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DAMARK INTERNATIONAL, INC.
AND
NORWEST BANK MINNESOTA, N.A.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF APRIL 16, 1998
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TABLE OF CONTENTS
Page
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Section 1. Certain 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, Split Up, Combination 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. . . . . . . 8
Section 9. Availability of Preferred Shares. . . . . . . . . . . . . . . . 9
Section 10. Preferred Shares Record Date. . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . .17
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale
or Transfer of Assets or Earning Power. . . . . . . . . . . . .17
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . .19
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . .20
Section 16. Agreement of Right Holders. . . . . . . . . . . . . . . . . . .21
Section 17. Right Certificate Holder Not Deemed a Shareholder . . . . . . .21
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . .22
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 20. Duties of Rights Agent. . . . . . . . . . . . . . . . . . . . .23
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . .24
Section 22. Issuance of New Right Certificates. . . . . . . . . . . . . . .25
Section 23. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . .27
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Section 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . .29
Section 28. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 29. Benefits of this Agreement. . . . . . . . . . . . . . . . . . .29
Section 30. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 32. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 33. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . .30
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
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Exhibit A - Form of Certificate of Designations, Rights and Preferences
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
RIGHTS AGREEMENT
AGREEMENT, dated as of April 16, 1998, between DAMARK INTERNATIONAL, INC.,
a Minnesota corporation (the "Company"), and NORWEST BANK MINNESOTA, N.A. (the
"Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Class A
Common Share of the Company outstanding at the Close of Business on May 1, 1998
(the "Record Date"), each Right representing the right to purchase one
one-hundredth of a Preferred Share, upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right with respect to each Common Share that shall become outstanding between
the Record Date and the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date (as all such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 20% or more of the Common Shares of the
Company then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary (as such term is hereinafter defined) of the Company, (iii) any
employee benefit plan of the Company or any Subsidiary of the Company, (iv) any
Person holding Common Shares for or pursuant to the terms of any such plan, or
(v) any Person holding Common Shares issued to that person from the Company in a
transfer approved by the Board of Directors of the Company (which action shall
be effective only with the concurrence of a majority of the Continuing Directors
and only if the Continuing Directors constitute a majority of the number of
directors then in office) (each of (i) through (v) an "Exempt Person").
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of the Common Shares of the
Company then outstanding; PROVIDED, HOWEVER, that if a Person, together with all
Affiliates and Associates of such Person, shall become the Beneficial Owner of
20% or more of the Common Shares of the Company then outstanding by reason of
share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares of the
Company, then such Person shall be deemed to be an "Acquiring Person."
Further, if the Board of Directors of the Company (which action shall be
effective only with the concurrence of a majority of the Continuing Directors
and only if the Continuing Directors constitute a majority of the number of
directors then in office) determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" of have "beneficial ownership" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, including without
limitation securities with respect to which such Person or any of such
Person's Affiliates or Associates has "beneficial ownership" pursuant to
Rule 13d-3 under the Exchange Act;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly (A) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
or to have beneficial ownership of, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote or dispose of
(including, without limitation, pursuant to any agreement, arrangement or
understanding); PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, or to have beneficial
ownership of, any security if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report) as being beneficially owned by such Person; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliates or Associates thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a
bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to
Section 1(c) (ii) (B)) or disposing of any securities of the Company.
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Notwithstanding anything in these definitions of Beneficial Ownership,
beneficially own or beneficial ownership to the contrary, the phrase "then
outstanding," when used with reference to a Person's Beneficial Ownership of
securities of the Company, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to own beneficially
hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the State of Minnesota are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Minneapolis time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., Minneapolis time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean the
shares of Class A common stock, par value $.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
(g) "Continuing Director" means a member of the Board of Directors of the
Company as of the date of this Agreement and any successor to a Continuing
Director if the successor was recommended for election by a majority of the
Continuing Directors or elected to succeed a Continuing Director by a majority
of the Continuing Directors. In no event shall a Continuing Director be an
Acquiring Person, an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate.
(h) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(i) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(j) "Person" shall mean any individual, partnership, firm, limited
liability company, corporation or other entity, and shall include any successor
(by merger or otherwise) of such entity.
(k) "Preferred Shares" shall mean shares of Series C Junior Participating
Preferred Stock, par value $.01 per share, of the Company having the rights and
preferences set forth in the Certificate of Designations attached to this
Agreement as Exhibit A.
(l) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(m) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act or any
successor statute) by the Company or an Acquiring Person that an
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Acquiring Person has become such.
(n) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or other
equity interests entitled to vote in the election of directors (or Persons with
comparable responsibilities if the entity has no directors) is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Shares Acquisition Date or (ii) the Close of Business on the tenth day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of any Person (other than an Exempt Person)
to commence, a tender or exchange offer the consummation of which would result
in any Person (other than an Exempt Person) becoming the Beneficial Owner of
Common Shares aggregating 20% or more of the then outstanding Common Shares
(including any such date after that is after the date of this Agreement and
prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares.
Notwithstanding anything stated in this Section 3, the Distribution Date shall
in no event occur until the authority of the Board of Directors of the Company
to redeem the Rights pursuant to Section 23(b), as such Section may be amended
pursuant to Section 27, shall have terminated. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send) by first-class, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
Right Certificates, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of
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Common Shares as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company. With respect to certificates
for Common Shares outstanding as of the Record Date, until the Distribution Date
(or the earlier Redemption Date or Final Expiration Date), the Rights will be
evidenced by such certificates registered in the names of the holders thereof.
Until the Distribution Date (or the earlier Redemption Date or Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Damark
International, Inc. and Norwest Bank Minnesota, N.A., dated as of
April 16, 1998 (the "Rights Agreement"), the terms of which
(including restrictions on the transfer of such Rights) are
hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Damark International,
Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. Damark
International, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights that are or were issued to
any Person who becomes an Acquiring Person, or any 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 thereof, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as 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
5
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
automated quotation system on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Sections 11 and 22
hereof, the initial Right Certificates shall entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred Share as shall be set
forth therein at the price per one one-hundredth of a Preferred Share set forth
therein (the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right shall be subject to adjustment as
provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer, President, Chief Financial Officer, any Vice President, or
its Treasurer, either manually or by facsimile signature. The Right
Certificates shall be countersigned either manually or by facsimile signature,
by the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of 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, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer 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.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. TRANSFER. SPLIT UP. COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a) (ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder (or former holder in the case of a transfer) to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall, subject
to Section 14 hereof, countersign and deliver to the Person entitled thereto a
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Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment by the registered holder of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates. 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 until the
registered holder shall have duly completed and executed the form of assignment
on the form of assignment on the reverse side of such Right Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) of such Right Certificate or Affiliates or
Associates thereof as the Company shall reasonably request.
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 make 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) Except as provided in Section 11(a)(ii), the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly completed and executed, to the Rights Agent at
the principal office of the Rights Agent, together with payment of the Purchase
Price for each one one-hundredth of a Preferred Share as to which the Rights are
exercised, at or prior to the earliest of (i) the Close of Business on May 1,
2008 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $65.00, shall
be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly completed and executed, accompanied
by payment of the Purchase Price for the shares to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 9 hereof by cash, certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent (or
make available, if the Rights Agent is the transfer agent for the shares) of the
Preferred Shares certificates for the number of Preferred
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Shares 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 total number of Preferred Shares issuable upon
exercise of the Rights under this Agreement with a depository agent, requisition
from the depository agent depository receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depository agent) and the Company
hereby directs the depository agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depository receipts, cause the
same to be 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 and (iv) when appropriate, after receipt, deliver such cash for
fractional interests in shares to or upon the order of the registered holder of
such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to such holder's duly authorized assigns, subject to the provisions of Section
14 hereof.
(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 upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i) duly
completed and executed the form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of such Right Certificate or Affiliates or Associates thereof
as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in 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
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Right Certificates, after any
retention period required by the Securities and Exchange Commission has lapsed,
and in such case shall deliver a certificate of destruction thereof to the
Company.
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Section 9. AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares, the number
of Preferred Shares that will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the Preferred Shares 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 shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price and any applicable transfer
taxes), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depository receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depository receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares 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 applicable transfer taxes) was made;
PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate as such shall
not be entitled to any rights of a holder of Preferred Shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
9
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection
with a consolidation, merger or statutory share exchange in which the
Company is the continuing, surviving or acquiring corporation), except as
otherwise provided in this Section 11 (a), the Purchase Price in effect at
the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind
of shares of capital stock issuable on such date pursuant to the exercise
of the Rights, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon payment
of the Purchase Price(and any applicable transfer taxes), the aggregate
number and kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs
which would require adjustment under both 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) Subject to Section 24 of this Agreement, in the event any Person,
alone or together with its Affiliates and Associates, becomes an Acquiring
Person, each holder of a Right, except as provided below, shall thereafter
have a right to receive, upon exercise thereof by payment of the amount
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right would otherwise be
then exercisable, in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of Common Shares of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right would otherwise be then exercisable and dividing that product
by (y) 50% of the then current per share market price of the Company's
Common Shares (determined pursuant to Section 11(d) hereof) on the date of
the occurrence of such event; PROVIDED, HOWEVER, that if the transaction
that would otherwise give rise to the foregoing adjustment is also subject
to the provisions of Section 13 hereof, then only the provisions of Section
13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii); and provided further that the adjustment set forth in
this Section 11(a)(ii) shall be effective only at and after the time at
which the authority of the Board of Directors of the Company to redeem the
Rights pursuant to Section 23(b), as such Section may be amended pursuant
to Section 27, shall have terminated.
10
Notwithstanding the foregoing, in the event any Person shall become an
Acquiring Person, any Rights that are or, after becoming an Acquiring
Person, were beneficially owned by an Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall become null and void at the time
of such event without any further action, and no holder of such Rights
shall thereafter have any right to exercise such Rights or any other rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an Acquiring
Person or any Associate or Affiliate of any Acquiring Person whose Rights
would be void pursuant to the preceding sentence; no Right Certificate
shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof shall be canceled. The Company shall use all reasonable
efforts to insure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of a Right
Certificate or other Person as a result of its failure in good faith to
make any determinations with respect to an Acquiring Person or its
Affiliates or Associates.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to
the interest of holders of Rights (and, in the event that the number of
Common Shares which are authorized by the Company's Articles of
Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights, or if any necessary regulatory approval for
such issuance has not been obtained by the Company), the Company shall: (A)
determine the excess of (1) the value of the Common Shares issuable upon
the exercise of a Right (the "Current Value") over (2) the Purchase Price
(such excess, the "Spread") and (B) with respect to each Right, make
adequate provision to substitute for such Common Shares, upon exercise of
the Rights, (including, without limitation, full payment of the Purchase
Price) (1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company (including, without limitation, shares or units
of shares of any series of preferred stock which the Board of Directors of
the Company has deemed to have the same value as Common Shares (such shares
or units of shares of preferred stock are herein called "common share
equivalents")), except to the extent that the Company has not obtained any
necessary shareholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary shareholder or regulatory approval for such
issuance, (5) other assets or (6) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such aggregate value
has been determined by the Board of Directors of the Company based upon the
advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Company; provided, however, if the Company shall
not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the later of (x)
11
the first occurrence of a Distribution Date and (y) the date on which the
Company's right of redemption pursuant to Section 23(b) expires (the later
of (x) and (y) being referred to herein as the "Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, Common Shares
(to the extent available), except to the extent that the Company has not
obtained any necessary shareholder or regulatory approval for such
issuance, and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the
Company shall determine in good faith that it is likely that sufficient
additional Common Shares could be authorized for issuance upon exercise in
full of the Rights or that any necessary regulatory approval for such
issuance will be obtained, the thirty(30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after
the Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares or take action to obtain
such regulatory approval (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines that
some action need be taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide, subject to the
second paragraph of Section 11(a)(ii) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares, to take any action to obtain
any required regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisabitity of the Rights
has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Shares shall be the current per
share market price (as determined pursuant to Section 11(d) hereof) of the
Common Shares on the Trigger Date and the value of any "common stock
equivalent" shall be deemed to have the same value as the Common Shares on
such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as determined pursuant to Section
11(d) hereof)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current per share market price and the
denominator of which
12
shall be the number of Preferred Shares outstanding on such record date plus the
number of additional Preferred Shares and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the 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 the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation or in a statutory share
exchange) of evidences of indebtedness or cash or non-cash assets (other than a
regular quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), 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 then current per
share market price of the Preferred Shares (as determined pursuant to Section
11(d) hereof) on such record date, less the fair market value (as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent) of the portion of the
evidences of indebtedness or cash or non-cash assets so to be distributed on, or
of such subscription rights or warrants applicable to, one Preferred Share and
the denominator of which shall be such current per share market price of the
Preferred Shares. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again 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, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d) (i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to
such date; PROVIDED, HOWEVER, that in the event that the current per share
market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such Security (other than the Rights), or (B)
any subdivision, combination or reclassification of such Security, and
prior to the expiration of 30 Trading Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current
per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing
price for each day shall be the last sale price, regular way, or, in case
13
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security
is not listed or admitted to trading on any national securities exchange,
the last 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 Quotations
System ("NASDAQ") or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the
Security, the fair value of such shares on such date as determined in good
faith by the Board of Directors of the Company shall be used in lieu of the
closing price for such date. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or,
if the Security is not listed or admitted to trading on any national
securities exchange, a Business Day. Except as provided in Section
11(d)(ii) with respect to Preferred Shares, if on any such day the Security
is not publicly held or no professional market maker is making a market in
the Security, the fair value of such Security on such day as determined in
good faith by the Board of Directors of the Company (whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights) shall be used in
lieu of the closing price for such day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d) (i). If the
Preferred Shares are not publicly traded, the "current per share market
price" of the Preferred Shares shall be conclusively deemed to be the
current per share market price of the Common Shares as determined pursuant
to Section 11(d)(i) (appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) Except as provided in the third sentence of this Section 11(e), 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,
HOWEVER, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section ll shall be made to
the nearest cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of a Common Share or any other share or security as the case may
be. Notwithstanding the first sentence of this Section 11(e),
14
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and Section 11(e), and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one 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 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment,
15
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 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 Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) 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
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due ββββ or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) 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 (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
dividends on Preferred Shares payable in Preferred Shares or (v) issuance of
rights, options or warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Preferred Shares shall not be taxable to
such shareholders.
(m) Anything in this Agreement or the Rights notwithstanding, in the event
that at any time after the date of this Agreement and prior to the Distribution
Date, the Company shall (i) declare or pay any dividend on the Common Shares
payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and
16
the denominator of which is the number of Common Shares outstanding immediately
after such event, and (B) each Common Share outstanding immediately after such
event shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event had issued with respect
to it. The adjustments provided for in this Section 11(m) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected. If an event occurs which would
require adjustment under both Section 11(a)(ii) and this Section 11(m), the
adjustment provided for in this Section 11(m) shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section 11(a)(ii).
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) if such adjustment is made
after the Distribution Date, mail a brief summary thereof to each holder of a
Right Certificate in accordance with Section 25 hereof.
Section 13. CONSOLIDATION, MERGER, STATUTORY SHARE EXCHANGE OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER.
(a) In the event that, following the Distribution Date, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and into, any
other Person, and the Company shall not be the continuing or surviving
corporation of such consolidation or merger;
(ii) any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares shall
be changed into or exchanged for stock or other securities of any other
Person (or the Company), money or any other property (except as the result
of the exercise of statutory dissenters' rights); or
(iii) the Company shall effect a statutory share exchange with the
outstanding Common Shares of the Company being exchanged for stock or other
securities of any Person, cash or other property;
(iv) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one or a series of
related transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or one or
more of its wholly owned Subsidiaries), then, and in each such case, proper
provision shall be made so that
17
(A) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof
by payment of the amount equal to the product of the number of one
one-hundredths of a Preferred Share which would otherwise be issuable upon
exercise of a Right and the then current Purchase Price in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or adverse claims, as shall be
equal to the result obtained by (A) multiplying the then current Purchase Price
by the number of one one-hundredths of a Preferred Share for which a Right
would otherwise be exercisable and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, exchange, sale or transfer;
(B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, merger, sale, exchange or
transfer, all the obligations and duties of the Company pursuant to this
Agreement;
(C) the term "Company" shall thereafter be deemed to refer to
such Principal Party; and
(D) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clauses (i), (ii) or
(iii) of the first sentence of Section 13(a), the Person (including,
without limitation, the Company as successor thereto or as the surviving
corporation) that is the issuer of any securities into which Common Shares
of the Company are converted in such merger, consolidation or exchange, or
if no securities are so issued, the Person that is the other party to such
merger, consolidation or exchange; and
(ii) in the case of any transaction described in clause (iv) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time or have not been continuously over the preceding 12-
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Shares of which are
and have been so registered, "Principal Party" shall refer to such other
18
Person, and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares 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 Shares having the greatest aggregate market value.
(c) The Company shall not consummate any event described in clauses(i),
(ii), (iii) or (iv) of the first sentence of Section 13(a) unless the Principal
Party shall have a sufficient number of authorized, unreserved Common Shares
which have not been issued or are held in treasury to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any event described in clauses (i), (ii), (iii)
or (iv) of the first sentence of Section 13(a), the Principal Party will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights, on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (1)
the date as of which the Rights are no longer exercisable for such
securities or (2) the Final Expiration Date;
(ii) 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; and
(iii) 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.
(d) The Company shall not enter into any transaction of the kind referred
to in this Section 13 if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights.
The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, exchanges, sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a
19
whole Right. For the purposes of this Section 14(a), the current market value
of a whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the 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. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depository receipts,
pursuant to an appropriate agreement between the Company and a depository
selected by it; PROVIDED, that such agreement shall provide that the holders of
such depository receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depository receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, 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 value of one Preferred Share. For the purposes
of this Section 14 (b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives
any right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the
20
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(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 of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. 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 Preferred Shares or any other
securities of the Company 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 shareholder 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
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
21
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers 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
hereof. If at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; 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
22
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of the "current per share market price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer or the Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a) (ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or
23
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Financial Officer, any Vice President, the Secretary or the Treasurer
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
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 Shares or Preferred Shares by registered or certified mail, and,
if such notice is after 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 Shares or Preferred Shares by registered or certified mail, and,
if such notice is mailed after 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
24
the 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 the State
of Minnesota (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of Minnesota), in good standing, that is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (b) an affiliate of a corporation described in clause (a). After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement.
Section 23. REDEMPTION.
(a) The Rights may be redeemed only by action of the Board of Directors
pursuant to paragraph (b) of this Section 23 and shall not be redeemed in any
other manner.
(b) The Company may, by action of the Board of Directors of the Company
(which action shall be effective only with the concurrence of a majority of the
Continuing Directors and only if the Continuing Directors constitute a majority
of the number of directors then in office), at its option, at any time prior to
the Close of Business on the earlier of the (i) tenth day following the Shares
Acquisition Date or (ii) the Final Expiration Date, redeem all but not less than
all the then outstanding Rights at a redemption price of $.01 per Right,
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"). The redemption of the Rights
by the Board of Directors may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.
25
(c) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (b) of this Section
23 and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. Within 10 days after such action of
the Board of Directors ordering the redemption of the Rights, the Company shall
mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any time
after the date the Rights first become exercisable for Common Shares pursuant to
Section 11(a)(ii), exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become void pursuant to the
provisions of Section 11(a) (ii) hereof) for Common Shares, with each Right to
be exchanged for such number of Common Shares as shall equal the result obtained
by dividing (x) the then current Purchase Price by (y) the current per share
market price of Common Shares (determined pursuant to Section 11(d) hereof) on
the date the Rights first become exercisable for Common Shares pursuant to
Section 11(a)(ii) (such number of shares being hereinafter referred to as the
"Exchange Ratio"). The Exchange Ratio shall be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction affecting the
Common Shares that occurs after the date the Rights first become exercisable for
Common Shares pursuant to Section 11(a)(ii). Notwithstanding the foregoing, the
Board of Directors of the Company shall not be empowered to effect such exchange
at any time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will
26
state the method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a) (ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient authorized, unissued
and unreserved Common Shares to permit any exchange of Rights as contemplated
in accordance with this Section 24, the Company, at its option, may substitute
Preferred Shares (or equivalent preferred shares, as such term is defined in
Section 11(b) hereof, or common share equivalents, as such term is defined in
Section 11(a)(iii)(B)(3) hereof) for Common Shares exchangeable for Rights, at
the initial rate of one one-hundredth of a Preferred Share (or equivalent
preferred share) or one common share equivalent for each Common Share, as
appropriately adjusted to reflect stock splits, stock dividends or similar
transactions affecting the Common Shares that occur after the date of this
Agreement.
(d) In the event that there shall not be sufficient Common Shares,
Preferred Shares, equivalent preferred shares or common share equivalents,
authorized, unissued and unreserved to permit the exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares or Preferred
Shares, equivalent preferred shares or common share equivalents for issuance
upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation, merger or
statutory share exchange into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, (v) to effect the liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the Common Shares payable in Common
Shares or to effect a subdivision, combination
27
or consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, 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 10 days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a) (ii) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a) (ii) hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, or delivered by hand or express courier service or faxed,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Damark International, Inc.
ββββ ββββββββ ββββββ βββββ
βββββββββββ, βββββββββ βββββ
Attention: βββ βββββ
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, or delivered by hand or express
courier service or faxed, addressed (until another address is filed in writing
with the Company) as follows:
Norwest Bank Minnesota, N.A.
βββ βββββ βββββββ ββββββββ ββββββ
βββββ ββ. ββββ, βββββββββ βββββ
Attention: βββββ Van Dell
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 shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
28
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. By action of the Board of
Directors (which action shall be effective only with the concurrence of a
majority of the Continuing Directors and only if the Continuing Directors
constitute a majority of the number of directors then in office), the Company
may from time to time supplement or amend this Agreement without the approval
of any holders of Right Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
any such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; PROVIDED, HOWEVER, that from and after such time
as any Person becomes an Acquiring Person, this Agreement shall not be amended
in any manner which would adversely affect the interests of the holders of
Rights (excluding the interests of any Acquiring Person or its Affiliates or
Associates).
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. BENEFITS OF THIS AGREEMENT.
(a) Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim under this Agreement.
This Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares).
(b) The Board of Directors of the Company shall have the exclusive power
and total and complete authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board of Directors or the
Company or necessary or advisable in the administration of this Agreement,
including without limitation the right and power to interpret this Agreement and
to make conclusively all determinations deemed necessary or advisable for the
administration of this Agreement. All such acts, calculations, interpretations
and determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) that are done or made by the Board of Directors
of the Company in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent and the holders of the Rights and all other parties
and (y) not subject the Board of Directors of the Company to any liability to
the holders of the Rights or any other party.
Section 30. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
29
Section 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Minnesota and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
DAMARK INTERNATIONAL, INC.
/s/ ββββ β. ββββ
ββββ β. ββββ
Chairman, President and
Chief Executive Officer
NORWEST BANK MINNESOTA, N.A.
/s/ βββββ Van Dell
βββββ Van Dell
Officer
30
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
OF
DAMARK INTERNATIONAL, INC.
(Pursuant to Section 302A.401 of the
Minnesota Business Corporation Act)
The undersigned, βββββββββ β. ββββββββ, Assistant Secretary of Damark
International, Inc., a corporation organized and existing under the business
corporation act of the State of Minnesota (hereinafter called the
"Corporation"), hereby certifies that the following resolution establishing a
series of junior participating preferred stock pursuant to Chapter 302A of the
Minnesota Statutes was adopted by the Board of Directors of the Corporation on
April 15, 1998.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Articles of Incorporation,
the Board of Directors hereby creates a series of Preferred Stock, par value
$.01 per share (the "Preferred stock"), the Series C Junior Participating
Preferred Stock, and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series C Junior Participating Preferred Stock" (the "Series C
Preferred Stock") and the number of shares constituting the Series C Preferred
Stock shall be 400,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series C Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series C Preferred Stock.
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Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series C Preferred Stock with respect to dividends, the holders of shares
of Series C Preferred Stock, in preference to the holders of Class A Common
Stock (the "Common Stock") of the Corporation, and of any other junior
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 in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series C Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) $1 or (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share
of Series C Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount
to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under clause (ii) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series C Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$l per share on the Series C 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 C Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin
A-2
to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series C Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series C 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 C Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series C
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series C Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series C 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, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series C Preferred Stock
and the holders of shares of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of shareholders of the
Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series C Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on
A-3
the Series C Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series C Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series C
Preferred Stock, except dividends paid ratably on the Series C
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series C Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series C Preferred Stock, or any shares of stock ranking
on a parity with the Series C Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms-as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein.
Section 6. LIQUIDATION. DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock
A-4
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Preferred Stock unless, prior thereto, the holders
of shares of Series C Preferred Stock shall have received $100 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 C 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 shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series C Preferred Stock, except distributions made ratably on the
Series C Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after the Record Date declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series C 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. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case each share of Series C Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series C 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 shares of Series C Preferred Stock shall
not be redeemable.
Section 9. RANK. The Series C Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Corporation's preferred stock hereafter issued that
specifically provide that they shall rank senior to the Series C
A-5
Preferred Stock.
Section 10. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series C Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series C Preferred Stock, voting together
as a single class.
IN WITNESS WHEREOF, executed on behalf of the Corporation by its Secretary
this __ day of April, 1998.
DAMARK INTERNATIONAL, INC.
βββββββββ β. ββββββββ
Assistant Secretary
A-6
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER MAY 1, 2008 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS THAT
TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID.
RIGHT CERTIFICATE
DAMARK INTERNATIONAL, INC.
This certifies that _____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of April 16, 1998 (the "Rights Agreement"), between Damark
International, Inc., a Minnesota corporation (the "Company"), and Norwest Bank
Minnesota, N.A. (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., Minneapolis time, on May 1, 2008 at the principal office
of the Rights Agent, or at the office of its successor as Rights Agent, one
one-hundredth of a fully paid non-assessable share of Series C Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company, at a purchase price of $65.00 per one one-hundredth of
a Preferred Share (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of May 1, 1998, based on the Preferred Shares as constituted
at such date. As provided in the Rights Agreement, the Purchase Price and the
number of one one-hundredths of a Preferred Share which may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
B-1
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. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
In the event that any Person shall become an Acquiring Person (as
such terms are defined in the Rights Agreement), any Rights evidenced by this
Right Certificate that are or, after becoming an Acquiring Person, were
beneficially owned by any Acquiring Person or an Associate or Affiliate of such
Acquiring Person (as such terms are defined in the Rights Agreement) shall be
null and void.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for Company's Common
Stock.
No fractional Preferred Shares will be issued-upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
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, manually or by facsimile signature, by
the Rights Agent.
B-2
WITNESS the manual or facsimile signature of the proper officer of the
Company. Dated as of ___________ 1998.
DAMARK INTERNATIONAL, INC.
By _____________________________
Its_____________________________
Countersigned:
NORWEST BANK MINNESOTA, N.A.
By ______________________________
Authorized Signature
B-3
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________________________
hereby sells, assigns and transfers unto ______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ______________________, ____
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- - - - - - - - - - - - - - - - - - - - - - -
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
Signature
___________________________
B-4
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: Damark International, Inc.
The undersigned hereby irrevocably elects to exercise
____________________________ Rights represented by this Right Certificate to
purchase the Preferred Shares (or other securities, if any) issuable upon the
exercise of such Rights and requests that certificates for such Preferred Shares
be issued in the name of:
Please insert social security
or other identifying number
______________________________________________________________________________
______________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
______________________________________________________________________________
(Please print name and address)
Dated: __________________, ____
Signature
____________________________
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
B-5
Form of Reverse Side of Right Certificate - - continued
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
_____________________
Signature
_______________________________________________________________________________
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
B-6
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
OF
DAMARK INTERNATIONAL, INC.
On April 15, 1998, the Board of Directors of Damark International, Inc.
(the "Company"), declared a dividend of one preferred share purchase right (a
"Right") per share for each outstanding share of Common Stock, par value $.01
(the "Common Shares"), of the Company. The dividend is payable on May 1, 1998
(the "Record Date") to shareholders of record at the close of business on that
date.
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series C Junior Participating Preferred Stock, par
value $.01 (the "Preferred Shares"), of the Company at a price of $65.00 per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement"), dated as of April 16, 1998, between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate certificates evidencing the
Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Shares and a Distribution Date will occur upon the earlier of
(i) ten (10) days following public disclosure that a person or group of
affiliated or associated persons has become an "Acquiring Person" (as defined
below), or (ii) ten (10) days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an "Acquiring Person." Except as set forth below,
an "Acquiring Person" is a person or group of affiliated or associated persons
who has acquired beneficial ownership of 20% or more of the outstanding Common
Shares. The term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company, (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, and
(v) any person holding Common Shares issued to that person by the Company in a
transaction approved in advance by a the Board of Directors, including a
majority of the Continuing Directors (as defined below).
The Rights are not exercisable until the occurrence of the Distribution
Date. Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Common Shares certificates and will be transferred with and
only with such Common Shares certificates, (ii) new Common Shares certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference, and (iii) the surrender for transfer of any certificates
for Common Shares outstanding will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
As soon as practicable after the occurrence of the Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Shares as
of the close of business on
C-1
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. The Rights will expire at the close of business on
May 1, 2008 , unless extended or earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) if holders of the Preferred Shares are granted certain rights or
warrants to subscribe for Preferred Shares or convertible securities at less
than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above). With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
amount to at least 1% of the Purchase Price. No fractional Units will be issued
and, in lieu thereof, an adjustment in cash will be made based on the market
price of the Preferred Shares on the last trading date prior to the date of
exercise.
Because of the nature of the Preferred Shares's dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Shares purchasable upon exercise of each Right should approximate the
value of one share of Common Shares. Shares of Preferred Shares purchasable
upon exercise of the Rights will not be redeemable. Each share of Preferred
Shares will be entitled to a quarterly dividend payment of 100 times the
dividend declared per share of Common Shares. Each share of Preferred Shares
will have 100 votes, voting together with the shares of Common Shares. These
rights are protected by customary antidilution provisions.
In the event that, at any time following the Distribution Date, a person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise of the Right, Common Shares (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void and nontransferable and any holder of any such Right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such Right.
In the event that, at any time following the Distribution Date, the Company
is acquired in certain merger or other business combination transactions or 50%
or more of the Company's assets or earning power is sold, mortgaged or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common Shares of the acquiring company having a value equal to two
times the exercise price of the Right.
At any time until ten days following the Shares Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price (the
"Redemption Price") of $.01 per Right by resolution of the Board of Directors
(provided that such resolution is approved by a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
directors then in office).
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At any time after a Person becomes an Acquiring Person (subject to certain
exceptions), and prior to the acquisition by a Person of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
all or part of the Rights for Common Shares at an exchange ratio per Right equal
to the result obtained by dividing the exercise price of a Right by the current
per share market price of the Common Shares, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common shares of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by resolution
of the Company's Board of Directors (provided that such resolution is approved
by a majority of the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office) prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights Agreement may
be amended by resolution of the Company's Board of Directors (provided that such
resolution is approved by a majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the directors then in office) in
order to make changes which do not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person or its affiliates or
associates).
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
____________, 1998. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
____________, 1998.
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