closing price of a share of Common Stock
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance thereof expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
20
SECTION 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement are vested in the registered holders of the Right Certificates
(and prior to the Distribution Date, the registered holders of the Common
Stock). Any registered holder of any Right Certificate (or, prior to the
Distribution Date, any registered holder of the Common Stock), without the
consent of the Rights Agent or the holder of any other Right Certificate (or,
prior to the Distribution Date, any other registered holder of the Common
Stock), may, on his own behalf and for his own benefit, enforce, and may
institute and maintain, any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
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.
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 be
transferable only in connection with the transfer of Common Stock;
(b) on and after the Distribution Date, the Right Certificates
will be transferable only on the registry books of the Rights Agent and then if
surrendered at the stock transfer office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever. Neither the Company nor the Rights Agent shall be affected
by any notice to the contrary.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby. No provision of this Agreement or of any Right
Certificate shall be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate have been exercised.
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
21
the Rights Agent for, and hold it harmless against any loss, liability, or
expense incurred, without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it, acting with reasonable care, to be genuine and
to be signed, executed and, where necessary, verified or acknowledged, by the
proper person or persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall succeed to the agency created
by this Agreement any of the Right 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 Right
Certificates so countersigned. In case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right 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
Right Certificates shall have the full force provided in the Right 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 Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right 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 Right Certificates either
in its prior name or in its changed name, and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter 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
22
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 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
Right 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 Right 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 Right Certificate,
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or 13 or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment), nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of stock to be issued pursuant to
this Agreement or any Right Certificate or as to whether any shares of stock
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 performance
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President 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 to be taken by it in
good faith in accordance with instructions of any such officer.
(h) Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights
23
Agent shall not take any further action with respect to such requested exercise
or transfer without first obtaining the Company's approval.
SECTION 21. CHANGE OF RIGHTS AGENT. Unless the Company and the
Rights Agent agree to a shorter time period, the Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 15 days' notice in writing mailed to the Company (and, if different, to
each transfer agent of Common Stock) by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. Unless the Company and
the Rights Agent agree to a shorter time period, the Company may remove the
Rights Agent or any successor Rights Agent upon 15 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of Common Stock by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 15 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States
having a stock transfer office in the State of Colorado which is subject to
supervision or examination by federal authority. 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 if different, each transfer agent of Common Stock) and mail a notice
thereof in writing to the registered holders of the Right 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 RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its board of directors to
reflect any adjustment or change in the Expiration Date, the Purchase Price per
share or the number or kind or class of shares of stock or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement.
SECTION 23. REDEMPTION.
(a) At its complete option and as provided below, the board of
directors of the Company may, if the triggering events set forth in Sections 11
and 13 should occur, and notwithstanding the operative provisions of those
Sections, instead elect to redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend, reclassification or similar
transaction occurring after the date hereof, at any time up to (but not after)
the Close of Business on a Stock Acquisition Date. PROVIDED, HOWEVER, that
redemption of the Rights only may be made in conjunction with the board of
directors' determination that a tender or exchange offer is a Qualified Offer,
and provided further that in its discretion, the board of directors may provide
that the Rights
24
shall be reinstated and the redemption price refunded if the Qualified Offer is
materially and adversely changed to the detriment of the Company and its
shareholders, as determined by the board of directors in its reasonable
discretion.
(b) Immediately upon the action of the board of directors
electing to redeem the Rights, the Company shall make a public announcement
thereof, and from and after the date of such announcement, without any further
action and without any further notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. As soon as practicable after the determination of
the board of directors to redeem the Rights, the Company shall give notice of
such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders 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 redemption will state the method by which the
payment of the Redemption Price will be made.
SECTION 24. NOTICE OF PROPOSED ACTIONS. In case the Company,
after the Rights become exercisable, shall propose (I) to pay any dividend
payable in stock of any class to the holders of its Common Stock or the Subject
Shares or to make any other distribution to the holders of its Common Stock or
Subject Shares (other than a regular periodic cash dividend), OR (II) to offer
to the holders of its Common Stock or Subject Shares rights or warrants to
subscribe for or to purchase any additional shares of Common Stock or shares of
stock of any class or any other securities, rights or options, OR (III) to
effect any reclassification of its Common Stock or Subject Shares (other than a
reclassification involving only the subdivision of outstanding shares of Common
Stock) or any recapitalization or reorganization of the Company, OR (IV) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50 percent of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person, OR (V) to effect the liquidation, dissolution or winding
up of the Company, THEN, in each such case, the Company shall give to each
holder of a Right, in accordance with Section 25, a notice. The notice of such
proposed action shall specify the record date or the date on which such
reclassification, recapitalization, reorganization, consolidation, merger, sale,
transfer, liquidation, dissolution or winding up is to take place and the date
of participation therein by the holders of Common Stock and/or Subject Shares,
if any such date is to be fixed. The notice shall be given in case of any action
covered by clause (i) or (ii) above at least 20 days prior to the record date
for determining holders of the Common Stock and/or Subject Shares for purposes
of such action; in the case of any other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of Common Stock and/or Subject Shares, whichever shall be the
earlier. The failure to give notice required by this Section 24 or any defect
thereon shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
SECTION 25. NOTICES IN GENERAL. Notices or demands authorized
by this Agreement to be given or made by the Rights Agent or by the holder of
any Right Certificate to or on the Company shall be given if sent by courier,
facsimile, or first-class mail, postage prepaid, addressed to:
U.S. Energy Corp.
βββ β. βββ β.
ββββββββ, βββββββ βββββ
Fax βββ.βββ.ββββ
25
Any notice or demand authorized by this Agreement to be given
or made by the Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by courier, facsimile
or first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Company) as follows:
Computershare Trust Company, Inc.
βββββ ββββ βββββββ βββββββ, βββββ β β
ββββββββ, ββββββββ [Fax βββ.βββ.ββββ]
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to or on the holder of any Right
Certificate shall be sufficiently given or made if sent by first- class mail,
postage prepaid, addressed to such holder at the address of such holder on the
Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date and subject to the penultimate sentence of this Section, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Right Certificates
in order (I) to cure any ambiguity, (II) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (III) to shorten or lengthen any time period, or (IV) to
change or supplement the provisions hereof in any manner which the Company may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Right Certificates; 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 are not then redeemable, OR
(B) any other time period, unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. 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, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary: (1) no supplement or amendment shall be made which
changes the Redemption Price, the Purchase Price or the number of shares or
Units for which a Right is exercisable; and (2) the duration of the Rights may
not be shortened without the written consent of the registered holders thereof
(other than by a redemption of the Rights). Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
SECTION 27. EXCHANGE OF RIGHTS FOR SHARES OF COMMON STOCK
WITHOUT CASH PAYMENT.
(a) The board of directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become subject to Section 7(f)) for Common Stock at an exchange ratio
of one share of Common Stock 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").
(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 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
26
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each notice of exchange will state the
method by which the exchange of the Common Stock 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 subject to the provisions of
Section 7(f)) held by each holder of Rights.
(c) If there is not enough authorized Common Stock to permit
an exchange of Rights as contemplated in accordance with this Section, the
Company shall take all such action as may be necessary to authorize additional
Common Stock or Equivalent Stock for issuance upon exchange of the Rights.
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. DETERMINATION AND ACTIONS TAKEN BY THE BOARD OF
DIRECTORS. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock (or other applicable securities hereunder) outstanding at
any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock (or other securities) of
which any Person is the Beneficial Owner, shall be made in accordance with the
last sentence of rule 13d- 3(d)(1)(i) (as in effect on the date of this
Agreement) 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 such 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
amend the Agreement). All such actions, calculations, interpretations and
Determinations (including, for purposes of clause (B) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (A) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, AND (B) not subject the board to
any liability to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the holders of Common Stock) any legal or equitable
right, remedy or claim under this Agreement. This Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
holders of Common Stock).
SECTION 31. GOVERNING LAW; CHOICE OF VENUE. This Agreement and
each Right Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Wyoming 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. The rights and obligations
of the Rights Agent under this Agreement shall be governed by and construed in
accordance with the laws in effect
27
in the State of Colorado. The parties to this Agreement, and all of the holders
of record of the Rights, irrevocably agree and acknowledge that all disputes
involving the subject matter of this Agreement are to be resolved in the
District Courts, Fremont County, Wyoming.
Notwithstanding any provision of this Agreement, in the event of any
conflict between any provision of this Agreement, on the one hand, and the
express provisions of the Wyoming Management Stability Act (the "WMSA," secs.
ββ-ββ-βββ et seq., as now in effect and hereafter amended), on the other hand,
then the express provisions of the WMSA shall control, and the necessary
provisions of this Agreement shall be deemed modified and changed to the extent
necessary so that this Agreement shall not conflict with the WMSA, and all the
other provisions of this Agreement shall remain intact and unchanged.
SECTION 32. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 33. SECTION HEADINGS. Descriptive headings of the
Sections of this Agreement are inserted only for convenience and shall not
control or affect its meaning or construction.
SECTION 34. 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, illegal, or unenforceable, (I) such invalid,
illegal or unenforceable term, provision, covenant or restriction shall
nevertheless be valid, legal and enforceable to the extent, if any, provided by
such court or authority, AND (II) 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
U.S. ENERGY CORP.
-------------------------------
By: βββββ β. ββββββ, President
COMPUTERSHARE TRUST COMPANY, INC.
---------------------------------
By:
Title:
28
EXHIBIT A
[Form of Right Certificate]
Certificate No. R- Rights
------------------
THESE RIGHTS ARE NOT EXERCISABLE AFTER PUBLIC ANNOUNCEMENT OF
REDEMPTION IS MADE. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. IF
THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO A PERSON WHO IS AN
ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) OR CERTAIN TRANSFEREES THEREOF, THIS RIGHT CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BE SUBJECT TO CERTAIN LIMITATIONS IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7 OF THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
This certifies that or registered assigns, is the registered owner of
the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of September 19, 2001 (the "Rights Agreement") between U.S. Energy Corp. a
Wyoming corporation (the "Company"), and Computershare Trust Company, Inc. (the
"Rights Agent"), to purchase from the Company, unless the Rights have been
previously redeemed, at any time after the Distribution Date (defined in the
Rights Agreement) and prior to the Expiration Date (defined in the Rights
Agreement), or the date, if any, on which the Rights evidenced by this
Certificate may be redeemed, at the stock transfer office of the Rights Agent,
or its successors as Rights Agent, ONE ONE- THOUSANDTH (1/1,000TH) OF ONE (1)
FULLY PAID AND NONASSESSABLE SHARE OF SERIES P PREFERRED STOCK, AT A PURCHASE
PRICE OF $200.00 (THE "PURCHASE PRICE"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly completed and
executed. The number of Rights evidenced by this Right Certificate as set forth
above (and the number of shares which may be purchased upon exercise thereof),
and the Purchase Price set forth above, are the number and Purchase Price as of
the date of the Rights Agreement based on the shares of Common Stock of the
Company as constituted at such date.
Upon the occurrence of an event described in clause (A), (B), (C) or
(D) of Section 11(a)(ii) of the Rights Agreement, the holder of any Rights that
are, or were, beneficially owned by an Acquiring Person or an Associate or
Affiliate thereof (as such terms are defined in the Rights Agreement) or certain
transferees thereof which engaged in, or realized the benefit of, an event or
transaction or transactions described in clause (A), (B), (C) or (D) of such
Section 11(a)(ii), shall not be entitled to the benefit of the adjustment
described in such Section 11(a)(ii).
As provided in the Rights Agreement, the Purchase Price and the number
and class of shares which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.
This Right 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. Reference is
made to the Rights Agreement 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 Right
29
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the office of
the Rights Agent and at the principal office of the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the stock transfer office of the Rights Agent set forth above, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase such number of
shares as the Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
Subject to the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.01 per Right.
No fractional shares will be issued upon the exercise of any Rights
evidenced hereby, but in lieu thereof a cash payment may be made, as provided in
the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares or of any
other securities of the Company which may at any time be issuable on the
exercise hereof. Nothing in this Right Certificate and nothing contained in the
Rights Agreement shall be construed to confer upon the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the Company.
Dated as of September 19, 2001
Attest:
By
--------------------------------------- --------------------------------
Secretary βββββ β. ββββββ, President
Countersigned:
By:
-----------------------------------
Authorized Signature
30
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells,
-------------------------------------
assigns and transfers unto
------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________________________
Attorney to transfer the within Right Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated:
----------------------- ----------------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) this Right 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 an Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights
evidenced by this Right Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated:
--------------- -----------------------------------------------------
Signature
Dated:
--------------- -----------------------------------------------------
Signature
Dated:
--------------- -----------------------------------------------------
Signature
Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
31
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Right Certificate.)
To the Company and the Rights Agent:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate and to purchase the shares issuable upon
the exercise of such Rights and requests that certificates for such shares 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
Right Certificate, a new Right 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
(Signature must conform in all respects to name of
holder as specified on the face of this Right
Certificate)
Signature Guaranteed:
32
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right 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 an Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights
evidenced by this Right Certificate from any person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated:
--------------- -----------------------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
33
EXHIBIT B
SUMMARY OF RIGHTS
This summary is qualified by reference to the detailed provisions of
the Rights Agreement, a copy of which is filed herewith. A copy of the Rights
Agreement is available free of charge from the Company.
As of September 19, 2001, the board of directors of U.S. Energy Corp.
(the "COMPANY") declared a distribution of one Right for each outstanding one
share of common stock (the "COMMON SHARES") of the Company. The distribution is
to be made as of September 19, 2001 (the "RIGHTS RECORD DATE") to the
stockholders of record on that date. All Common Shares issued after the Rights
Record Date also will carry one Right for each share. The Rights are designed to
discourage unfair takeovers of the Company, by encouraging a potential acquiror
of the Company to negotiate with the board of directors a fair price for the
Company. The Rights defined as part of the Rights Agreement between the Company
and Computershare Trust Company, Inc. as the Rights Agent. Arrangements adopted
by United States corporations which are similar to the Rights Agreement are
often called "poison pills." As summarized below, if a Qualified Offer is made
to acquire all the stock of the Company, the Rights would be redeemed by the
board of directors, thus causing the poison pill to disappear.
Each Right entitles the registered holder to purchase from the Company,
initially, one one-thousandth (1/1,000th) of one (1) share of Series P Preferred
Stock ("PREFERRED SHARES") at a price of $200.00 (the "PURCHASE PRICE") for each
1/1,000th of 1 share, subject to adjustment. Fractional shares may not be
issued, at the discretion of the Company, in which event fractions would be
cashed out. The terms and conditions of the Rights are set forth in the Rights
Agreement between the Company and the Rights Agent.
A Preferred Share purchasable upon exercise of the Rights will be
entitled to dividends equal to 1,000 times the dividends, per share, declared on
the Common Shares. In the event of liquidation, a Preferred Share will be
entitled to a minimum preferential liquidating distribution of $1,000 per share
and an aggregate liquidating distribution, per share, equal to 1,000 times the
distribution made per Common Share. The Preferred Shares will vote together with
the Common Shares and in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive 1,000 times the amount received per Common Share.
Because of the Preferred Shares' dividend and liquidation rights, the
value when issued of the 1/1,000th of a Preferred Share purchasable upon
exercise of each Right should approximate the underlying value (but not
necessarily the market value) of one Common Share.
Until the earlier to occur of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"ACQUIRING PERSON") has acquired beneficial ownership of 15% or more of the
Company's general voting power other than pursuant to a Qualified Offer (as
defined below), the date of such public announcement being called the "STOCK
ACQUISITION DATE," or (ii) 10 business days (or such later date as may be
determined by action of the board of directors) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the Company's general voting power (the date of such
earlier occurrence being called the "DISTRIBUTION DATE"), the Rights will be
evidenced by the certificates representing the Common Shares and will be
transferred with and only with the Common Shares. New Common Share certificates
issued after the Rights Record Date upon transfer or new issuance of Common
Shares will contain a notation incorporating the Rights Agreement by reference,
and the surrender
34
for transfer of any certificate for Common Shares, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate.
If there ever is a Distribution Date, then immediately the Company will
mail to holders of record of the Common Shares (as of the close of business on
the Distribution Date) separate certificates evidencing the Rights ("RIGHT
CERTIFICATES"), and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on the tenth anniversary of the Rights Record Date (the "FINAL
EXPIRATION DATE"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, as described below.
The Purchase Price payable, the number of shares or other securities or
property issuable upon exercise of the Rights, and the number of outstanding
Rights, are subject to adjustment from time to time to prevent dilution.
A QUALIFIED OFFER is a tender offer or exchange offer for all
outstanding Common Shares which is determined by the directors not affiliated
with an Acquiring Person to be fair to and otherwise in the best interests of
the Company and its shareholders.
If any person becomes an Acquiring Person other than by a purchase
pursuant to a Qualified Offer, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will not be entitled to the benefit of such adjustment) will thereafter
have the right to receive upon exercise that number of Common Shares or Common
Share equivalents having a market value of two times the exercise price of the
Right (i.e., Common Shares will be issued at one-half or 50% of market value at
the time).
If, at any time after an Acquiring Person has become such, the Company
is acquired in a merger or other business combination transaction (other than a
merger which follows a Qualified Offer at the same or a higher price) or 50% or
more of its consolidated assets or earning power are sold, proper provision will
be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
At any time after an Acquiring Person has become such, the board of
directors of the Company may exchange the Rights (other than Rights owned by
such person or group), in whole or in part, at an exchange ratio of one Common
Share per one Right (subject to adjustment), termed an "EXCHANGE." Unlike
exercise of a Right with cash (see the preceding paragraph), such an Exchange
would not require payment of cash or other consideration by the holder of the
Right.
At any time up to close of business on a Stock Acquisition Date, the
board of directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "REDEMPTION PRICE"). Immediately upon
any redemption of the Rights, the right to exercise them will terminate and the
only right of the holders will be to receive the Redemption Price. However, such
redemption only can be made in conjunction with the board of directors'
determination that there is a Qualified Offer.
The terms of the Rights may be amended by the board of directors
without the consent of the holders of the Rights at any time prior to the
Distribution Date. Thereafter the Rights may be amended to make
35
changes which do not adversely affect the interests of the holders of the
Rights, or which shorten or lengthen time periods, subject to certain
limitations set forth in the Rights Agreement.
Holders of Rights will have no rights as stockholders of the Company,
until Preferred Shares or Common Shares are acquired on exercise or exchange of
the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a registration statement on Form 8-A.
36
EXHIBIT C
ARTICLES OF AMENDMENT TO THE RESTATED
ARTICLES OF INCORPORATION OF U.S. ENERGY CORP.
TO ESTABLISH SERIES P PREFERRED STOCK
By authority of Article IV of the existing Restated Articles of
Incorporation of U.S. Energy Corp. (the "Corporation"), and section 17-16-602(a)
of the Wyoming Business Corporation Act (the "WBCA"), the board of directors of
the Corporation has established a new series of shares of the Preferred Stock.
These Articles of Amendment are filed with the Wyoming Secretary of
State by the Corporaiton under section 17-16-1006 of the WBCA.
A. The name of the Corporation is U.S. Energy Corp.
B. The text of the amendment is:
"There is established the series P Preferred Stock. The number of
shares in the series, its designation thereof, and the rights, preferences,
privileges and restrictions of the shares of such series, all are fixed and
established as follow:
I. DESIGNATION AND AMOUNT
The series is designated the "Series P Preferred Stock." The
number of shares constituting the Series P Preferred Stock is fifty thousand
(50,000). Such number of shares may be increased or decreased by resolution of
the board of directors, but no decrease shall reduce the number of shares of
Series P Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series P
Preferred Stock.
II. DIVIDENDS AND DISTRIBUTIONS
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series P Preferred Stock with respect to dividends, the holders of shares of
Series P Preferred Stock, in preference to the holders of Common Stock of the
Corporation, shall be entitled to receive, when, as and if declared by the board
of directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in each
year (a "Quarterly Dividend Payment Date"), starting on the first Quarterly
Dividend Payment Date after the first issuance of a share of Series P Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 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 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 of
Series P Preferred Stock. If the Corporation shall at any time declare or pay
any dividend on the Common
37
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series P Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series P Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); PROVIDED that, if no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series P
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series P Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, 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 P Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series P 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 P Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
III. VOTING RIGHTS
The holders of shares of Series P Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series P Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as otherwise provided herein, or in any other
resolutions of the board of directors creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series P Preferred Stock
and the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, in the Corporation's articles
of incorporation or as otherwise provided by law, holders of Series P Preferred
Stock shall have no voting rights.
38
IV. CERTAIN RESTRICTIONS
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series P Preferred Stock as provided in Section II
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series P Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series P Preferred Stock;
(ii) declare or pay dividends, 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 the Series P
Preferred Stock, except dividends paid ratably on the Series P 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;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series P Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such 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 P Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series P Preferred Stock, or any shares of stock
ranking on a parity with the Series P 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 such shares upon such terms as the board of
directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section IV purchase or otherwise acquire such shares at such time and in
such manner.
V. REACQUIRED SHARES
Any shares of Series P Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the articles of incorporation,
any other Certificate of Designations creating a series of Preferred Stock or
any similar stock or as otherwise required by law.
VI. LIQUIDATION, DISSOLUTION, OR WINDING UP
Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series P Preferred Stock unless, prior thereto, the holders
of shares of Series
39
P Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series P
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series P Preferred Stock, except distri- butions made ratably on the Series P
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series P
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
VII. 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 P Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
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. If the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series P
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
VIII. REDEMPTION
The shares of Series P Preferred Stock shall not be redeemable.
IX. RANK
The Series P Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
X. AMENDMENT
The articles of incorporation of the Corporation shall not be
amended in any manner which would alter or change the powers, preferences or
special rights of the Series P Preferred Stock so as to affect
40
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series P Preferred Stock, voting
together as a single class."
C. This amendment was duly adopted and authorized by the board of
directors of U.S. Energy Corp. on September 10, 2001.
U.S. Energy Corp.
September ___, 2001
----------------------------------------
By: βββββ β. ββββββ, President
Attest:
September ___, 2001
----------------------------------------
ββββββ β. ββββββ, Ass't Secretary
September ___, 2001
----------------------------------------
By: βββ βββββ, Secretary
Fremont )
State of Wyoming )
On September __, 2001 personally appeared before me, a Notary Public,
βββββ β. ββββββ and βββ βββββ, who acknowledged that they executed the above
instrument.
-----------------------------
Notary Public
SEAL
My Commission Expires: _________
41