1
EXHIBIT 1
RIGHTS AGREEMENT
dated as of
July 10, 1997
by and between
SCIENTIFIC GAMES HOLDINGS CORP.
and
FIRST UNION NATIONAL BANK,
as Rights Agent
2
TABLE OF CONTENTS
Page
----
Section 1. Definitions. .........................................................................1
Section 2. Appointment of Rights Agent. .........................................................4
Section 3. Issue of Right Certificates. ..........................................................4
Section 4. Form of Right Certificates. ..........................................................5
Section 5. Countersignature and Registration. ...................................................6
Section 6. Transfer and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates. ............................................................6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. ........................7
Section 8. Cancellation and Destruction of Right Certificates. ..................................9
Section 9. Reservation and Availability of Capital Stock. ........................................9
Section 10. Preferred Stock Record Date. ........................................................10
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights................................................................................10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. .........................18
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..................18
Section 14. Fractional Rights and Fractional Shares. .............................................21
Section 15. Rights of Action. ...................................................................22
Section 16. Agreement of Right Holders. .........................................................22
Section 17. Right Certificate Holder Not Deemed a Stockholder. ..................................23
Section 18. Concerning the Rights Agent. .........................................................23
i
3
Section 19. Merger or Consolidation or Change of Name of Rights Agent. ...........................23
Section 20. Duties of Rights Agent. .............................................................24
Section 21. Change of Rights Agent. .............................................................26
Section 22. Issuance of New Right Certificates. .................................................27
Section 23. Redemption. ..........................................................................27
Section 24. Exchange. ............................................................................27
Section 25. Notice of Proposed Actions. ..........................................................28
Section 26. Notices. ............................................................................29
Section 27. Supplements and Amendments. .........................................................29
Section 28. Successors. .........................................................................30
Section 29. Determinations and Actions by the Board of Directors, etc. ..........................30
Section 30. Benefits of this Agreement. .........................................................30
Section 31. Severability. .......................................................................31
Section 32. Governing Law. ......................................................................31
Section 33. Counterparts. .......................................................................31
Section 34. Descriptive Headings. ...............................................................31
ii
4
Exhibit A - Form of Certificate of Designation of Preferred Stock
Exhibit B - Form of Right Certificate
Exhibit C - Summary Description of the Stockholder Rights Plan
iii
5
RIGHTS AGREEMENT
AGREEMENT dated as of July 10, 1997, between Scientific Games Holdings
Corp., a Delaware corporation (the "Company"), and First Union National Bank, as
Rights Agent (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, on July 10, 1997, the Board of Directors of the Company
authorized and declared a dividend of one preferred stock purchase right (a
"Right") for each share of Common Stock (as hereinafter defined) outstanding at
the close of business on August 11, 1997 (the "Record Date") and has authorized
the issuance, upon the terms and subject to the conditions hereinafter set
forth, of one Right in respect of each share of Common Stock issued after the
Record Date, each Right representing the right to purchase, upon the terms and
subject to the conditions hereinafter set forth, one one-hundredth of a share of
Preferred Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein, have
the following meanings:
"Acquiring Person" means any Person who, together with all
Affiliates and Associates of such person, shall be the Beneficial Owner
of 20% or more of the shares of Common Stock then outstanding;
provided, however, that, notwithstanding the foregoing, a Person shall
not be an "Acquiring Person" if (i) such Person is an Excluded Person
or (ii) the event which causes such Person, together with all
Affiliates and Associates of such Person, to become the Beneficial
Owner of 20% or more the shares of Common Stock then outstanding is (A)
the acquisition of shares of Common Stock by such Person pursuant to a
Permitted Offer or (B) the acquisition of shares of Common Stock or
securities convertible into or exchangeable for Common Stock directly
from the Company pursuant to an offer exempt from the registration
requirements of the Securities Act pursuant to Rule 144 or Rule 144A
promulgated thereunder.
"Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(a) which such Person or any of its Affiliates or Associates,
directly or indirectly, beneficially owns (as determined pursuant to
Rule 13d-3 under the Exchange Act as in effect on the date hereof);
6
(b) which such Person or any of its Affiliates or Associates,
directly or indirectly, has
(i) the right to acquire (whether such right is
exercisable immediately or only upon the occurrence of certain
events or the passage of time or both) pursuant to any
agreement, arrangement or understanding (whether or not in
writing) or otherwise (other than pursuant to the Rights);
provided that a Person shall not be deemed the "Beneficial
Owner" of or to "beneficially own" securities tendered
pursuant to a tender or exchange offer made by or on behalf of
such Person or any of its Affiliates or Associates until such
tendered securities are accepted for payment or exchange; or
(ii) the right to vote (whether such right is
exercisable immediately or only upon the occurrence of certain
events or the passage of time or both) pursuant to any
agreement, arrangement or understanding (whether or not in
writing) or otherwise; provided that a Person shall not be
deemed the "Beneficial Owner" of or to "beneficially own" any
security under this clause (ii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding (A) arises solely from
a revocable proxy or consent given in response to a public
proxy or consent solicitation made pursuant to the applicable
rules and regulations under the Exchange Act and (B) is not
also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person or any of its Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in subparagraph (b)(ii) immediately above) or
disposing of any such securities.
"Business Day" means any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Close of business" on any given date means 5:00 P.M., New
York City time, on such date; provided that if such date is not a
Business Day, "close of business" means 5:00 P.M., New York City time,
on the next succeeding Business Day.
"Common Stock" means the Common Stock, par value $.001 per
share, of the Company, except that, when used with reference to any
Person other than the Company, "Common Stock" means the capital stock
of such Person with the greatest voting power, or the equity securities
or other equity interest having power to control or direct the
management, of such Person.
2
7
"Continuing Director" means any member of the Board of
Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative or nominee of an Acquiring Person
or of any such Affiliate or Associate and either (a) was a member of
the Board immediately prior to the time any Person becomes an Acquiring
Person or (b) subsequently becomes a member of the Board, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
"Distribution Date" means the earlier of (a) the close of
business on the tenth day (or such later day as may be designated by
action of a majority of the Continuing Directors) after the Stock
Acquisition Date and (b) the close of business on the tenth Business
Day (or such later day as may be designated by action of a majority of
the Continuing Directors) after the date of the commencement of a
tender or exchange offer, other than a Permitted Offer, by any Person
if, upon consummation thereof, such Person, together with all
Affiliates and Associates of such Person, would be the Beneficial Owner
of 20% or more of the shares of Common Stock then outstanding.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Person" means any of the Company or any of its
Subsidiaries.
"Expiration Date" means the earlier of (a) the Final
Expiration Date and (b) the time at which all Rights are redeemed as
provided in Section 23 or exchanged as provided in Section 24.
"Final Expiration Date" means the close of business on August
11, 2007.
"Permitted Offer" means a tender or exchange offer by a Person
for all outstanding shares of Common Stock, which is made at a price
and on such other terms determined by at least a majority of the
Continuing Directors to be in the best interests of the Company and its
stockholders.
"Person" means an individual, corporation, partnership,
association, trust or any other entity or organization.
"Preferred Stock" means the Series A Participating Cumulative
Preferred Stock, par value $.001 per share, of the Company, having the
terms set forth in the form of certificate of designation attached
hereto as Exhibit A.
"Purchase Price" means the price (subject to adjustment as
provided herein) at which a holder of a Right may purchase one
one-hundredth of a share of Preferred Stock (subject to adjustment as
provided herein) upon exercise of a Right, which price shall initially
be $84.00.
3
8
"Section 11(a)(ii) Event" means any event described in the
first clause of Section 11(a)(ii).
"Section 13 Event" means any event described in clauses (x),
(y) or (z) of Section 13(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Acquisition Date" means the date of the first public
announcement (including the filing of a report on Schedule 13D under
the Exchange Act (or any comparable or successor report)) by the
Company or an Acquiring Person indicating that an Acquiring Person has
become such.
"Subsidiary" of any Person means any other Person of which
securities or other ownership interests having ordinary voting power,
in the absence of contingencies, 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 first Person.
"Trading Day" means 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.
"Triggering Event" means any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. If the Company appoints
one or more Co-Rights Agents, the respective duties of the Rights Agent and any
Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates. (a) Prior to the Distribution
Date, (i) the Rights will be evidenced by the certificates for the Common Stock
and not by separate Right Certificates (as hereinafter defined) and the
registered holders of the Common Stock shall be deemed to be the registered
holders of the associated Rights, and (ii) the Rights will be transferable only
in connection with the transfer of the underlying shares of Common Stock. As
soon as practicable after the Record Date, the Company will send a summary of
the Rights substantially in the form of Exhibit C hereto, by first-class,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Record Date at the address of such holder shown on the
records of the Company.
(b) As soon as practicable after the Company has notified the
Rights Agent of the occurrence of the Distribution Date, the Rights
Agent will send, by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of business
4
9
on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more Right Certificates evidencing one
Right (subject to adjustment as provided herein) for each share of
Common Stock so held. If an adjustment in the number of Rights per
share of Common Stock has been made pursuant to Section 11(p), the
Company shall, at the time of distribution of the Right Certificates to
record holders of Common Stock as of the close of business on the
Distribution Date, make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a)) so that Right
Certificates representing only whole numbers of Rights are distributed
to such holders and cash is paid to such holders in lieu of any
fractional Rights. From and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(c) Rights shall be issued in respect of all shares of Common
Stock outstanding as of the Record Date or issued (on original issuance
or out of treasury) after the Record Date but prior to the earlier of
the Distribution Date and the Expiration Date. In addition, in
connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the
Company (i) shall, with respect to shares of Common Stock so issued or
sold (x) pursuant to the exercise of stock options or under any
employee plan or arrangement or (y) upon the exercise, conversion or
exchange of other securities issued by the Company prior to the
Distribution Date and (ii) may, in any other case, if deemed necessary
or appropriate by the Board of Directors of the Company, issue Right
Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided that no such Right
Certificate shall be issued if, and to the extent that, (i) the Company
shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or
the Person to whom such Right Certificate would be issued or (ii)
appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
(d) Certificates for the Common Stock issued after the Record
Date but prior to the earlier of the Distribution Date and the
Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences certain Rights as set forth in
a Rights Agreement between Scientific Games Holdings Corp. and
First Union National Bank dated as of July 10, 1997 (the
"Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. The
Company will mail to the holder of this certificate a copy of
the Rights Agreement without charge promptly after receipt of
a written request therefor. Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be
evidenced by separate certificates and no longer be evidenced
by this certificate, may be redeemed or exchanged or may
expire. As set forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or becomes an Acquiring
Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or
on behalf of such Person or by any subsequent holder, may be
null and void.
5
10
Section 4. Form of Right Certificates. (a) The certificates evidencing
the Rights (and the forms of assignment, election to purchase and certificates
to be printed on the reverse thereof) (the "Right Certificates") shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. The Right Certificates, whenever distributed, shall be dated as of the
Record Date.
(b) Any Right Certificate representing Rights beneficially
owned by any Person referred to in clauses (i), (ii) or (iii) of the
first sentence of Section 7(d) shall (to the extent feasible) contain
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). This Right
Certificate and the Rights represented hereby may be or may
become null and void in the circumstances specified in Section
7(d) of such Agreement.
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 Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The 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 of the Company whose
manual or facsimile signature is affixed to the Right Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates may,
nevertheless, be countersigned by the Rights Agent and 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. 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 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, at its principal office or offices designated
as the place for surrender of Right Certificates upon exercise,
transfer or exchange, books for registration and transfer of the Right
Certificates. Such books shall show with respect to each Right
Certificate the name and address of the registered holder thereof, the
number of Rights indicated on the certificate and the certificate
number.
6
11
Section 6. Transfer and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates. (a) At any time after the
Distribution Date and prior to the Expiration Date, any Right Certificate or
Certificates may, upon the terms and subject to the conditions set forth below
in this Section 6(a), be transferred or exchanged for another Right Certificate
or Certificates evidencing a like number of Rights as the Right Certificate or
Certificates surrendered. Any registered holder desiring to transfer or exchange
any Right Certificate or Certificates shall surrender such Right Certificate or
Certificates (with, in the case of a transfer, the form of assignment and
certificate on the reverse side thereof duly executed) to the Rights Agent at
the principal office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate or Certificates until the registered holder of the Rights has
complied with the requirements of Section 7(e). Upon satisfaction of the
foregoing requirements, the Rights Agent shall, subject to Sections 4(b), 7(d),
14 and 24, countersign and deliver to the Person entitled thereto a Right
Certificate or Certificates as so requested. The Company may require payment of
a sum sufficient to cover any transfer tax or other governmental charge that may
be imposed in connection with any transfer or exchange of any Right Certificate
or Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will issue and deliver a new
Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein, including
Sections 7(d) and (e), 9(c), 11(a) and 24) in whole or in part at any time after
the Distribution Date and prior to the Expiration Date upon surrender of the
Right Certificate, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, to the Rights Agent at the principal
office or offices of the Rights Agent designated for such purpose, together with
payment (in lawful money of the United States of America by certified check or
bank draft payable to the order of the Company) of the aggregate Purchase Price
with respect to the Rights then to be exercised and an amount equal to any
applicable transfer tax or other governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and
subject to Section 20(k), the Rights Agent shall thereupon promptly
(i)(A) requisition from any transfer agent of the Preferred Stock (or
make available, if the Rights Agent is the transfer agent therefor)
certificates for the total number of one one-hundredths of a share of
Preferred Stock to be purchased (and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests) or (B)
if the Company shall have elected to deposit the shares of Preferred
Stock issuable upon exercise of the Rights with a depositary agent,
requisition from the depositary agent depositary receipts representing
such number of one one-hundredths of a
7
12
share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent, to comply with
such request, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of issuance of fractional shares in accordance
with Section 14 and (iii) after receipt of such certificates or
depositary receipts and cash, if any, cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate
(with such certificates or receipts registered in such name or names as
may be designated by such holder). If the Company is obligated to
deliver Common Stock, other securities or assets pursuant to this
Agreement, the Company will make all arrangements necessary so that
such other securities and assets are available for delivery by the
Rights Agent, if and when appropriate.
(c) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing the number of Rights remaining unexercised shall
be issued by the Rights Agent and delivered to, or upon the order of,
the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, subject to the
provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii)
Event, any Rights beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the
Acquiring Person (or any such Associate or Affiliate) to holders of
equity interests in such Acquiring Person (or in any such Associate or
Affiliate) or to any Person with whom the Acquiring Person (or any such
Associate or Affiliate) has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the continuing Directors have determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect the avoidance
of this Section 7(d) shall become null and void without any further
action, and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(d) 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 failure to make any
determinations with respect to an Acquiring Person or its Affiliates
and Associates or any transferee of any of them hereunder.
(e) 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 of Rights
upon the occurrence of any purported transfer pursuant to Section 6 or
exercise pursuant to this Section 7 unless such registered holder (i)
shall have completed and signed the certificate contained in the form
of assignment or election to purchase, as the case may be, set forth on
the reverse side of the Right Certificate surrendered for such
8
13
transfer or exercise, as the case may be, (ii) shall not have indicated
an affirmative response to clause 1 or 2 thereof and (iii) 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.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for exercise, transfer 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 canceled 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 the Rights Agent shall cancel,
any other Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available a number of shares of Preferred Stock which are authorized but not
outstanding or otherwise reserved for issuance sufficient to permit the exercise
in full of all outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock issuable upon the exercise
of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time
as the Rights become exercisable, all securities reserved for such
issuance to be listed on any such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as
soon as practicable following the earliest date after the occurrence of
a Section 11(a)(ii) Event, or as soon as is required by law following
the Distribution Date, as the case may be, a registration statement
under the Securities Act with respect to the securities issuable upon
exercise of the Rights, (ii) to cause such registration statement to
become effective as soon as practicable after such filing and (iii) to
cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The
Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or blue sky laws of the various
states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any such provision
of this Agreement to the contrary, the Rights shall not be exercisable
for securities in any jurisdiction if the requisite qualification in
such
9
14
jurisdiction shall not have been obtained, such exercise therefor shall
not be permitted under applicable law or a registration statement in
respect of such securities shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to insure that all one one-hundredths
of a share of Preferred Stock issuable upon exercise of Rights shall,
at the time of delivery of the certificates for such securities
(subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and
other governmental charges which may be payable in respect of the
issuance or delivery of the Right Certificates and of any certificates
for Preferred Stock upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax or other governmental
charge which may be payable in respect of any transfer involved in the
issuance or delivery of any Right certificates or of any certificates
for Preferred Stock to a Person other than the registered holder of the
applicable Right Certificate, and prior to any such transfer, issuance
or delivery any such tax or other governmental charge shall have been
paid by the holder of such Right Certificate or it shall have been
established to the Company's satisfaction that no such tax or other
governmental charge is due.
Section 10. Preferred Stock Record Date. Each Person (other than the
Company) in whose name any certificate for Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Stock represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any transfer taxes
or other governmental charges) was made; provided that if the date of such
surrender and payment is a date upon which the transfer books of the Company
relating to the Preferred Stock are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the applicable transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, 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 the right to vote, to receive dividends or other
distributions or to exercise any preemptive right and shall not be entitled to
receive any notice of any proceedings of the Company except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. (a)(i) If the Company shall at any time after the date of this
Agreement (A) pay a dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred Stock into a greater
number of shares, (C) combine the outstanding Preferred Stock into a smaller
number of shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger involving the Company), the Purchase
Price in effect immediately prior to the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind
10
15
of shares of Preferred Stock or other capital stock issuable on such date shall
be proportionately adjusted so that each holder of a Right shall (except as
otherwise provided herein, including Section 7(d)) thereafter be entitled to
receive, upon exercise thereof at the Purchase Price in effect immediately prior
to such date, the aggregate number and kind of shares of Preferred Stock or
other capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the applicable transfer books
of the Company were open, such holder would have been entitled to receive upon
such exercise and by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which requires an adjustment under 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 any Person, alone or together with its
Affiliates and Associates, shall, at any time after the date
of this Agreement, become an Acquiring Person, then proper
provision shall promptly be made so that each holder of a
Right shall (except as otherwise provided herein, including
Section 7(d)) thereafter be entitled to receive, upon election
to exercise the Right, without payment of the Purchase Price
and in lieu of Preferred Stock, such number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock of the Company (such shares being
referred to herein as the "Adjustment Shares") as shall be
equal to the result obtained by dividing
(x) the product obtained by multiplying the
Purchase Price in effect immediately prior to the
first occurrence of a Section 11(a)(ii) Event by the
number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately
prior to such first occurrence (such product being
thereafter referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by
(y) 50% of the current market price
(determined pursuant to Section 11(d)(i)) per share
of Common Stock on the date of such first
occurrence;
provided 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 shall apply and no adjustment shall be made pursuant to
this Section 11(a)(ii).
(iii) If the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation
but not outstanding or reserved for issuance other than upon
exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with Section
11(a)(ii), the Company shall, with respect to each Right, make
adequate provision to substitute for the Adjustment Shares,
(A) (to the extent available) Common Stock and then, (B) (to
the extent available) other equity securities of the Company
which a majority of the Continuing Directors has determined to
be essentially equivalent to shares of Common Stock in respect
to
11
16
dividend, liquidation and voting rights (such securities being
referred to herein as "common stock equivalents") and then, if
necessary, (C) other equity or debt securities of the Company,
cash or other assets, a reduction in the Purchase Price or any
combination of the foregoing, having an aggregate value (as
determined by the Continuing Directors based upon the advice
of a nationally recognized investment banking firm selected by
the Continuing Directors) equal to the value of the Adjustment
Shares; provided that (x) the Company may, and (y) if the
Company shall not have made adequate provision as required
above to deliver value within 30 days following the later of
the first occurrence of a Section 11(a)(ii) Event and the
first date that the right to redeem the Rights pursuant to
Section 23 shall expire, then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, (1) (to the
extent available) Common Stock and then (2) (to the extent
available) common stock equivalents and then, if necessary,
(3) other equity or debt securities of the Company, cash or
other assets or any combination of the foregoing, having an
aggregate value (as determined by the Continuing Directors
based upon the advice of a nationally recognized investment
banking firm selected by the Continuing Directors) equal to
the excess of the value of the Adjustment Shares over the
Purchase Price. If the Continuing Directors of the Company
shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights,
the 30 day period set forth above (such period, as it may be
extended, being referred to herein as the "Substitution
Period") may be extended to the extent necessary, but not more
than 90 days following the first occurrence of a Section
11(a)(ii) Event, in order that the Company may seek
stockholder approval for the authorization of such additional
shares. To the extent that the Company determines that some
action is to be taken pursuant to the first and/or second
sentence of this Section 11(a)(iii), the Company (X) shall
provide, subject to Section 7(d), that such action shall apply
uniformly to all outstanding Rights and (Y) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form and
value of any consideration to be delivered as referred to in
such first and/or second sentence. If any such suspension
occurs, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Stock shall be the
current market price per share of Common Stock (as determined
pursuant to Section 11(d)) on the later of the date of the
first occurrence of a Section 11(a)(ii) Event and the first
date that the right to redeem the Rights pursuant to Section
23 shall expire; any common stock equivalent shall be deemed
to have the same value as the Common Stock on such date; and
the value of other securities or assets shall be determined
pursuant to Section 11(d)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warranties to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period
expiring within 45 calendar days after such record date) Preferred
Stock (or
12
17
securities having the same rights, privileges and preferences as the
shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into or exercisable for Preferred Stock (or equivalent
preferred stock) at a price per share of Preferred Stock (or equivalent
preferred stock) (in each case, taking account of any conversion or
exercise price) less than the current market price (as determined
pursuant to Section 11(d)) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately
prior to such date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date,
plus the number of shares of Preferred Stock which the aggregate price
(taking account of any conversion or exercise price) of the total
number of shares of Preferred Stock (and/or equivalent preferred stock)
so to be offered would purchase at such current market price and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date plus the number of additional shares of
Preferred Stock (and/or equivalent preferred stock) so to be offered.
In case such subscription price may be paid by delivery of
consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and if such rights,
options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger
involving the Company) of evidences of indebtedness, equity securities
other than Preferred Stock, assets (other than a regular periodic cash
dividend out of the earnings or retained earnings of the Company) or
rights, options or warrants (excluding those referred to in Section
11(b)), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the current market price (as determined pursuant to Section 11(d))
per share of Preferred Stock on such record date, less the value (as
determined pursuant to Section 11(d)(iii)) of such evidences of
indebtedness, equity securities, assets, rights, options or warrants so
to be distributed with respect to one share of Preferred Stock and the
denominator of which shall be such current market price per share of
Preferred Stock. Such adjustment shall be made successively whenever
such a record date is fixed, and if such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder other
than computations made pursuant to Section 11(a)(iii) or 14, 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 immediately prior to
such date;
13
18
for purposes of computations made pursuant to Section 11(a)(iii), 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 10 consecutive Trading Days immediately following
such date; and for purposes of computations made pursuant to Section
14, the "current market price" per share of Common Stock for any
Trading Day shall be deemed to be the closing price per share of Common
Stock for such Trading Day; provided that if the current market price
per share of the Common Stock is determined during a period following
the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such Common
Stock or securities exercisable for or convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite 30 Trading Day or 10 Trading Day period, as
set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market
price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in use
or, if on any such date the shares of Common Stock are not quoted by
any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors of the Company, or, if
at the time of such selection there is an Acquiring Person, by a
majority of the Continuing Directors. If on any such date no market
maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of
Directors of the Company (or, if at the time of such determination
there is an Acquiring Person, by a majority of the Continuing
Directors) shall be used. If the Common Stock is not publicly held or
not so listed or traded, the "current market price" per share means the
fair value per share as determined in good faith by the Board of
Directors of the Company, or, if at the time of such determination
there is an Acquiring Person, by a majority of the Continuing
Directors, or if there are no Continuing Directors, by a nationally
recognized investment banking firm selected by the Board of Directors,
which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per share of Preferred Stock shall
be determined in the same manner as set forth above for the
Common Stock in Section 11(d)(i) (other than the last sentence
thereof). If the current market price per share of Preferred
Stock cannot be
14
19
determined in such manner, the "current market price" per
share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the current
market price per share of Common Stock (as determined pursuant
to Section 11(d)(i) (other than the last sentence thereof)).
If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, the "current market
price" per share of the Preferred Stock shall be determined in
the same manner as set forth in the last sentence of Section
11(d)(i). For all purposes of this Agreement, the "current
market price" of one one-hundredth of a share of Preferred
Stock shall be equal to the "current market price" of one
share of Preferred Stock divided by 100.
(iii) For the purpose of any computation hereunder,
the value of any securities or assets other than Common Stock
or Preferred Stock shall be the fair value as determined in
good faith by the Board of Directors of the Company, or, if at
the time of such determination there is an Acquiring Person,
by a majority of the Continuing Directors then in office, or,
if there are no Continuing Directors, by a nationally
recognized investment banking firm selected by the Board of
Directors, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive
for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be.
(f) If at any time, as a result of an adjustment made pursuant
to Section 11(a)(ii) or Section 13(a), the holder of any Right shall be
entitled to receive upon exercise of such Right any shares of capital
stock other than Preferred Stock, thereafter the number of such other
shares so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in section 11(a), (b), (c),
(e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7,
9, 10, 13 and 14 with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made hereunder shall evidence the right to purchase, at
the Purchase Price then in effect, the then applicable number of one
one-hundredths of a share of Preferred Stock and other capital stock of
the Company issuable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
15
20
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(b) and (c), each
Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a share of
Preferred Stock (calculated to the nearest one- millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share for
which a Right was exercisable immediately prior to this adjustment by
(y) the Purchase Price in effect immediately prior to such adjustment
of the Purchase Price and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
lieu of any adjustment in the number of one one-hundredths of a share
of Preferred Stock issuable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall
be exercisable for the number of one one-hundredths of a share of
Preferred Stock for which such 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 ten-thousandth) obtained by dividing the Purchase Price
in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the 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 pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14, the additional Rights
to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for
herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase
Price per one one-hundredth of a share and the number of shares which
were expressed in the initial Right Certificates issued hereunder.
16
21
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the par value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that
the Company may validly and legally issue fully paid and nonassessable
such number of one one-hundredths of a share of Preferred Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date the number of one one-hundredths of a
share of Preferred Stock or other capital stock of the Company, if any,
issuable upon such exercise over and above the number of one
one-hundredths of a share of Preferred Stock or other capital stock of
the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided 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 upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it, in its sole
discretion, shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Stock, issuance wholly
for cash of any Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exercisable for Preferred Stock,
stock dividends or issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to the holders of its
Preferred Stock, shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it will not at any
time after the Distribution Date (i) consolidate, merge or otherwise
combine with or (ii) sell or otherwise transfer (and/or permit any of
its Subsidiaries to sell or otherwise transfer), in one transaction or
a series of related transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its
Subsidiaries, taken as a whole, to any other Person or Persons if (x)
at the time of or immediately after such consolidation, merger,
combination or sale there are any rights, warrants or other instruments
or securities outstanding or any agreements or arrangements in effect
which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger, combination or
sale, the stockholders of a Person who constitutes, or would
constitute, the "Principal Party" for the purposes of Section 13 shall
have received a distribution of Rights previously owned by such Person
or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the
Distribution Date, it will not, except as permitted by Sections 23, 24
and 27, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action
will
17
22
substantially diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the
contrary, if at any time after the date hereof and prior to the
Distribution Date the Company shall (i) pay a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock into a larger number of
shares or (iii) combine the outstanding Common Stock into a smaller
number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter as
contemplated by Section 3(c), shall be proportionately adjusted so that
the number of Rights thereafter associated with each share of Common
Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Common
Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 and 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred Stock
and the Common Stock, a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (or, if prior to the Distribution
Date, to each holder of a certificate representing shares of Common Stock) in
the manner set forth in Section 26. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such a certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) If, following the Stock Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, merge into, or otherwise
combine with, any other Person, and the Company shall not be the continuing or
surviving corporation of such consolidation, merger or combination, (ii) any
Person shall merge into, or otherwise combine with, the Company, and the Company
shall be the continuing or surviving corporation of such merger or combination
and, in connection with such merger or combination, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for other
stock or securities of the Company or any other Person, cash or any other
property, or (iii) the Company and/or one or more of its Subsidiaries shall sell
or otherwise transfer, in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries, taken as a whole, to any other Person or
Persons, then, and in each such case, proper provision shall promptly be made so
that (x) each holder of a Right shall thereafter be entitled to receive, upon
exercise thereof at the Purchase Price in effect immediately prior to the first
occurrence of any Triggering Event, such number of duly authorized, validly
issued, fully paid and nonassessable shares of freely tradeable Common Stock of
the Principal Party (as hereinafter defined), not subject to any rights of call
or first refusal, liens, encumbrances or other claims, as shall be equal to the
result obtained by dividing (A)
18
23
the product obtained by multiplying the Purchase Price in effect immediately
prior to the first occurrence of any Triggering Event by the number of one
one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such first occurrence (such product being thereafter
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (B) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per share of the Common Stock of such Principal Party on the
date of consummation of such consolidation, merger, combination, sale or
transfer; (y) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, combination, sale or transfer,
all the obligations and duties of the Company pursuant to this Agreement; (z)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 shall apply
only to such Principal Party following the first occurrence of a Section 13
Event; and (aa) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its Common
Stock to permit exercise of all outstanding Rights in accordance with this
Section 13(a)) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of its
Common Stock thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in
Section 13(a)(x) or (y), the Person that is the issuer of any
securities into which shares of any Common Stock of the
Company are converted in such merger, consolidation or
combination, and if no securities are so issued, the Person
that survives or results from such merger, consolidation or
combination; and
(ii) in the case of any transaction described in
Section 13(a)(z), the Person that is the party receiving the
greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided that in any such case, (A) 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 Person the
Common Stock of which is and has been so registered, "Principal Party"
shall refer to such other Person; and (B) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such
consolidation, merger, combination, sale or transfer unless the Principal Party
shall have a sufficient number of authorized shares of its Common Stock which
are not outstanding or otherwise reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section
19
24
13(a) and (b) and providing that, as soon as practicable after the date
of any consolidation, merger, combination, sale or transfer mentioned
in Section 13(a), the Principal Party will
(i) prepare and file a registration statement under
the Securities Act with respect to the securities issuable
upon exercise of the Rights, and will use its best efforts to
cause such registration statement (A) to become effective as
soon as practicable after such filing and (B) to remain
effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date
and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers,
consolidations, combinations, sales or other transfers. If any Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p), or to distribute Right
Certificates which evidence fractional Rights. In lieu of any such fractional
Rights, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
price of a whole Right. For purposes of this Section 14(a), the current market
price of a whole Right shall be the closing price of a Right for the Trading Day
immediately prior to the date on which such fractional Rights would otherwise
have been issuable. The closing price of a Right 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, on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company, or, if at the time of such selection there is an Acquiring Person,
by a majority of the Continuing Directors. If on any such date no such market
maker is making a market in the Rights, the current market price of the Rights
on such date shall be as determined in good faith by the Board of Directors of
the Company, or, if at the time of such determination there is an Acquiring
Person, by a majority of the Continuing Directors.
(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions which are multiples
of one one-hundredth of a share of Preferred
20
25
Stock) upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions
which are multiples of one one-hundredth of a share of Preferred
Stock). In lieu of any such fractional shares of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market price of one
one-hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market price of one one-hundredth of a share
of Preferred Stock shall be one one-hundredth of the closing price of a
share of Preferred Stock (as determined pursuant to Section 11(d)) for
the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of any Triggering Event or
upon any exchange pursuant to Section 24, the Company shall not be
required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company shall pay to the registered holders of Right Certificates
at the time such Rights are exercised or exchanged as herein provided
an amount in cash equal to the same fraction of the current market
price of a share of Common Stock. For purposes of this Section 14(c),
the current market price of a share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to
Section 11(d)(i)) for the Trading Day immediately prior to the date of
such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of any certificate representing
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of any certificate
representing Common Stock), may, in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such 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:
21
26
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates
fully executed;
(c) subject to Sections 6 and 7, the Company and the
Rights Agent may deem and treat the Person in whose name a Right
Certificate (or, prior to the Distribution Date, a certificate
representing shares of Common Stock) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificate or the
certificate representing shares of Common Stock made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence
of Section 7(d), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority prohibiting or otherwise restraining
performance of such obligation; provided that the Company must use its
best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. 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 the shares of capital stock
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Right Certificate 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 25), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees
to pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other disbursements
incurred in the execution or administration of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent, its directors, officers, employees and agents for, and to hold
each of them harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part
22
27
of the Rights Agent or such other indemnified party, for anything done or
omitted by the Rights Agent in connection with the administration of this
Agreement or the exercise or performance of its duties hereunder, including the
costs and expenses of defending against any claim of liability. The indemnity
provided in this Section 18 shall survive the expiration of the Rights and the
termination of the Agreement.
(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 the administration of this Agreement or the
exercise or performance of its duties hereunder 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, instruction,
direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided 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 a predecessor Rights Agent and deliver such Right
Certificates so countersigned; and 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:
23
28
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the advice or 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 advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including, without limitation, the identity of any
"Acquiring Person" and the determination of "current market price") be
proved or established by the Company prior to taking, suffering or
omitting to take 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 a person reasonably believed by the Rights Agent
to be the Chairman of the Board, the President or any Executive Vice
President or Senior Vice President and Secretary or an Assistant
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, suffered or omitted in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own gross 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 any provision 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 change in the
exercisability of the Rights (including the Rights becoming void
pursuant to Section 7(d)) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in this
Agreement, 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 receipt of the certificate
contemplated by Section 12); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization
or reservation of any shares of Common Stock or Preferred Stock to be
issued pursuant to this Agreement or any Right Certificate or as to
whether any shares of Common Stock or Preferred Stock will, when
issued, be duly authorized, validly 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
24
29
acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any person reasonably believed by the Rights Agent to be
the Chairman of the Board, the President or any Executive Vice
President or Senior Vice President or the Corporate Secretary or an
Assistant 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, suffered or omitted to be taken by it
in good faith in accordance with instructions of any such officer or
for any delay in acting while awaiting instruction after requesting the
Company to provide such instructions, except to the extent such delay
results solely from the failure to timely request such instructions.
Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under
this Agreement and the date on or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after
the date specified in such application (which date shall not be less
than ten (10) Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any
such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to
such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully
and freely as though it were not the Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company or to any holders of Rights resulting from any such act,
default, neglect or misconduct, provided that reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder
or in the exercise of its rights if there shall be reasonable grounds
for believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
25
30
(k) 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 cases
may be, has either not been completed or indicates an affirmative
response to clause 1 or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer
without first consulting with the Company.
(l) The Rights Agent undertakes only the express duties
and obligations imposed by this Agreement and/or under law and no
implied duties or obligations shall be read into this Agreement against
the Rights Agent.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and, subsequent to the Distribution Date, to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock by registered or certified mail,
and, subsequent to the Distribution Date, 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 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a 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) a corporation organized and doing business under the laws of the
United States or of any state of the United States, in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an Affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and, subsequent to the Distribution
Date, 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, 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
26
31
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares of stock issuable upon exercise of the Rights
made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of (i) the close of
business on the tenth day after the Stock Acquisition Date (or such later date
as a majority of the Continuing Directors may designate prior to such time as
the Rights are no longer redeemable) and (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"); provided that after any Person has become an Acquiring Person, any
redemption of the Rights shall be effective only if there are Continuing
Directors then in office, and such redemption shall have been approved by a
majority of such Continuing Directors; and provided further, any redemption of
Rights shall also be subject to any additional approval procedures required by
the certificate of incorporation or by-laws of the Company. Notwithstanding
anything in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors
of the Company electing to redeem the Rights and without any further
action and without any notice, the right to exercise the Rights will
terminate and thereafter the only right of the holders of Rights shall
be to receive the Redemption Price for each Right so held. The Company
shall promptly thereafter give notice of such redemption to the Rights
Agent and the holders of the Rights in the manner set forth in Section
26; provided that the failure to give, or any defect in, such notice
shall not affect the validity of such redemption. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will
state the method by which the payment of the Redemption Price will be
made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in Section 23 or 24, and
other than in connection with the purchase, acquisition or redemption
of shares of Common Stock prior to the Distribution Date.
Section 24. Exchange. (a) At any time after any Person becomes an
Acquiring Person, a majority of the Continuing Directors may, at their option,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to Section 7(d)) for shares of
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"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange if at any
time after any Person (other than an Excluded Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the shares of Common Stock then outstanding.
27
32
(b) Immediately upon the action of the Continuing
Directors electing to exchange any Rights pursuant to Section 24(a) and
without any further action and without any notice, the right to
exercise such Rights will terminate and thereafter the only right of a
holder of such 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 thereafter
give notice of such exchange to the Rights Agent and the holders of the
Rights to be exchanged in the manner set forth in Section 26; provided
that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method
by which the exchange of the shares of 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 void pursuant to Section 7(d)) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute common stock equivalents (as
defined in Section 11(a)(iii)) for shares of Common Stock exchangeable
for Rights, at the initial rate of one common stock equivalent for each
share of Common Stock, as appropriately adjusted to reflect adjustments
in dividend, liquidation and voting rights of common stock equivalents
pursuant to the terms thereof, so that each common stock equivalent
delivered in lieu of each share of Common Stock shall have essentially
the same dividend, liquidation and voting rights as one share of Common
Stock.
Section 25. Notice of Proposed Actions. (a) In case the Company
shall propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company), or
(ii) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options, or (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or combination of outstanding
shares of Preferred Stock) or (iv) to effect any consolidation or merger with
any other Person, or to effect and/or to permit one or more of its Subsidiaries
to effect any sale or other transfer, in one transaction or a series of related
transactions, of assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries, taken as a whole, to any
other Person or Persons, 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, to the extent feasible and in accordance with Section
26, a notice of such proposed action, which shall specify the record date for
the purposes of any such dividend, distribution or offering of rights or
warrants, or the date on which any such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution or winding up is to take place and the
date of participation therein by the holders of Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 20 days prior to the record date
for determining holders of the Preferred Stock entitled to participate in such
dividend, distribution or offering, and in the case of any such other action, at
least 20 days
28
33
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Preferred Stock, whichever shall be the
earlier. The failure to give notice required by this Section or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to the
contrary, prior to the Distribution Date a public filing by the Company
with the Securities and Exchange Commission shall constitute sufficient
notice to the holders of securities of the Company, including the
Rights, for purposes of this Agreement and no other notice need be
given to such holders.
(c) If a Triggering Event shall occur, then, in any such
case, (1) the Company shall as soon as practicable thereafter give to
each holder of a Right, in accordance with Section 26, a notice of the
occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii)
or 13, as the case may be, and (2) all references in Section 25(a) to
Preferred Stock shall be deemed thereafter to refer to Common Stock or
other capital stock, as the case may be.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
to or on the Company shall be sufficiently given or made if sent by first-class
mail (postage prepaid) to the address of the Company indicated on the signature
page hereof or such other address as the Company shall specify in writing to the
Rights Agent. Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail (postage prepaid) to the address of the Rights Agent
indicated on the signature page hereof or such other address as the Rights Agent
shall specify in writing to the Company. Notices or demands authorized by this
Agreement to be given or made by the Company or the Rights Agent to the holder
of any Right Certificate (or, prior to the Distribution Date, to the holder of
any certificate representing shares of Common Stock) shall be sufficiently given
or made if sent by first-class mail (postage prepaid) to the address of such
holder shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
Date, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Right Certificates in order (a) to cure any ambiguity, (b) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or (c) 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 Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person).
Notwithstanding the foregoing, after any Person has become an Acquiring Person,
any supplement or amendment shall be effective only if there are Continuing
Directors then in office, and such supplement or amendment shall have been
approved by a majority of such Continuing Directors. Upon the delivery of a
29
34
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. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
that changes the rights and duties of the Rights Agent under this Agreement
shall be effective without the consent of the Rights Agent.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on
the date of this Agreement. The Board of Directors of the Company (or, after any
Person has become an Acquiring Person, a majority of the continuing Directors)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including 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
exchange or not to redeem or exchange the Rights or to amend the Agreement);
provided, that any redemption of Rights shall also be subject to any additional
approval procedures required by the certificate of incorporation or by-laws of
the Company. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board (or, after any Person has become
an Acquiring Person, by the Continuing Directors) in good faith shall (x) be
final, conclusive and binding on the Company (subject to any additional
redemption approval procedures referred to in the proviso to the immediately
preceding sentence), the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board of Directors of the Company or the
Continuing Directors 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 certificates representing the shares of Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the certificates representing the shares of Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
30
35
in full force and effect and shall in no way be affected, impaired or
invalidated; provided that, notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company (or, after any Person has become an Acquiring Person, a
majority of the Continuing Directors) determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth day following the date of such determination by the Board
of Directors or Continuing Directors, as the case may be.
Section 32. Governing Law. This Agreement, each Right and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, except that the rights and
obligations of the Rights Agent shall be governed by the law of the State of New
York.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
Section 34. Descriptive Headings. The captions herein are
included for convenience of reference only, do not constitute a part of this
Agreement and shall be ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE COMPANY:
SCIENTIFIC GAMES HOLDINGS CORP.
By: /s/ βββββββ β. ββββββ
------------------------------------------
Name: βββββββ β. ββββββ
Title: President and CEO
Scientific Games Holdings Corp.
[corporate seal] ββββ βββββββββ βββββ βββββββ
ββββββββββ, βββββββ βββββ
Attn: President and Chief
Executive Officer
31
36
with copies to:
Scientific Games Holdings Corp.
ββββ βββββββββ βββββ βββββββ
ββββββββββ, βββββββ βββββ
Attn: Vice President, Secretary and
General Counsel
THE RIGHTS AGENT:
FIRST UNION NATIONAL BANK
By: /s/ βββββββ β. βββββββ
------------------------------------------
βββββββ β. βββββββ
Vice President
First Union National Bank
ββββ ββββ β.β. ββββββ ββββ. βββ
βββββββββ, βββββ ββββββββ βββββ-ββββ
Attention: Shareholder Services
[corporate seal]
Attest: First Union National Bank
/s/ βββββββ β. ββββ
-------------------
βββββββ ββββ
Vice President
32
37
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
SCIENTIFIC GAMES HOLDINGS CORP.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, βββββββ β. ββββββ, President, Chief Executive Officer and Chairman
of the Board, and βββββββ β. ββββ, Executive Vice President, of Scientific Games
Holding Corp. (the "Company"), a corporation organized and existing under the
General Corporation Law of the State of Delaware ("Delaware Law"), in accordance
with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company, the Board of Directors on July
10, 1997 adopted the following resolution creating a series of Preferred Stock
in the amount and having the designation, voting powers, preferences and
relative, participating, optional and other special rights and qualifications.,
limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of such
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"), and the number of shares constituting
such series shall be 500,000. Such number of shares of the Series A Preferred
Stock may be increased or decreased by resolution of the Board of Directors;
provided that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares issuable upon exercise or conversion of outstanding rights,
options or other securities issued by the Company.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable on the first day of February, May, August and November of each
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of any share or fraction of a share of Series
A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 and (b) subject to the
38
provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends or other distributions and 100
times the aggregate per share amount of all non-cash dividends or other
distributions (other than (i) a dividend payable in shares of Common
Stock, par value $.0l per share, of the Company (the "Common Stock") or
(ii) 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 or fraction of a share of Series A Preferred Stock. If the
Company shall at any time after July 10, 1997 (the "Rights Declaration
Date") pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) 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 A Preferred Stock were
entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common
Stock (other than as described in clauses (i) and (ii) of the first
sentence of paragraph (A)); 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 (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first
issuance of any share or fraction of a share of Series A Preferred
Stock and such first Quarterly Dividend Payment Date), a dividend of
$1.00 per share on the Series A 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 A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares is
on or before the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue and
be cumulative from the date of issue of such shares, or unless the date
of issue is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and on or before such Quarterly Dividend Payment
Date, in which case dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall not be more than 60 days prior to the date fixed for the
payment thereof.
A-2
39
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of stockholders
of the Company. If the Company shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares of Series
A Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as a single class on all matters
submitted to a vote of stockholders of the Company.
(C) (i) If at any time dividends on any series A Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall ββββ the beginning of
a period (herein called a "default period") which shall extend until
such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Preferred Stock then outstanding shall
have been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock and any other series of
Preferred Stock then entitled as a class to elect directors, voting
together as a single class, irrespective of series, shall have the
right to elect two Directors.
(ii) During any default period, such voting right of
the holders of Series A Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
(iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock,
if any, to increase, in certain cases, the authorized number
of Directors shall be exercised unless the holders of 10% in
number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of
holders of Common Stock shall not affect the exercise by
holders of Preferred Stock of such voting right. At any
meeting at which holders of Preferred Stock shall exercise
such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect
Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two Directors or, if such
right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any
special meeting does not
A-3
40
amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number
of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A
Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised
their right to elect Directors, the Board of Directors may
order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of series, may
request, the calling of special meeting of holders of
Preferred Stock, which meeting shall thereupon be called by
the President, a Vice President or the Secretary of the
Company. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant
to this paragraph (C)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to
him at his last address as the same appears on the books of
the Company. Such meeting shall be called for a time not
earlier than 20 days and not later than 60 days after such
order or request or in default of the calling of such meeting
within 60 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders
owning in the aggregate not less than 10% of the total number
of shares of Preferred Stock outstanding, irrespective of
series. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the
period within 60 days immediately preceding the date fixed for
the next annual meeting of stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Company if
applicable, shall continue to be entitled to elect the whole
number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected by the
holders of the class of stock which elected the Director whose
office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a
class to elect Directors shall cease, (y) the term of any
Directors elected by the holders of Preferred Stock as a class
shall terminate,
A-4
41
and (z) the number of Directors shall be such number as may be
provided for in the certificate of incorporation or bylaws
irrespective of any increase made pursuant to the provisions
of paragraph (C)(ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or bylaws). Any
vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
(D) The Certificate of Incorporation of the Company shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the
Series A Preferred Stock without the affirmative vote of the holders of
a majority of the outstanding shares of Series A Preferred Stock,
voting separately as a class.
(E) Except as otherwise provided herein, holders of
Series A Preferred Stock shall have no special voting rights, and their
consent shall not be required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding
shares of Series A Preferred Stock shall have been paid in full, the
Company shall not:
(i) declare or pay dividends on, 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 A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such other 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, purchase or otherwise acquire for value
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of stock of the Company
ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends
A-5
42
or upon liquidation, dissolution or winding up) with the
Series A 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 Series A Preferred Stock
and all such other parity stock 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 Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for value any shares
of stock of the Company unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock redeemed, purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock without designation as to series and may be reissued
as part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors as permitted by the Certificate of
Incorporation or as otherwise permitted under Delaware Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, 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 A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1.00 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 A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such other 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 Company shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) 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 A 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.
Section 7. Consolidation, Merger, etc. If the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are
A-6
43
exchanged for or changed into other stock or securities, cash or any other
property, then in any such case the shares of Series A Preferred Stock shall at
the same time be similarly exchanged for or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash or any other property, as
the case may be, into which or for which each share of Common Stock is changed
or exchanged. If the Company shall at any time after the Rights Declaration Date
pay any dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) 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 A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock 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.
Section 8. No Redemption. The Series A Preferred Stock shall not
be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior
(as to dividends and upon liquidation, dissolution and winding up) to all other
series of the Company's preferred stock, except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
A-7
44
IN WITNESS WHEREOF, we have executed and subscribed this Certificate as
of this ___ day of ______ , 1997.
--------------------------------------
βββββββ β. ββββββ
President, Chief Executive Officer and
Chairman of the Board
--------------------------------------
βββββββ β. ββββ
Executive Vice President
Attest:
---------------------------------
C. ββββ ββββββ, ββ.,
Vice President, Secretary and
General Counsel
A-8
45
Exhibit B
[Form of Right Certificate]
No. R- __________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF AUGUST 11, 2007 AND THE DATE ON WHICH THE
RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET FORTH IN
THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR
HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT
HOLDER, MAY BE NULL AND VOID. [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 AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BE OR MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(d) OF THE RIGHTS AGREEMENT.]1
RIGHT CERTIFICATE
SCIENTIFIC GAMES HOLDINGS CORP.
This Right Certificate certifies that___________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the holder (upon the terms and subject to the conditions set
forth in the Rights Agreement dated as of July 10, 1997 (the "Rights Agreement")
between Scientific Games Holdings Corp., a Delaware corporation (the "Company"),
and First Union National Bank, as rights agent (the "Rights Agent")) to purchase
from the Company, at any time after the Distribution Date and prior to the
Expiration Date, ________ one-hundredth[s] of a fully-paid, nonassessable share
of Series A Participating Cumulative Preferred Stock (the "Preferred Stock") of
the Company at a purchase price of $84.00 per one one-hundredth of a share (the
"Purchase Price"), payable in lawful money of the United States of America, upon
surrender of this Right Certificate, with the form of election to purchase and
related certificate duly executed, and payment of the Purchase Price at an
office of the Rights Agent designated for such purpose.
Terms used herein and not otherwise defined herein have the meanings
assigned to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and the
number and kind of shares issuable upon exercise of each Right) and the Purchase
Price set forth above are as of July 10, 1997,
--------
(1)If applicable, insert this portion of the legend and delete the
preceding sentence.
46
and may have been or in the future be adjusted as a result of the occurrence of
certain events, as more fully provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Right Certificate are beneficially owned by (a) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (b) a transferee of
an Acquiring Person (or any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (c) under certain
circumstances specified in the Rights Agreement, a transferee of an Acquiring
Person (or any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such, such Rights shall become
null and void, and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section 11(a)(ii) Event.
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 and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Upon surrender at the principal office or offices of the Rights Agent
designated for such purpose and subject to the terms and conditions set forth in
the Rights Agreement, any Rights Certificate or Certificates may be transferred
or exchanged for another Rights Certificate or Certificates evidencing a like
number of Rights as the Rights Certificate or Certificates surrendered.
Subject to the provisions of the Rights Agreement, the Board of
Directors of the Company may, at its option,
(a) at any time prior to the earlier of (i) the close of
business on the tenth day after the Stock Acquisition Date (or such
later date as a majority of the Continuing Directors may designate
prior to such time as the Rights are no longer redeemable) and (ii) the
Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right; or
(b) at any time after any Person becomes an Acquiring Person
(but before such Person becomes the Beneficial Owner of 50% or more of
the shares of Common Stock then outstanding), exchange all or part of
the then outstanding Rights (other than Rights held by the Acquiring
Person and certain related Persons) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right. If the Rights
shall be exchanged in part, the holder of this Right Certificate shall
be entitled to receive upon surrender hereof another Right Certificate
or Certificates for the number of whole Rights not exchanged.
No fractional shares of Preferred Stock are required to be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are multiples of one one-hundredth
B-2
47
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Certificates for the number of whole Rights not
exercised.
No holder of this Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of capital stock
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a 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.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal by its authorized officers.
Dated as of _________________, _____.
SCIENTIFIC GAMES HOLDINGS CORP.
By:
----------------------------
Title:
[SEAL]
Attest:
-----------------------------
Secretary
Countersigned:
-----------------------------
as Rights Agent
By:
--------------------------
Authorized Signature
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed if the registered holder
B-3
48
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 Company,
with full power of substitution.
Dated:
--------------------------
-----------------------------
Signature
Signature Guaranteed:
B-4
49
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate ____ are ____ are
not being assigned by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it ____ did ____ did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
--------------------,---- -------------------------
Signature
----------
The signatures 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.
----------
B-5
50
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise
Rights represented by the Right Certificate.)
To: Scientific Games Holdings Corp.
The undersigned hereby irrevocably elects to exercise _____ Rights
represented by this Right Certificate to purchase shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such securities be issued in the name
of and delivered to:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated:
-------------------
--------------------------
Signature
Signature Guaranteed:
B-6
51
Certificate
The undersigned hereby certifies 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 any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
___did ___ did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
--------------------
---------------------------
Signature
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.
B-7
52
Exhibit C
SUMMARY OF TERMS OF RIGHTS PLAN
================================================================================
Form of Security: Right to purchase one-hundredth (1/100)
of a share of a series of existing
authorized Preferred Stock of the
Company. Each one-hundredth of a share
of Preferred Stock is intended to be
the economic equivalent of one share of
Common Stock.
Distribution of Rights: To holders of outstanding Common Stock
as a dividend of one Right per share of
Common Stock. Before the Distribution
Date (defined below), Rights are
attached to and transferable with the
Common Stock. Rights will also be
attached to all future issuances of
Common Stock until the Distribution
Date. After the Distribution Date,
separate certificates evidencing the
Rights will be mailed to each holder of
Common Stock, and Rights will trade
separately from the Common Stock.
Exercisability of Rights: Rights will become exercisable on the
date (the "Distribution Date") that is
the earlier of: (i) the 10th day
following the public announcement that
a person or group (an "Acquiring
Person") has acquired beneficial
ownership of 20% or more of the
outstanding Common Stock or (ii) the
10th day following the commencement or
announcement of an intention to make a
tender offer or exchange offer by any
person which would result in such
person owning 20% or more of the
outstanding Common Stock. AN OFFER FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
THAT THE BOARD OF DIRECTORS DETERMINES
TO BE FAIR AND OTHERWISE IN THE BEST
INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS (A
53
SUMMARY OF TERMS OF RIGHTS PLAN
================================================================================
"QUALIFYING TENDER OFFER") WOULD NOT
TRIGGER A DISTRIBUTION DATE.
Exercise Price of Rights: $84.00 (the "Exercise Price") per one-
hundredth of a share of Preferred Stock,
before adjustment.
Expiration of Rights: August 11, 2007, unless earlier redeemed
or exchanged by the Company as described
below.
Redemption of Rights: The Board of Directors may redeem all of
the Rights at a price of $.01 per Right
at any time before the close of business
on the 10th day after public
announcement that any person has become
an Acquiring Person (subject to
extension by a majority of Directors who
are not affiliated with the Acquiring
Person ("Unaffiliated Directors")).
After any person has become an Acquiring
Person, the Rights may be redeemed only
with the approval of a majority of the
Unaffiliated Directors.
Flip-In Rights: If any person or group becomes an
Acquiring Person, each holder of a Right
(other than Rights held by the Acquiring
Person, which will thereupon become
void) will thereafter have the right to
exercise his or her Rights at the then
current Exercise Price and receive in
exchange that number of shares of Common
Stock having a market value on the date
the flip-in right becomes exercisable of
twice the Rights' exercise price.
C-2
54
SUMMARY OF TERMS OF RIGHTS PLAN
================================================================================
Exchange Rights: At any time after a person becomes an
Acquiring Person and before suc
Acquiring Person acquires at least 50%
of the outstanding Common Stock, a
majority of the Unaffiliated Directors
may exchange all or part of the Rights
(other than Rights held by the Acquiring
Person and certain affiliated persons,
which will become void) at an exchange
ratio of one share of Common Stock, or
one one-hundredth of a share of
Preferred Stock, per Right.
Rights in Events of Business Combination
or Asset Sale (Flip-Over Rights): If, after any person has become an
Acquiring Person, (1) the Company is
involved in a merger or other business
combination in which the Company is not
the surviving corporation or its Common
Stock is exchanged for other securities
or assets or (2) the Company and/or one
or more of its subsidiaries sell or
otherwise transfer assets or earning
power aggregating more than 50% of the
assets or earning power of the Company
and its subsidiaries, taken as a whole,
then each Right will entitle the holder
to purchase, for the then current
Exercise Price, a number of shares of
common stock of the other party to such
business combination or sale (or in
certain circumstances, an affiliate)
having a market value of twice the
Exercise Price of the Right.
Voting Power of Rights: None.
Preferred Stock Dividends: Cumulative quarterly dividends on the
Preferred Stock will be payable in an
C-3
55
SUMMARY OF TERMS OF RIGHTS PLAN
================================================================================
amount per share equal to the greater of
(i) $1 or (ii) 100 times the aggregate
per share amount of all cash dividends
and 100 times the aggregate per share
amount of all non-cash dividends
declared on the Common Stock.
Voting Rights of Preferred Stock: Holders of the Preferred Stock will vote
with the holders of the Common Stock as
a single class and are entitled to 100
votes per share.
Redemption of Preferred Stock: None.
Sinking Fund for Preferred Stock: None.
Preferred Stock Liquidation Rights: Upon liquidation, the holders of
Preferred Stock will be entitled to an
aggregate liquidation payment of 100
times the payment made per share of
Common Stock. Preferred Stock Ranking:
Junior to all other preferred stock of
the Company as to dividends and upon
liquidation, but senior to the Common
Stock as to dividends and upon
liquidation.
Amendments: Before the Distribution Date, the Board
may amend the Rights Agreement in any
respect.
After the Distribution Date, the Rights
Agreement may be amended in any respect
that does not adversely affect the
Rights holders (other than any Acquiring
Person and certain affiliated persons).
C-4
56
SUMMARY OF TERMS OF RIGHTS PLAN
================================================================================
After any person has become an Acquiring
Person, the Rights Agreement may be
amended only with the approval of a
majority of the Unaffiliated Directors.
Antidilution Provisions: The Rights Agreement includes
antidilution provisions designed to
prevent efforts to diminish the
efficacy of the Rights.
Taxes: While the dividend of the Rights will
not be taxable to stockholders or to
the Company, stockholders or the
Company may, depending upon the
circumstances, recognize taxable
income in the event that the Rights
become exercisable.
C-5