1
EXHIBIT 4.2
RIGHTS AGREEMENT
DATED AS OF OCTOBER 13, 1998
BETWEEN
BNC MORTGAGE, INC.
AND
U.S. STOCK TRANSFER CORPORATION
AS RIGHTS AGENT
2
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions...............................................................1
Section 2. Appointment of Rights Agent.......................................................4
Section 3. Issuance of Right Certificates....................................................4
Section 4. Form of Right Certificate.........................................................5
Section 5. Countersignature and Registration.................................................5
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificate.......................................6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....................6
Section 8. Cancellation and Destruction of Right Certificates................................8
Section 9. Reservation and Availability of Preferred Shares..................................8
Section 10. Preferred Shares Record Date.....................................................9
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights......9
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......................14
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............14
Section 14. Fractional Rights and Fractional Shares.........................................16
Section 15. Rights of Action................................................................17
Section 16. Agreement of Right Holders......................................................17
Section 17. Right Certificate Holder Not Deemed a Stockholder...............................18
Section 18. Concerning the Rights Agent.....................................................18
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......................18
Section 20. Duties of Rights Agent..........................................................18
Section 21. Change of Rights Agent..........................................................20
Section 22. Issuance of New Right Certificates..............................................21
Section 23. Redemption and Termination......................................................21
Section 24. Exchange........................................................................22
i
3
Section 25. Notice of Certain Events........................................................23
Section 26. Notices.........................................................................24
Section 27. Supplements and Amendments......................................................24
Section 28. Determination and Actions by the Board of Directors, etc........................25
Section 29. Successors......................................................................25
Section 30. Benefits of this Agreement......................................................25
Section 31. Severability....................................................................25
Section 32. Governing Law...................................................................25
Section 33. Counterparts....................................................................25
Section 34. Descriptive Headings............................................................25
DEFINED TERM CROSS REFERENCE SHEET
Acquiring Person......................Section 1(a)
Act...................................Section 1(b)
Adjustment Shares................Section 11(a)(ii)
Adjusted Number of Shares.......Section 11(a)(iii)
Adjusted Purchase Price.........Section 11(a)(iii)
Affiliate.............................Section 1(c)
Agreement..................................Preface
Associate.............................Section 1(c)
Beneficial Owner......................Section 1(d)
Beneficially Own......................Section 1(d)
Business Day..........................Section 1(e)
Capital Stock Equivalent.........Section 11(a)(ii)
Close of Business.....................Section 1(f)
Common Shares.........................Section 1(g)
Continuing Director...................Section 1(h)
ii
4
Corporation................................Preface
Current Per Share Market Price....Section 11(d)(i)
Distribution Date.....................Section 3(a)
Equivalent Preferred Shares..........Section 11(b)
Exchange Act..........................Section 1(c)
Exchange Ratio.......................Section 24(a)
Final Expiration Date.................Section 7(a)
Interested Stockholder................Section 1(k)
Permitted Offer.......................Section 1(l)
Person................................Section 1(m)
Preferred Shares......................Section 1(n)
Principal Party......................Section 13(b)
Proration Factor................Section 11(a)(iii)
Purchase Price........................Section 4(a)
Record Date................................Preface
Redemption Date.......................Section 7(a)
Redemption Price........................Section 23
Right......................................Preface
Right Certificate.....................Section 3(a)
Rights Agent...............................Preface
Section 11(a)(ii) Event..........Section 11(a)(ii)
Section 13 Event.....................Section 13(a)
Security..........................Section 11(d)(i)
Shares Acquisition Date...............Section 1(r)
Subsidiary............................Section 1(s)
Summary of Rights.....................Section 3(b)
Then Outstanding.................Section 1(d)(iii)
Trading Day.......................Section 11(d)(i)
Transaction...........................Section 1(t)
iii
5
Transaction Person....................Section 1(u)
Triggering Event......................Section 1(v)
Voting Securities....................Section 13(a)
iv
6
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of October 13, 1998 (the "Agreement"),
between BNC MORTGAGE, INC., a Delaware corporation (the "Corporation"), and U.S.
STOCK TRANSFER CORPORATION (the "Rights Agent").
The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred stock purchase right (a "Right") for each Common Share
(as defined herein) of the Corporation outstanding at the Close of Business (as
defined herein) on October 26, 1998 (the "Record Date"), each Right representing
the right to purchase one one-hundredth of a Preferred Share (as defined
herein), 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 or the Final Expiration
Date (as such terms are defined herein); provided, however, that Rights may be
issued with respect to Common Shares that shall become outstanding after the
Distribution Date and before the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
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 defined herein) who or
which, together with all Affiliates and Associates (as defined herein) of such
Person, shall be the Beneficial Owner (as defined herein) of 15% or more of the
then outstanding Common Shares (other than as a result of a Permitted Offer (as
defined herein)) or was such a Beneficial Owner at any time after the date
hereof, whether or not such person continues to be the Beneficial Owner of 15%
or more of the then outstanding Common Shares. Notwithstanding the foregoing,
(A) the term "Acquiring Person" shall not include (i) the Corporation, (ii) any
Subsidiary of the Corporation, (iii) any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation, (iv) any Person organized,
appointed or established by the Corporation for or pursuant to the terms of any
such plan, or (v) any Person, who or which together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 15% or more of the
then outstanding Common Shares as a result of the acquisition of Common Shares
directly from the Corporation, and (B) no Person shall be deemed to be an
"Acquiring Person" either (X) as a result of the acquisition of Common Shares by
the Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by such Person,
together with all Affiliates and Associates of such Person; except that if (i) a
Person would become an Acquiring Person (but for the operation of this subclause
(X) as a result of the acquisition of Common Shares by the Corporation, and (ii)
after such share acquisition by the Corporation, such Person, or an Affiliate or
Associate of such Person, becomes the Beneficial Owner of any additional Common
Shares, then such Person shall be deemed an Acquiring Person, or (Y) if the
Board of Directors of the Corporation determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this Section 1(a), has become such, 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 Section 1(a).
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
1
7
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates directly or indirectly, has "beneficial ownership" as determined in
accordance with Rule 13d-3 of the General Rules and Regulations under the
Exchange Act;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or after the passage of time) pursuant to any agreement, arrangement
or understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of 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 pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from 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 or Schedule 13G under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) relating to the acquisition, holding, voting (except to
the extent contemplated by the proviso to Section 1(d)(ii)(B)) or disposing of
any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used herein with reference to
a Person's Beneficial Ownership of securities of the Corporation, 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.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
U.S. federal holiday.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the Corporation shall
mean the shares of Common Stock, $.001 par value per share, of the Corporation
or, in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
reference to any Person other than the Corporation 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.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Corporation while such Person is a member the Board of
Directors, who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate and was a member of the Board prior to the date of this
Agreement or (ii) any Person who subsequently becomes a member of the Board of
Directors, while such Person is a member of the Board of Directors who is rot an
Acquiring Person or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate if
such Person's nomination for election or election to the Board of Directors is
recommended or
2
8
approved by a majority of the Continuing Directors.
(i) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(k) "Interested Stockholder" shall mean any Acquiring Person, or any
Affiliate or Associate of an Acquiring Person, or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean a tender or exchange offer which is for
all outstanding Common Shares at a price and on terms determined, before the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board of Directors who are not officers of the Corporation
and who are not Acquiring Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person, to be adequate (taking into account all
factors that such members of the Board of Directors deem relevant including,
without limitation, prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation and its stockholders
(other than the Person or any Affiliate or Associate thereof on whose basis the
offer is being made) taking into account all factors that such directors may
deem relevant.
(m) "Person" shall mean any individual, firm, partnership, corporation,
trust, association, joint venture or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, $0.001 par value per share, of the Corporation
having the relative rights, preferences and limitations set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) hereof.
(r) "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 the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a) hereof, then no Shares Acquisition Date shall be deemed to have
occurred.
(s) "Subsidiary" of any Person shall mean any corporation or other
Person of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(t) "Transaction" shall mean any merger, consolidation or sale of assets
described in Section 13(a) hereof or any acquisition of Common Shares of the
corporation which would result in a Person becoming a Transaction Person.
(u) "Transaction Person" with respect to a Transaction shall mean (x)
any Person who (i) is or will become an Acquiring Person if the Transaction were
to be consummated, and (ii) directly or indirectly proposed or nominated a
director of the Corporation which director is in office at the time of
consideration of the Transaction, or (y) an Affiliate or Associate of such a
Person.
3
9
(v) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Corporation hereby appoints
the Rights Agent to act as agent for the Corporation and the holders of the
Rights (who, in accordance with Section 3 hereof, shall before the Distribution
Date also be the holders of Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) the tenth day after the Shares Acquisition
Date or (ii) the Close of Business on the tenth Business Day (or such later date
as may be determined by action of the Corporation's Board of Directors) after
the date on which any Person (other than the Corporation, any Subsidiary of the
Corporation, any employee benefit plan of the Corporation or of any Subsidiary
of the Corporation or any Person or entity organized, appointed or established
by the Corporation for or pursuant to the terms of any such plan) commences or
first publicly announces the intent to commence (which intention to commence
remains in effect for five Business Days after such announcement), a tender or
exchange offer the consummation of which would result in any Person becoming an
Acquiring Person (including, in the case of both (i) and (ii), any such date
which is after the date of this Agreement and before the issuance of the
Rights), the earlier of such dates being herein referred to as the "Distribution
Date," (x) the Rights will be evidenced by (subject to the provisions of Section
3(b) hereof) the certificates for Common Shares registered in the names of the
holders thereof (which certificates shall also be deemed to be Right
Certificates (as defined herein)) and not by separate Right Certificates, and
(y) the right to receive Right Certificates will be transferable only in
connection with the transfer of the underlying Common Shares (including a
transfer to the Corporation); provided, however, that if a tender offer is
terminated before a Distribution Date occurs, then no Distribution Date shall
occur as a result of such tender offer. As soon as practicable after the
Distribution Date, the Corporation will prepare and execute, the Rights Agent
will countersign, and the Corporation will send or cause to be sent 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 Corporation, a Right Certificate, substantially in
the form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for
each Common Share so held. As of and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) As soon as practicable following the Record Date, the Corporation
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 Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Corporation. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the 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 such Common Shares.
(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 before the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date, shall be
deemed also to be certificates for Rights and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between BNC Mortgage,
Inc. and U.S. Stock Transfer Corporation, dated as of October 13, 1998
(the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of BNC Mortgage, Inc.
4
10
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. BNC Mortgage, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of such Person
or by any subsequent holder, may become null and void. With respect to
such certificates containing the foregoing legend, until the
Distribution 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 Corporation purchases or
acquires any Common Shares after the Record Date but before the
Distribution Date, any Rights associated with such Common Shares shall
be deemed canceled and retired so that the Corporation shall not be
entitled to exercise any Rights associated with the Common Shares that
are no longer outstanding.
Section 4. Form of Right Certificate.
(a) The Right Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall be substantially in the
form set forth in Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Corporation may deem appropriate and as are consistent 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 on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the 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 and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Corporation by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Corporation's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Corporation, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In the
event that any officer of the Corporation who signs any of the Right
Certificates ceases to be such officer of the Corporation before such
countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Corporation; and any Right Certificate may be
5
11
signed on behalf of the Corporation by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the
Corporation to sign such Right Certificate, although at the date of the
execution of this 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 or offices designated as the appropriate place
for surrender or transfer of such Right Certificate, 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
certificate number 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 Certificate. Subject to
the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or before the Close
of Business on the earlier of the Redemption Date or the Final Expiration Date,
any Right Certificate or Right Certificates 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 (or, following a Triggering Event, other securities, as the
case may be) as the Right Certificate or Right Certificates surrendered then
entitle 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 or offices of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Corporation shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder has completed and signed the certificate
contained in the form of assignment on the reverse side of such Right
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner), or Affiliates or Associates
thereof, as the Corporation shall reasonably request. Subject to Section 4(b),
Section 7(e) and Section 14 hereof, the Rights Agent shall thereupon countersign
and deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Corporation may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Corporation 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 Corporation's request,
reimbursement to the Corporation 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 Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, 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
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for the total
number of one one-hundredths of a Preferred Share (or other securities, as the
case may be) as to which such surrendered Rights are exercised, at or before the
earliest of (i) the Close of Business on October 26, 2008 (the "Final Expiration
Date"), (ii) the date on which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the date on which the Rights are
exchanged pursuant to Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a
6
12
Right shall initially be $25.00, subject to adjustment from time to time as
provided in the next sentence and in Sections 11 and 13(a) hereof, and shall be
payable in accordance with paragraph (c) below. Notwithstanding anything in this
Agreement to the contrary, in the event that at any time after the date of this
Agreement and before the Distribution Date, the Corporation 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, each
Common Share outstanding following such subdivision, combination or
consolidation shall continue to have a Right associated therewith, and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price immediately before
such event by a fraction the numerator of which shall be the total number of
Common Shares outstanding immediately before the event occurs and the
denominator of which shall be the total number of Common Shares outstanding
immediately after such event occurs. The adjustment provided for in the
preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(c) Upon receiving a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
securities, as the case may be) to be purchased, and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof, by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i)(A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be
purchased, and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Corporation, in its sole
discretion, shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary 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 depositary agent), and the Corporation
will direct the depositary agent to comply with such requests, (ii) when
appropriate, requisition from the Corporation the amount of cash to be paid in
lieu of issuance of fractional shares, in accordance with Section 14 hereof, and
(iii) after receipt of such certificates or depositary receipts, cause the same,
together with any cash to be paid in lieu of fractional shares, 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. In the
event that the Corporation is obligated to issue other securities (including
Common Shares) of the Corporation pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement, and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(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 to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
7
13
or Associate thereof) who becomes a transferee before or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Corporation, in its sole discretion, has determined is part of a plan,
arrangement or understanding that has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action, and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Corporation shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Corporation shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Corporation 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 Corporation 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 Agreement. The Corporation 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
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such canceled Right Certificates and
in such case, shall deliver a certificate of destruction thereof to the
Corporation.
Section 9. Reservation and Availability of Preferred Shares. The
Corporation covenants and agrees that at all times before a Section 11(a)(ii)
Event occurs it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares, or any authorized and issued Preferred
Shares held in its treasury, the number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights and after a
Section 11(a)(ii) Event occurs, shall, to the extent reasonably practicable, so
reserve and keep available a sufficient number of Common Shares (and/or other
securities) which may be required to permit the exercise in full of the Rights
pursuant to this Agreement.
So long as the Preferred Shares (and, after a Section 11(a)(ii) Event
occurs, Common Shares or any other securities) issuable upon the exercise of the
Rights may be listed on any national securities exchange or on the Nasdaq Stock
Market, the Corporation 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 or on the Nasdaq Stock Market upon official notice of
issuance upon such exercise.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all U.S. 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 (or Common Shares and/or other securities, as the
case may be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any transfer tax which may be payable in
8
14
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 (or Common Shares and/or other securities, as the case may be)
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 depositary receipts for Preferred Shares (or Common Shares
and/or other securities, as the case may be) upon the exercise of any Rights,
until any such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has been
established to the Corporation's reasonable satisfaction that no such tax is
due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act on an appropriate form, with respect to the securities purchasable
upon exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate or required
under the blue sky laws of the various states.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) 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 (or
Common Shares and/or other securities, as the case may be) transfer books of the
Corporation are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Corporation are
open.
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 Corporation 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
or merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, 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, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately before such
date and at a time when the Preferred Shares transfer books of the Corporation
were open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Corporation issuable upon exercise of one
Right. If an event occurs which would require an 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 before, any adjustment
required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, each holder of a
Right (except as provided below and in Section 7(e) hereof) shall, for a period
of 60 days after the later of the occurrence of any such event or the effective
date of an appropriate
9
15
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Common
Shares (or, in the discretion of the Board of Directors, one one-hundredth of a
Preferred Share) as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately before the first occurrence
of a Section 11(a)(ii) Event, and dividing that product by (y) 50% of the then
current per share market price of the Corporation's Common Shares (determined
pursuant to Section 11(d) hereof) on the date of such first occurrence (such
number of shares being referred to as the "Adjustment Shares"); 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);
(iii) In the event that there shall not be sufficient treasury
shares or authorized but unissued (and unreserved) Common Shares to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) and the Rights become so exercisable (and the Board has determined to make
the Rights exercisable into fractions of a Preferred Share), notwithstanding any
other provision of this Agreement, to the extent necessary and permitted by
applicable law, each Right shall thereafter represent the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, (x) a number of (or fractions of) Common Shares (up to the
maximum number of Common Shares which may permissibly be issued) and (y) one
one-hundredth of a Preferred Share or a number of, or fractions of other equity
securities of the Corporation (or, in the discretion of the Board of Directors,
debt) which the Board of Directors of the Corporation has determined to have the
same aggregate current market value (determined pursuant to Section 11(d)(i) and
(ii) hereof, to the extent applicable,) as one Common Share (such number of, or
fractions of, Preferred Shares, debt, or other equity securities or debt of the
Corporation, being referred to as a "capital stock equivalent"), equal in the
aggregate to the number of Adjustment Shares; provided, however, if sufficient
Common Shares and/or capital stock equivalents are unavailable, then the
Corporation shall, to the extent permitted by applicable law, take all such
action as may be necessary to authorize additional Common Shares or capital
stock equivalents for issuance upon exercise of the Rights, including, if
necessary, the calling of a meeting of stockholders; and provided, further, that
if the Corporation is unable to cause sufficient Common Shares and/or capital
stock equivalents to be available for issuance upon exercise in full of the
Rights, then each Right shall thereafter represent the right to receive the
Adjusted Number of Shares upon exercise at the Adjusted Purchase Price (as such
terms are hereinafter defined). As used herein, the term "Adjusted Number of
Shares" shall be equal to that number of (or fractions of) Common Shares (and/or
capital stock equivalents) equal to the product of (x) the number of Adjustment
Shares and (y) a fraction, the numerator of which is the number of Common Shares
(and/or capital stock equivalents) available for issuance upon exercise of the
Rights and the denominator of which is the aggregate number of Adjustment Shares
otherwise issuable upon exercise in full of all Rights (assuming there were a
sufficient number of Common Shares available) (such fraction being referred to
as the "Proration Factor"). The "Adjusted Purchase Price" shall mean the product
of the Purchase Price and the Proration Factor. The Board of Directors may, but
shall not be required to, establish procedures to allocate the right to receive
Common Shares and capital stock equivalents upon exercise of the Rights among
holders of Rights.
(b) In case the Corporation shall fix a record date for the issuance of
rights (other than the 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 before 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
10
16
(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 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); provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Corporation issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be determined
in good faith by the Board of Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent. Preferred Shares owned by or held for the account
of the Corporation 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 Corporation 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
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or 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 before such record date by a fraction, the numerator
of which shall be the then current per share market price (as determined
pursuant to Section 11(d) hereof) of the Preferred Shares on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent)
of the portion of the assets or evidences of indebtedness so to be distributed
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; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Corporation to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the 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 thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately before 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 shares,
or (B) any subdivision, combination or reclassification of such Security and
before the expiration of thirty (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 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 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 Corporation. If on any
such date no such market maker is making market in the Security, the fair value
of the Security on such date as determined in good faith by the Board of
Directors of the Corporation shall be used. The term "Trading Day" shall mean a
day on which the
11
17
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.
(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 Corporation,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent.
(e) Notwithstanding anything herein to the contrary, 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 11 shall be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Shares, thereafter the number of 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 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 Corporation 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 Corporation shall have exercised its election as provided
in Section 11(i) hereof upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately before 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 before this
adjustment by (y) the Purchase Price in effect immediately before 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 Corporation may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a 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-hundredth of a
Preferred Share for which a Right was exercisable immediately before such
adjustment. Each Right held of record before 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 before
the Purchase Price is adjusted by the Purchase Price in effect
12
18
immediately after such adjustment. The Corporation 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 ten (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 Corporation 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, or, at the option of the Corporation, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders before the date of
adjustment, and upon surrender thereof, if required by the Corporation, 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) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of one
one-hundredths of a Preferred Share or other securities issuable upon exercise
of the Rights, the Corporation shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue such number of fully paid and non-assessable one
one-hundredths of a Preferred Share or other securities at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until such event occurs the
issuance to the holder of any Right exercised after such record date the
Preferred Shares, Common Shares or other securities of the Corporation, if any,
issuable upon such exercise over and above the Preferred Shares, Common Shares
or other securities of the Corporation, if any, issuable upon exercise on the
basis of the Purchase Price in effect before such adjustment; provided, however,
that the Corporation shall deliver to such holder a due ββββ or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Notwithstanding anything in this Section 11 to the contrary, the
Corporation 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 (i) any consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of 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)
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Corporation to holders of its Preferred
Shares shall not be taxable to such stockholders.
(n) The Corporation covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Corporation in a transaction that does not violate Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Corporation in a transaction that does not violate Section 11(o) hereof)
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Corporation and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Corporation and/or any of its Subsidiaries in one or more transactions each
of which does not violate Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger, sale or
13
19
transfer there are any charter or bylaw provisions or any rights, warrants or
other instruments or securities outstanding or agreements in effect or other
actions taken, which would materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) before, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates. The
Corporation shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Corporation and such other Person shall have
executed and delivered to the Rights Agent a supplemental agreement evidencing
compliance with this Section 11(n).
(o) The Corporation covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Agreement,
including the rights represented by Section 13 hereof.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 26 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of Common Shares are not treated alike any other Person, (y) the
Corporation shall consolidate with, or merge with, any Interested Stockholder
or, if in such merger or consolidation all holders of Common Shares are not
treated alike, any other Person, and the Corporation shall be the continuing or
surviving corporation of such consolidation or merger (other than, in a case of
any transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting securities
of the Corporation or such surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any Interested
Stockholder or Stockholders or, if in such transaction all holders of Common
Stock are not treated alike, any other Person (other than the Corporation or any
Subsidiary of the Corporation in one or more transactions each of which does not
violate Section 11(n) hereof), then, and in each such case (except as provided
in Section 13(d) hereof), proper provision shall be made so that (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of freely tradeable Common Shares of the Principal
Party (as hereinafter defined), not subject to any liens, encumbrances, rights
of first refusal or other adverse claims, as shall equal 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 is then exercisable
(without taking into account any adjustment previously made pursuant to Section
11(a)(ii)) and dividing that product by (B) 50% of the then current per share
market price
14
20
of the Common Shares of such Principal Party (determined pursuant to Section
11(d) hereof) on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Corporation
pursuant to this Agreement; (iii) the term "Corporation" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; and (iv) 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, to the Common
Shares thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean (i) in the case of any transaction
described in clause (x) or (y) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which Common Shares of the
Corporation are converted in such merger or consolidation, and if no securities
are so issued, the Person that is the other party to such merger or
consolidation (including, if applicable, the Corporation if it is the surviving
corporation); and (ii) in the case of any transaction described in clause (z) 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 of the foregoing
cases, (1) if the Common Shares of such Person are not at such time and have not
been continuously over the preceding twelve (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 Person; (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; and (3) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers, and the Principal Parties
in each such chain shall bear the obligations set forth in this Section 13 in
the same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
its authorized Common Shares which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13,
and unless prior thereto the Corporation 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 consolidation,
merger, sale or transfer mentioned in paragraph (a) of this Section 13, the
Principal Party at its own expense shall:
(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 Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
15
21
(d) Notwithstanding anything in this Agreement to the contrary, this
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or a
wholly owned Subsidiary of any such Person or Persons); (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such Permitted Offer; and (iii) the form of consideration offered in such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Corporation 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 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 before 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 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 Corporation. 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 Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are one one-hundredth or 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 one one-hundredth or 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
Corporation, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Corporation and a depositary selected by it; provided that
such agreement shall provide that the holders of such depositary receipts shall
have the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not one one-hundredth
or integral multiples of one one-hundredth of a Preferred Share, the Corporation
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 Section 11(d)(ii)
hereof) for the Trading Day immediately before the date of such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Common Shares,
capital stock equivalents (other than Preferred Shares) or other securities upon
the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Shares, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Shares, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common Shares, capital
stock equivalents or other securities, the Corporation may 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 a share or unit of such Common Shares, capital stock equivalents or
other securities. For purposes of this Section 14(c), the current market value
shall be determined in
16
22
the manner set forth in Section 11(d) hereof for the Trading Day immediately
before the date of such exercise and, if such capital stock equivalent is not
traded, each such capital stock equivalent shall have the value of one
one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional share 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, before the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, before
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, before the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) before 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 or offices of the Rights Agent designated for such purpose, duly endorsed
or accompanied by a proper instrument of transfer and with the appropriate form
fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the Corporation and
the Rights Agent may deem and treat the person in whose name the Right
Certificate (or, before 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 Certificate or the associated Common Shares certificate made by anyone
other than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Corporation nor the Rights Agent shall have any liability to any holder of a
Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Corporation must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Shares or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for
17
23
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or other distributions
or to exercise any preemptive or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation 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 Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The indemnity provided
for herein shall survive the expiration of the Rights and the termination of
this Agreement.
The Rights Agent shall be protected and shall incur no liability for, or
in respect of, any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Shares or for other securities of the Corporation,
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.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
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
all or substantially all of the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor 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. In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Corporation 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 Corporation), 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
18
24
necessary or desirable that any fact or matter (including, without limitation,
the identity of an Acquiring Person and the determination of the current market
price of any Security) be proved or established by the Corporation before 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, any Vice
President, the Treasurer or the Secretary of the Corporation and delivered to
the Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature on such Right Certificates) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Corporation 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 Corporation of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares or Common Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares or
Common Shares will, when issued, be validly authorized and issued, fully paid
and non-assessable.
(f) The Corporation 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,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and shall not be liable for any action taken or suffered by it in good faith or
lack of action in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Corporation actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, before taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instruction in response to such application specifying the action to be taken or
omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or become pecuniarily interested in any
19
25
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation 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 Corporation 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 Corporation resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights Agent
upon sixty (60) 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 to 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 Corporation shall
appoint a successor to the Rights Agent. If the Corporation shall fail to make
such appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), 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
Corporation or by such a court, shall be a corporation organized, in good
standing and doing business under the laws of the United States or of any state
of the United States, which 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. 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 Corporation 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
Corporation 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.
20
26
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and before the earlier of the Redemption Date
and the Final Expiration Date, the Corporation (a) shall with respect to Common
Shares so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Corporation, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Corporation, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) the
Corporation shall not be obligated to issue any such Right Certificates if, and
to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Corporation or the Person to whom such Right Certificate would be issued,
and (ii) no Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) (i) The Board of Directors of the Corporation may, at its option,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.0001 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"), at any time before the earlier of (x) the occurrence of a
Section 11(a)(ii) Event, or (y) the Final Expiration Date. The Corporation may,
at its option, pay the Redemption Price either in Common Shares (based on the
"current per share market price," as defined in Section 11(d) hereof, of the
Common Shares at the time of redemption) or cash; provided that if the
Corporation elects to pay the Redemption Price in Common Shares, the Corporation
shall not be required to issue any fractional Common Shares and the number of
Common Shares issuable to each holder of Rights shall be rounded down to the
next whole share.
(ii) In addition, the Board of Directors of the Corporation may,
at its option, at any time following the occurrence of a Section 11(a)(ii) Event
and the expiration of any period during which the holder of Rights may exercise
the rights under Section 11(a)(ii) but before any Section 13 Event, redeem all
but not less than all of the then outstanding Rights at the Redemption Price (x)
in connection with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or earning power
aggregating 50% or more of the earning power of the Corporation and its
subsidiaries (taken as a whole) in which all holders of Common Shares are
treated alike and not involving (other than as a holder of Common Shares being
treated like all other such holders) an Interested Stockholder or (y)(aa) if and
for so long as the Acquiring Person is not thereafter the Beneficial Owner of
15% of the Common Shares, and (bb) at the time of redemption no other Persons
are Acquiring Persons.
(b) Notwithstanding the provisions of Section 23(a), in the event that a
majority of the Board of Directors of the Corporation is comprised of (i)
persons elected at a meeting of or by written consent of stockholders who were
not nominated by the Board of Directors in office immediately prior to such
meeting or action by written consent, and/or (ii) successors of such persons
elected to the Board of Directors for the purpose of either facilitating a
Transaction with a Transaction Person or circumventing, directly or indirectly
the provisions of this Section 23(b), then (I) the Rights may not be redeemed
for a period of 180 days following the effectiveness of such election if such
redemption is reasonably likely to have the purpose or effect of facilitating a
Transaction with a Transaction Person and (II) the Rights may not be redeemed
following such 180-day period, if (x) such redemption is reasonably likely to
have the purpose or effect of facilitating a Transaction with a Transaction
Person and (y) during such 180-day period the Corporation enters into any
agreement, arrangement or understanding with any Transaction Person which is
reasonably likely to have the purpose or effect of facilitating a Transaction
with any Transaction Person. If the Board of Directors of the Corporation
authorizes redemption of the Rights in either of the circumstances set forth in
clauses 23(a)(i) or 23(a)(ii) above then there must he Continuing Directors then
in office and such authorization shall require only the concurrence of a
majority of such Continuing Directors if: (i) such authorization occurs on or
after the time a Person becomes an Acquiring Person or (ii) such authorization
occurs on or after the date of a change (resulting from a proxy or consent
solicitation) in a majority of the directors
21
27
in office at the commencement of such solicitation if any Person who is a
participant in such solicitation has stated (or if upon the commencement of such
solicitation a majority of the Board of Directors of the Corporation has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take or may consider taking any action which would result
in such Person becoming an Acquiring Person or which would cause the occurrence
of a Triggering Event.
(c) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified in) in a resolution of the Board of Directors of the Corporation
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights will terminate, and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price for each Right
so held. In the case of a redemption permitted only under Section 23(a)(ii),
evidence of which shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the right to receive the
Redemption Price upon the later of ten (10) Business Days following the giving
of such notice or the expiration of any period during which the rights under
Section 11(a)(ii) may be exercised. The Corporation shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such date for redemption set forth in a resolution of
the Board of Directors ordering the redemption of the Rights, the Corporation
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, before 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 Corporation 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 and other than in connection with the purchase of Common Shares
before the Distribution Date.
(d) The Corporation may, at its option, discharge all of its obligations
with respect to the Rights by (i) issuing a press release announcing the manner
of redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
before the Distribution Date, on the registry books of the Transfer Agent of the
Common Shares, and upon such action, all outstanding Rights and Right
Certificates shall be null and void without any further action by the
Corporation.
Section 24. Exchange.
(a) The Board of Directors of the Corporation may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares of the Corporation at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Corporation, any Subsidiary of the
Corporation, any employee benefit plan of the Corporation or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such a plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate, and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Corporation 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 Corporation shall
22
28
promptly mail a notice of any such exchange to all of the holders of such Rights
at their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b) hereof) for some or all of the Common Shares
exchangeable for Rights, at the initial rate of one one-hundredth of a Preferred
Share (or equivalent preferred share) for each Common Share, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Shares
pursuant to the terms thereof, so that the fraction of a Preferred Share
delivered in lieu of each Common Share shall have the same voting rights as one
Common Share.
(d) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Corporation shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights.
Section 25. Notice of Certain Events.
(a) In case the Corporation shall propose (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
regularly 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 or merger
into or with any other Person (other than a Subsidiary of the Corporation in a
transaction which does not violate Section 11(n) hereof), 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 Corporation and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Corporation and/or any of
its Subsidiaries in one or more transactions each of which does not violate
Section 11(n) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Corporation, then, in each such case, the Corporation shall give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action to the extent feasible and file a certificate
with the Rights Agent to that effect, 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 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 twenty (20) days before 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 twenty (20) days
before the date of the taking of such proposed action or the date of
participation therein by the holders of the Preferred Shares, whichever shall be
the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation 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, and (ii) all references in the
preceding paragraph (a) to Preferred Shares shall be deemed thereafter to refer
also to Common Shares and/or, if appropriate, other securities of the
Corporation.
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 Corporation shall be sufficiently given or made if sent
23
29
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Rights Agent) as follows:
BNC MORTGAGE, INC.
ββββ βββββ ββββββ
ββββββ, ββββββββββ βββββ-ββββ
Attention: βββββ βββββββ
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation 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, addressed (until another address
is filed in writing with the Corporation) as follows:
U.S. STOCK TRANSFER CORPORATION
ββββ βββββββ ββββββ
ββββββββ, ββββββββββ βββββ-ββββ
Attention: ββββ ββββββββ
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
before the Distribution Date, to the holder of certificates representing Common
Shares 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 books of the Corporation.
Section 27. Supplements and Amendments. Before the Distribution Date,
the Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares. From and after the
Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Before the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares. Notwithstanding anything contained in
this Rights Agreement to the contrary, in the event that a majority of the Board
of Directors of the Corporation is comprised of (i) persons elected at a meeting
of or by written consent of stockholders who were not nominated by the Board of
Directors in office immediately prior to such meeting or action by written
consent, and/or (ii) successors of such persons elected to the Board of
Directors for the purpose of either facilitating a Transaction with a
Transaction Person or circumventing, directly or indirectly the provisions of
this Section 27, then for a period of 180 days following the effectiveness of
such action, this Rights Agreement shall not be amended or supplemented in any
manner reasonably likely to have the purpose or effect of facilitating a
Transaction with a Transaction Person.
Section 28. Determination and Actions by the Board of Directors, etc.
The Board of Directors of the Corporation shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Corporation, or as may be necessary or
advisable in the
24
30
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of Common Shares or
other securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares or any
other securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Corporation, the Rights Agent, the holders
of the Right Certificates and all other parties, and (y) not subject the Board
to any liability to the holders of the Right Certificates.
Section 29. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Corporation,
the Rights Agent and the registered holders of the Right Certificates (and,
before the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, before the Distribution Date, the Common
Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, for any reason, such
invalid or unenforceable provision shall not affect any other provision hereof
and this Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
Section 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counter- parts, 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 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
25
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
BNC MORTGAGE, INC.
By: /s/ ββββ βββββββ
--------------------------------
ββββ βββββββ
Chairman of the Board
and Chief Executive Officer
Attest:
/s/ βββββ βββββββ
--------------------------------
βββββ βββββββ
U.S. STOCK TRANSFER CORPORATION
By: /s/ βββββββ ββββββ
--------------------------------
βββββββ ββββββ
--------------------------------
Its Sr. Vice President
----------------------------
Attest:
/s/ ββββ β. ββββββββ
--------------------------------
ββββ β. ββββββββ
Assistant Vice President
26
32
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
BNC MORTGAGE, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
BNC MORTGAGE, INC. a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on October 13, 1998 adopted the
following resolution creating a series of shares of Preferred Stock designated
as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value
$.001 per share, of the Corporation be and hereby is created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:
Series A Junior Participating Preferred Stock.
Section 1. Designation and Amount. There shall be a series of Preferred
Stock that shall be designated as "Series A Junior Participating Preferred
Stock" (hereinafter referred to as "Series A Preferred Stock") and the number of
shares constituting such series shall be 570,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of Series A Junior
Participating Preferred Stock to less than the number of shares then issued and
outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the first business day of January, April,
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 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, $.001 par value per share, of the Corporation (the
"Common Stock") or a subdivision of the outstanding shares of Common Stock (by
reclassification
A-1
33
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (a) above immediately after it
declares a dividend or distribution on the Common Stock (other than 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 $1.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A 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 A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days before the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Except as provided in paragraph (c) of this Section 3 and subject to
the provision for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) (i) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in preference
dividends (as defined in subparagraph (v) below) on the Series A Preferred Stock
shall exist, the holders of the Series A Preferred Stock shall have the right,
voting as a class as described in subparagraph (ii) below, to elect two
directors, and the holders of shares of Common Stock shall have the right to
elect the remaining directors. Such right may be exercised at any meeting of
stockholders for the election of directors until all such cumulative dividends
(referred to above) shall have been paid in full or until noncumulative
dividends have been paid regularly for at least one year.
(ii) The right of the holders of Series A Preferred Stock to
elect two directors, as described above, shall be exercised as a class
concurrently with the rights of holders of any other series of Preferred Stock
upon which voting rights to elect such directors have been conferred and are
then exercisable. The Series A Preferred Stock and any additional series of
Preferred Stock which the Corporation may issue and which may provide for the
right to vote with the foregoing series of Preferred Stock are collectively
referred to herein as "Voting Preferred Stock."
(iii) Each director elected by the holders of shares of Voting
Preferred Stock shall be referred
A-2
34
to herein as a "Preferred Director." A Preferred Director so elected shall
continue to serve as such director for a term of one year, except that upon any
termination of the right of all of such holders to vote as a class for Preferred
Directors, the term of office of such directors shall terminate. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of the
holders of record of a majority of the outstanding shares of Voting Preferred
Stock then entitled to vote for the election of directors, present (in person or
by proxy) and voting together as a single class (a) at a meeting of the
stockholders, or (b) at a meeting of the holders of shares of such Voting
Preferred Stock, called for the purpose in accordance with the Bylaws of the
Corporation, or (c) by written consent signed by the holders of a majority of
the then outstanding shares of Voting Preferred Stock then entitled to vote for
the election of directors, taken together as a single class.
(iv) So long as a default in any preference dividends on the
Series A Preferred Stock shall exist or the holders of any other series of
Voting Preferred Stock shall be entitled to elect Preferred Directors, (a) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote or
written consent of the holders of a majority of the outstanding shares of Voting
Preferred Stock then entitled to vote for the election of directors, present (in
person or by proxy) and voting together as a single class, at such time as the
removal shall be effected. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever (x) no default in preference dividends on the Series A
Preferred Stock shall exist and (y) the holders of any other Series of Voting
Preferred Stock shall no longer be entitled to elect such Preferred Directors,
then the number of directors of the Corporation shall be reduced by two.
(v) For purposes hereof, a "default in preference dividends" on
the Series A Preferred Stock shall be deemed to have occurred whenever the
amount of cumulative and unpaid dividends on the Series A Preferred Stock shall
be equivalent to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all cumulative dividends on all shares of the
Series A Preferred Stock then outstanding shall have been paid through the last
Quarterly Dividend Payment Date or until, but only until, non-cumulative
dividends have been paid regularly for at least one year.
(d) Except as set forth herein (or as otherwise required by applicable
law), holders of Series A Preferred Stock shall have no general or special
voting rights and their consent shall not be required for taking any corporate
action
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A 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 A 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 A Preferred Stock,
except dividends paid ratably on the Series A 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
(except as provided in (iv) below) shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to
A-3
35
the Series A 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 A
Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A 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 A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Amendment creating a
series of Preferred Stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(a) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Preferred Stock with respect to rights upon liquidation, dissolution or
winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A 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
(the "Series A Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Capital Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (such number in clause (ii), the
"Adjustment Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Capital Adjustment in respect of all outstanding
shares of Series A Preferred Stock and Common Stock, respectively, holders of
Series A Preferred Stock and holders of Common Stock shall receive their ratable
and proportionate share of the remaining assets to be distributed in the ratio
of the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of Series A Preferred Stock
and the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Capital Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
A-4
36
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
IN WITNESS WHEREOF, this Certificate of Amendment is executed on behalf
of the Corporation by its President and attested by its Secretary this _____ day
of October, 1998.
------------------------------
βββββ βββββββ
President
Attest:
------------------------------
ββββ β. βββββββ
Secretary
A-5
37
EXHIBIT B
FORM OF RIGHT CERTIFICATE
NO. R- ___________ RIGHTS
NOT EXERCISABLE AFTER OCTOBER 26, 2008 OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.0001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT
RIGHT CERTIFICATE
BNC MORTGAGE, 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 that certain Rights
Agreement, dated as of October 13, 1998 (the "Rights Agreement"), between BNC
Mortgage, Inc., a Delaware corporation (the "Corporation"), and U.S. Stock
Transfer Corporation (the "Rights Agent"), to purchase from the Corporation at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and before 5:00 P.M., New York time, on October 26, 2008 unless the
Rights evidenced hereby shall have been previously redeemed by the Corporation,
at the principal office or offices of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-hundredth of
a fully paid non-assessable share of Series A Junior Participating Preferred
Stock, $0.001 par value per share (the "Preferred Shares"), of the Corporation,
at a purchase price of $25.00 per one one-hundredth of 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
______, 1998, based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee before or concurrently with the Acquiring Person becoming such, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-hundredths of a Preferred Share or other securities 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,
including Triggering Events (as such term is defined in the Rights Agreement).
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 Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Corporation and the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the
B-1
38
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 or other securities 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 may be redeemed by the Corporation at a redemption price of
$.0001 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one
one-hundredth or integral multiples of one one-hundredth of a Preferred Share,
which may, at the election of the Corporation, be evidenced by depositary
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 Corporation 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 Corporation 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 other distributions or to exercise
any preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal.
Dated as of ________ __, _____.
[SEAL]
BNC MORTGAGE, INC.
Attest:
By_____________________________ By_______________________________________
Name: Name:
Title: Title:
Countersigned:
U.S. Stock Transfer Corporation
By_____________________________
Authorized Signatory
Name:
Title:
β-β
ββ
ββββ ββ βββββββ ββββ of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ___________________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________________
------------------------------
Signature
Signature Guaranteed: _________________________
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement) and (2) after due inquiry
and to the best knowledge of the undersigned, the undersigned did not acquire
the Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement).
------------------------------
Signature
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise ______________
Rights represented by this Right Certificate to purchase the Preferred Shares,
Common Shares or other securities issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares, Common Shares or other
securities be issued in the name of:
Please insert social security or other identifying number ______________________
B-3
40
--------------------------------------------------------------------------------
(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 an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement) and (2) after due inquiry
and to the best knowledge of the undersigned, the undersigned did not acquire
the Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are 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
Corporation 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-4
41
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On October 13, 1998, the Board of Directors of BNC Mortgage, Inc. (the
"Corporation") declared a dividend distribution of one preferred share purchase
right (a "Right") for each outstanding share of Common Stock, $.001 par value
per share (the "Common Stock"), of the Corporation. The dividend is payable to
stockholders of record on October 26, 1998 (the "Record Date"), and with respect
to Common Stock issued thereafter until the Distribution Date (as defined below)
and, in certain circumstances, with respect to Common Stock issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation one
one-hundredth of a share of Series A Junior Participating Preferred Stock, $.001
par value per share (the "Preferred Shares"), of the Corporation at a price of
$25.00 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") between the Corporation and U.S.
Stock Transfer Corporation, as Rights Agent (the "Rights Agent") dated as of
October 13, 1998.
Initially, the Rights will be attached to all certificates representing
Common Stock then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Stock upon the earliest to
occur of (i) ten (10) days after a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the Corporation's
outstanding Common Stock (except pursuant to a Permitted Offer, as hereinafter
defined); or (ii) ten (10) Business Days (as defined in the Rights Agreement)
(or such later date as the Board may determine) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (as hereinafter defined) (the earliest of such dates being called the
"Distribution Date"). A person or group whose acquisition of Common Stock causes
a Distribution Date pursuant to clause (i) above is an "Acquiring Person." The
date that a person or group becomes an Acquiring Person is the "Shares
Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred solely with the Common Stock. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date upon transfer or new issuances of
Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Stock
outstanding as of the Record Date, even if such notation or a copy of the
Summary of Rights is not attached thereto, will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Stock
issued after the Distribution Date), and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 26, 2008, unless earlier redeemed by
the Corporation as described below.
If any person becomes an Acquiring Person (except pursuant to a tender
or exchange offer which is for all outstanding Common Stock at a price and on
terms which a majority of members of the Board of Directors (who are not also
officers of the Corporation or an Acquiring Person or affiliate or associate
thereof) determines to be adequate and in the best interests of the Corporation
and its stockholders, other than such Acquiring Person, its affiliates and
associates (a "Permitted Offer")), each holder of a Right will thereafter have
the right (the "Flip-In Right") to receive upon exercise the number of shares of
Common Stock (or, in certain circumstances, one one-hundredths of a share of
Preferred Shares or other securities of the Corporation) having a market value
C-1
42
(immediately before such triggering event) equal to two times the exercise price
of the Right. At such time, all Rights that are beneficially owned by the
Acquiring Person or any affiliate, associate or transferee thereof will be null
and void.
If at any time following the Shares Acquisition Date, (i) the
Corporation is acquired in a merger or other business combination transaction in
which the holders of all of the outstanding Common Shares immediately before the
consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or (ii) more than 50% of the Corporation's assets or
earning power are sold or transferred, in either case with or to an Acquiring
Person or any affiliate or associate or any other person in which such Acquiring
Person, affiliate or associate has an interest or any person acting on behalf of
or in concert with such Acquiring Person, affiliate or associate, or, if in such
transaction all holders of Common Stock are not treated alike, then each holder
of a Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right (the "Flip-Over Right") to receive, upon
exercise, common shares of the acquiring company having a value equal to two
times the exercise price of the Right. The holder of a Right will continue to
have the Flip-Over Right only to the extent that the Flip-In Right has not
previously been exercised.
The Purchase Price payable and the number of Preferred Shares, shares of
Common Stock or other securities 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) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price (or conversion price as the case may be), less than the then 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).
The number of outstanding Rights and the number of one one-hundredths of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, before the
Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 100 times the dividend declared per share
of Common Stock. In the event of liquidation, the holders of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of $1.00
per share, plus accrued and unpaid dividends; thereafter, and after the holders
of the Common Stock receive a liquidation payment of $1.00 per share (as
adjusted), the holders of the Preferred Shares and the holders of the Common
Stock will share the remaining assets in the ratio of 100 to 1 (as adjusted) for
each Preferred Share and share of Common Stock so held, respectively. Finally,
in the event of any merger, consolidation or other transaction in which Common
Stock is exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per share of Common Stock. The rights are protected by
customary antidilution provisions. In the event that the amount of accrued and
unpaid dividends on the Preferred Shares is equivalent to six full quarterly
dividends or more (whether or not consecutive), the holders of the Preferred
Shares shall have the right, voting as a class, to elect two directors until all
cumulative dividends on the Preferred Shares have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are one one-hundredth or integral multiples of one one-hundredth
of a Preferred Share, which may, at the election of the Corporation, be
evidenced by depository receipts) and in lieu thereof, a payment in cash will be
made based on the market price of the Preferred Shares on the last Trading Day
(as defined in the Rights Agreement) before the date of exercise.
C-2
43
At any time before the earlier to occur of (i) a person becoming an
Acquiring Person, (ii) the expiration of the Rights, or (iii) in certain
circumstances, after the Shares Acquisition Date, the Corporation may redeem all
but not less than all of the Rights at a price of $.0001 per Right (the
"Redemption Price") which redemption shall be effective upon the action of the
Board of Directors.
All of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Corporation before the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
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 Corporation. 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 hereby incorporated herein by reference.
C-3