HOUGHTON MIFFLIN COMPANY
and
THE FIRST NATIONAL BANK OF BOSTON,
Rights Agent
Rights Agreement
Dated as of December 9, 1988
Table of Contents
Section Page
------- ----
1 Certain Definitions .................................................... 1
2 Appointment of Rights Agent ............................................ 8
3 Issuance of Rights Certificates ........................................ 8
4 Form of Rights Certificates ............................................ 11
5 Countersignature and Registration ...................................... 12
6 Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates .......................... 13
7 Exercise of Rights; Purchase Price;
Expiration Date of Rights .............................................. 14
8 Cancellation and Destruction of
Rights Certificates .................................................... 17
9 Reservation and Availability of Capital Stock .......................... 17
10 Preferred Stock Record Date ............................................ 19
11 Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights ..................................... 20
12 Certificate of Adjusted Purchase Price or
Number of Shares ....................................................... 35
13 Consolidation, Merger or Sale or
Transfer of Assets or Earning Power .................................... 35
14 Fractional Rights and Fractional Shares ................................ 39
15 Rights of Action ....................................................... 41
16 Agreement of Rights Holders ............................................ 41
17 Rights Certificate Holder Not Deemed a
Stockholder ............................................................ 42
i
Section Page
------- ----
18 Concerning the Rights Agent ............................................ 43
19 Merger or Consolidation or Change of Name
of Rights Agent ........................................................ 43
20 Duties of Rights Agent ................................................. 44
21 Change of Rights Agent ................................................. 47
22 Issuance of New Rights Certificates .................................... 49
23 Redemption and Termination ............................................. 49
24 Notice of Certain Events ............................................... 51
25 Notices ................................................................ 52
26 Supplements and Amendments ............................................. 53
27 Successors ............................................................. 54
28 Determinations and Actions by the Board of
Directors, etc. ........................................................ 54
29 Benefits of this Agreement ............................................. 55
30 Severability ........................................................... 55
31 Governing Law .......................................................... 56
32 Counterparts ........................................................... 56
33 Descriptive Headings ................................................... 56
Exhibit A -- Certificate of Vote of Directors Establishing a
Series of a Class of Stock
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
ii
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 9, 1988, between Houghton
Mifflin Company, a Massachusetts corporation (the "Company"), and The First
National Bank of Boston, a national banking association (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on December 9, 1988 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the Close of Business on December 19,
1988 (the "Record Date"), and has authorized the issuance of one Right (as such
number may hereinafter be adjusted pursuant to the provisions of Section ll(p)
hereof) for each share of Common Stock of the Company issued between the Record
Date (whether originally issued or delivered from the Company's treasury) and
the Distribution Date, each Right initially representing the right to purchase
one one-thousandth of a share of Series A Junior Participating Preferred Stock
of the Company having the rights, powers and preferences set forth in the form
of Certificate of Vote of Directors Establishing a Series of a Class of Stock
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 20% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company or (iv) any
Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan.
(b) "Act" shall mean the Securities Act of 1933, as amended and as
in effect on the date of this Agreement.
(c) "Adjustment Shares" shall have the meaning set forth in Section
ll(a)(ii) hereof.
(d) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Continuing Directors (with the concurrence of the Outside
Directors) upon determination that the criteria set forth in Section
ll(a)(ii)(D) apply to such Person.
(e) "Adverse Person Event" shall mean the determination by the
Continuing Directors (with the concurrence of the Outside Directors) pursuant to
the criteria set forth in Section ll(a)(ii)(D) hereof, that a Person is an
Adverse Person.
(f) "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").
(g) "Agreement" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(h) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (whether or not in writing)
or upon the exercise of conversion rights, exchange rights, other rights,
warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to
2
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (C) securities issuable
upon exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to
Section ll(i) hereof in connection with an adjustment made with respect to
any Original Rights;
(ii) which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in
3
writing), for the purpose of acquiring, holding, voting (except pursuant to
a revocable proxy as described in the proviso to subparagraph (ii) of this
paragraph (h)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (h) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition.
(i) "Board" means the Board of Directors of the Company.
(j) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.
(k) "Close of Business" on any given date shall mean 5:00 P.M.,
Boston, Massachusetts time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on
the next succeeding Business Day.
(1) "Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the class of capital stock of such
Person with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(m) "Common Stock Equivalents" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(n) "Company" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this
4
Agreement, and thereafter "Company" shall mean such successor corporation or
Principal Party.
(o) "Continuing Director" shall mean:
(i) any member of the Board, while such Person is a member of
the Board, who is not an Acquiring Person or an Adverse Person, or an
Affiliate or Associate of an Acquiring Person or an Adverse Person, or a
representative of an Acquiring Person or an Adverse 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, while such Person is a member of the Board, who is not an Acquiring
Person or an Adverse Person, or an Affiliate or Associate of an Acquiring
Person or an Adverse Person, or a representative of an Acquiring Person or
an Adverse Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved
by a majority of the Continuing Directors.
(p) "Current Market Price" shall have the meaning set forth in
Section ll(d) hereof.
(q) "Current Value" shall have the meaning set forth in Section
ll(a)(iii) hereof.
(r) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(s) "Equivalent Preferred Stock" shall have the meaning set forth
in Section ll(b) hereof.
(t) "Exchange Act" shall have the meaning set forth in Section l(f)
hereof.
(u) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(v) "Final Expiration Date" shall mean the Close of Business on
December 18, 1998.
5
(w) "Outside Directors" shall mean the Continuing Directors who are
not officers of the Company.
(x) "Original Rights" shall have the meaning set forth in Section
l(h)(i) hereof.
(y) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(z) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, par value $1.00 per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating Preferred Stock.
(aa) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(bb) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.
(cc) "Record Date" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.
(dd) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(ee) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.
(ff) "Rights Agent" shall mean the Person named as the "Rights
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the applicable provisions of this Agreement, "Rights Agent" shall mean and
include each such Person.
6
(gg) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(hh) "Rights Dividend Declaration Date" shall have the meaning set
forth in the WHEREAS clause at the beginning of the Agreement.
(ii) "Section ll(a)(ii) Event" shall mean any event described in
Section ll(a)(ii) (A), (B), (C) or (D) hereof.
(jj) "Section ll(a)(ii) Trigger Date" shall have the meaning set
forth in Section ll(a)(iii) hereof.
(kk) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(11) "Spread" shall have the meaning set forth in Section
ll(a)(iii) hereof.
(mm) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(nn) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(oo) "Substitution Period" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(pp) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(qq) "Trading Day" shall have the meaning set forth in Section
ll(d)(i) hereof.
(rr) "Triggering Event" shall mean any Section ll(a)(ii) Event or
any Section 13 Event.
7
(ss) "Unit" shall mean one-thousandth of a share of Preferred
Stock.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the earliest of (i) the Close of Business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), (ii) the Close of Business on the tenth Business Day (or, if such
tenth Business Day occurs before the Record Date, the Close of Business on the
Record Date), or such specified or unspecified later date on or after the Record
Date as may be determined by action of a majority of the Continuing Directors,
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 30% or more of the shares
of Common Stock then outstanding or (iii) immediately after the occurrence of an
Adverse Person Event (the earliest of (i), (ii) and (iii) being herein referred
to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will
8
send by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights
certificates, in the form specified in Section 4 hereof (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
ll(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Rights shall also be issued to the extent provided in Section
22 in respect of all shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Distribution Date and prior to
the Expiration Date. Certificates representing such shares of Common Stock in
9
respect of which Rights are issued pursuant to the first sentence of this
Section 3(c) shall also be deemed 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 the Rights Agreement between Houghton
Mifflin Company (the "Company") and The First National Bank of Boston (the
"Rights Agent") dated as of December 9, 1988 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. 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. The Company will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of mailing, without charge
promptly 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, an Adverse Person
or any Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such Person or
by any subsequent holder, may become null and void. The Rights shall not be
exercisable, and shall be void so long as held, by a holder in any
jurisdiction where the requisite qualification to the issuance to such
holder, or the exercise by such holder, of the Rights in such jurisdiction
shall not have been obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
10
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment and related certificates to be printed on the reverse thereof)
shall each 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 Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange 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 Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of Units as shall be
set forth therein at the price set forth therein (such exercise price per Unit,
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 Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or an Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person or the Adverse Person becomes such or (iii) a transferee of
an Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
the Adverse Person becoming such and receives such Rights pursuant to either (A)
a transfer (whether or not for consideration) from the Acquiring Person or the
Adverse Person to holders of equity interests in such Acquiring Person or
Adverse Person or to any Person with whom such Acquiring Person or Adverse
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which a majority of the Continuing
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of Section 7(e) hereof, and any
Rights Certificate issued
11
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend (modified to apply
to an Acquiring Person or an Adverse Person, as applicable):
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an [Acquiring] [Adverse] Person or an
Affiliate or Associate of an [Acquiring] [Adverse] Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate and
the Rights represented hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Clerk or
any Assistant Clerk or the Treasurer or any Assistant Treasurer of the Company,
either manually or by facsimile signature. The Rights Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office
12
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of 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 prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of Units (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the office of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
13
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights 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
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section ll(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase set
forth on the reverse side thereof and the certificate contained therein duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price with respect
to the total number of Units (or other shares, securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earliest of (i) the Final Expiration Date, (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof or (iii) the time
at which the Rights expire pursuant to Section 13(d) hereof (the earliest of
(i), (ii) and (iii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each Unit pursuant to the exercise of a
Right shall initially be $125, and shall be subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below.
14
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per Unit (or other shares, securities, cash or other assets, as the case
may be) to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of Units to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of Units as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section ll(a)(iii) hereof) shall be
made in cash or by certified check, cashier's check or bank draft payable to the
order of the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section ll(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evi-
15
dencing Rights equivalent to the Rights remaining unexercised shall be issued by
the Rights Agent and delivered to, or upon the order of, the registered holder
of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of an event described in Section
ll(a)(ii)(A) or (C) and from and after the tenth day after the occurrence of an
event described in Section ll(a)(ii)(B) or (D), any Rights beneficially owned by
(i) an Acquiring Person, an Adverse Person or an Affiliate or Associate of an
Acquiring Person or an Adverse Person, which a majority of the Continuing
Directors, in their sole discretion, determines is or was involved in or caused
or facilitated, directly or indirectly (including through any change in the
Board), such Section ll(a)(ii) Event, (ii) a transferee of any such Acquiring
Person or Adverse Person (or of any such Affiliate or Associate) who becomes a
transferee after such Acquiring Person or Adverse Person becomes such, or (iii)
a transferee of any such Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
such Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from such
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom such Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which a
majority of the Continuing Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action, and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or any of their respective Affiliates, Associates or
transferees hereunder.
16
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. A11
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section ll(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
17
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Act, with respect to the Common Stock or other
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Upon any suspension of
exercisability of the Rights referred to in this Section 9(c), the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable, and shall be
void so long as held, by a holder in any jurisdiction where the requisite
qualification to
18
the issuance to such holder, or the exercise by such holder, of the Rights in
such jurisdiction shall not have been obtained or be obtainable, or the exercise
thereof shall not be permitted under applicable law or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Units (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of Units (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of Units (or Common
Stock and/or other securities, as the case may be) in respect of a name other
than that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
Units (or Common Stock and/or other securities, as the case may be) in a name
other than that of the registered holder upon the exercise of any Rights until
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for a number of Units (or Common Stock 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 such fractional
shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of
19
the Purchase Price (and all applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of shares,
or (D) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section ll(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 Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exer-
20
cised after such time shall be entitled to receive, upon payment of the
aggregate adjusted Purchase Price then in effect necessary to exercise a
Right in full, the aggregate number and kind of shares of Preferred Stock or
capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock (or
other capital stock, as the case may be) transfer books of the Company were
open, he would have owned upon such exercise and by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this Section ll(a)(i) and Section ll(a)(ii)
hereof, the adjustment provided for in this Section ll(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section ll(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of
such merger or combination and the Common Stock of the Company shall remain
outstanding and unchanged, (2) shall merge or otherwise combine with any
Subsidiary of the Company, (3) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its
Subsidiaries in exchange (in whole or in part) for shares of Common Stock,
for shares of other equity securities of the Company or any Subsidiary of
the Company, or for securities exercisable for or convertible into shares
of equity securities of the Company or any Subsidiary of the Company
(Common Stock or otherwise) or otherwise obtain from the Company, with or
without consideration, any additional shares of equity securities or
securities exercisable for or convertible into shares of equity securities
(other than pursuant to a pro rata distribution to all holders of Common
Stock, or upon the
21
exercise of a convertible security of the Company or any Subsidiary of the
Company in accordance with its terms), (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in
one transaction or a series of transactions, to, from or with (as the case
may be) the Company or any of its Subsidiaries, assets on terms and
conditions less favorable to the Company than the Company would be able to
obtain in arm's-length negotiation with an unaffiliated third party, other
than pursuant to a transaction set forth in Section 13(a) hereof, (5) shall
sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise
acquire or dispose of in one transaction or a series of transactions, to,
from or with (as the case may be) the Company or any of the Company's
Subsidiaries (other than incidental to the lines of business, if any,
engaged in as of the date hereof between the Company and such Acquiring
Person or Associate or Affiliate) assets having an aggregate fair market
value of more than $5,000,000, other than pursuant to a transaction set
forth in Section 13(a) hereof, (6) shall receive any compensation from the
Company or any of the Company's Subsidiaries other than compensation for
full-time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices or (7) shall receive the
benefit, directly or indirectly (except proportionately as a stockholder and
except if resulting from a requirement of law or governmental regulation),
of any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantage provided by the Company or any of its
Subsidiaries, or
(B) any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become
22
the Beneficial Owner of 30% or more of the shares of Common Stock then
outstanding, unless the event causing the 30% threshold to be crossed is a
transaction set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined by
at least a majority of the Outside Directors after receiving advice from one
or more investment banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such Outside Directors
deem relevant including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best interests
of the Company and its stockholders, or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other transaction or
series of transactions involving the Company or any of its Subsidiaries,
other than a transaction or transactions to which the provisions of Section
13(a) apply (whether or not with or into or otherwise involving an Acquiring
Person) which has the effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding shares of any class of
equity securities of the Company or any of its Subsidiaries which is
directly or indirectly beneficially owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, or
(D) the Continuing Directors shall declare any Person to be
an Adverse Person, upon a determination that such Person, alone or together
with its Affiliates and Associates, has, at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner of an amount of
Common Stock which the Continuing Directors determine to be substan-
23
tial (which amount shall in no event be less than 15% of the shares of
Common Stock then outstanding) and a majority of the Outside Directors
determines, after reasonable inquiry and investigation, which may include a
review of the public record regarding such Person and any information such
directors may request from such Person and consultation with such persons as
such directors shall deem appropriate, that (1) such Beneficial Ownership by
such Person is intended to cause the Company to repurchase the Common Stock
beneficially owned by such Person or to cause pressure on the Company to
take action or enter into a transaction or series of transactions intended
to provide such Person with short-term financial gain under circumstances
where such directors determine that the best long-term interests of the
Company and its stockholders would not be served by taking such action or
entering into such transaction or series of transactions at that time or (2)
such Beneficial Ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of the
Company's relationships with its authors or customers or its ability to
maintain its competitive position) on the business or prospects of the
Company,
proper provision shall be made so that immediately upon the occurrence of any
event described in Section ll(a)(ii)(A) or (C) hereof, and ten (10) days after
the occurrence of any event described in Section ll(a)(ii)(B) or (D) hereof,
each holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of Units, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of Units for which a Right was or would have been
exercisable immediately prior to the first occurrence of a Section ll(a)(ii)
Event, whether or not such Right was then exercisable, and (y) dividing that
product (which, following such first occurrence, shall thereafter be referred to
as the "Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price per
24
share of Common Stock on the date of such first occurrence (such number of
shares being referred to as the "Adjustment Shares").
(iii) In lieu of issuing shares of Common Stock in accordance
with Section ll(a)(ii), if the Board determines that the action described
below in this Section ll(a)(iii) is necessary or appropriate and not
contrary to the interests of the holders of Rights (other than any Acquiring
Person, any Adverse Person and any Affiliate or Associate of any such
Person), the Company may: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess being referred to as the
"Spread"), and (B) with respect to each Right (subject to Section 7(e)
hereof), make adequate provision to substitute for the Adjustment Shares,
upon the exercise of a Right and payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock which the Board has deemed to have the
same value as shares of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such aggregate value
has been determined by the Board based upon the advice of a nationally
recognized investment banking firm selected by the Board which has
theretofore performed no services for the Company or any Subsidiary of the
Company in the past five years; provided, however, that if the Company shall
not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the later of (x) the first
occurrence of a Section ll(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section ll(a)(ii) Trigger
Date"), then the
25
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If, after the
occurrence of a Section ll(a)(ii) Event, the number of shares of Common
Stock that are authorized by the Company's Articles of Organization but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with Section ll(a)(ii) hereof and the Board determines
in good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section ll(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such thirty (30) day period, as
it may be extended, is herein called the "Substitution Period"). To the
extent that action is to be taken pursuant to the preceding provisions of
this Section ll(a)(iii), the Company (x) shall provide, subject to Section
7(e) hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek such stockholder
approval for such authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For purposes of this
Section ll(a)(iii), the value of the Common Stock shall be the Current
Market Price per share of the Common Stock on the Section ll(a)(ii) Trigger
Date and the per share or per unit value of any
26
Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares of
Preferred Stock which the aggregate offering price of the total number of shares
of Preferred Stock or Equivalent Preferred Stock (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock or Equivalent Preferred Stock to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which
27
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section ll(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and the
denominator of which shall be such Current Market Price per share of Preferred
Stock. 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 be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section ll(a)(iii) hereof, the Current
Market Price per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and for
purposes of computations made pursuant to Section ll(a)(iii) hereof, the
Current Market Price per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices per share of such Common Stock
for the ten (10) consecutive Trading Days immediately following such date;
provided, however,
28
that in the event that the Current Market Price per share of the Common
Stock is determined during a period following the announcement by the issuer
of such Common Stock of (A) a dividend or distribution on such Common Stock
payable in shares of such Common Stock or securities convertible into shares
of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Market Price
shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or such other system
then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board. If on any such date no market maker is
making a market in the Common Stock, the fair value of
29
such shares on such date as determined in good faith by the Board shall be
used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed
or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly
held or not so listed or traded, Current Market Price per share shall mean
the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of this
Section ll(d) (other than the last sentence thereof). If the Current Market
Price per share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section ll(d), the
Current Market Price per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 1,000 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date
of this Agreement) multiplied by the current market price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. For
all purposes of this Agreement, the Current Market Price of a Unit shall be
equal to the Current Market Price of one share of Preferred Stock divided by
1,000.
30
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
ll(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock or other share or one-millionth of a share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section ll(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 Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
ll(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections ll(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m) hereof, and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Units purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section ll(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Sections ll(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
31
Units (calculated to the nearest one-millionth) obtained by (i) multiplying (x)
the number of Units covered by a Right immediately prior to this adjustment, by
(y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Units purchasable upon the exercise of a Right. Each
of the Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Units for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section ll(i), the
Company shall as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record
32
of Rights 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 Units issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per Unit and the number of Units which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of Units issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable such
number of Units at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Units and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of Units and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due ββββ or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are con-
33
vertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company 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 Company in a transaction which complies with
Section ll(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section ll(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
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or any of its Subsidiaries in one or more transactions
each of which complies with Section ll(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, 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.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the
34
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(q) The failure by the Continuing Directors to declare (or
the Outside Directors to concur therewith) a Person to be an Adverse Person
following such Person becoming the Beneficial Owner of 15% or more or the
outstanding Common Stock shall not imply that such Person is not an Adverse
Person or limit such directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 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 any adjustment unless and
until it shall have received such certificate.
Section 13. Consolidation, Merqer or Sale or Transfer of Assets
or Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the
35
Company shall consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
ll(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section ll(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
(z) the Company 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 Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section ll(o)
hereof), then, and in each such case (except as may be contemplated by 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 the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Units for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section ll(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such Units
for which a Right was exercisable immediately prior to the first occurrence of a
Section ll(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the Current
Market Price per share of the Common Stock of such Principal Party on the date
of consummation of such
36
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 Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section ll(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(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) hereof, the Person that is
the issuer of any securities into which shares of Common Stock of the
Company 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; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 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 Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person,
37
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Stock 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 Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any such Section 13
Event, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will 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 Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section ll(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) hereof if (i) such transaction is
38
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section ll(a)(ii)(B) hereof
(or a wholly owned subsidiary of any such Person or Persons), (ii) the price per
share of Common Stock offered in such transaction is not less than the price per
share of Common Stock paid to all holders of shares of Common Stock whose shares
were purchased pursuant to such tender offer or exchange offer and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange 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 Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section ll(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such
39
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. 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 shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one Unit) upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions which are
integral multiples of one Unit). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one Unit, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Unit. For purposes of this Section 14(b), the current market
value of one Unit shall be one one-thousandth of the closing price of a share of
Preferred Stock (as determined pursuant to Section ll(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section ll(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
40
Section 15. Rights of Action. All rights of action in respect of
this Agreement, except the rights of action vested in the Rights Agent pursuant
to Section 18 and Section 20 hereof, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer, with the form of assignment set
forth on the reverse side thereof and the certificate contained therein duly
completed and executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Com-
41
mon Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(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 Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Units or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
42
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The indemnity provided
for hereunder shall survive the expiration of the Rights and the termination of
this Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible
43
for appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of
44
Current Market Price) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of
the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Clerk or any Assistant Clerk of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any 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 Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so
45
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Clerk, any
Assistant Clerk, the Treasurer or any Assistant Treasurer of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. Any application
by the Rights Agent for written instructions from the Company may, at the option
of the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights Agreement and the date on or after
which such action shall be taken or such omission shall be effective. The Rights
Agent shall not be liable for any action taken by, or omission of, the Rights
Agent in accordance with a proposal included in any such application on or after
the date specified in such application (which date shall not be less than five
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
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 Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall pre-
46
clude the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, 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 contained in the form
of assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take
any further action with respect to such requested exercise of transfer without
first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall
47
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States, the Commonwealth of Massachusetts
or the State of New York (or any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
Commonwealth of Massachusetts or the State of New York), in good standing,
having a principal office in the Commonwealth of Massachusetts or the State of
New York, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
48
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board 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 Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date (other than
upon exercise of a Right) and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock 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
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board may, at its option, at any time prior to the
earlier of (i) the Close of Business on the tenth day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to
the Record Date, the Close of Business on the tenth day following the Record
Date), or (ii) the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $.05 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"); provided, however,
that the Board may not redeem any Rights following an Adverse Person Event; and
provided further that, if the Board authorizes redemption of
49
the Rights in either of the circumstances set forth in clauses (i) and (ii)
below, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors: (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 effected in compliance
with applicable law and the requirements of any national securities exchange on
which the Common Stock is listed) in a majority of the directors 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, the
Board 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 unless, concurrently with such solicitation,
such Person (or one or more of its Affiliates or Associates) is making a cash
tender offer pursuant to a Schedule 14D-1 (or any successor form) filed under
the Exchange Act for all outstanding shares of Common Stock not beneficially
owned by such Person (or by its Affiliates or Associates). If, following the
occurrence of a Stock Acquisition Date and following the expiration of the
Company's right of redemption set forth in the preceding sentence but prior to
any Triggering Event, (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock in one
or more transactions, not directly or indirectly involving the Company or any of
its Subsidiaries, which did not result in the occurrence of a Triggering Event
such that such Person is thereafter a Beneficial Owner of less than 10% of the
outstanding shares of Common Stock, (ii) there are no other Persons, immediately
following the occurrence of the event described in clause (i), who are Acquiring
Persons, and (iii) the Board (with the concurrence of a majority of the
Continuing Directors) shall so approve, then the Company's right of redemption
set forth in the preceding sentence shall be reinstated and thereafter be
subject to the provisions of this Section 23. Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section ll(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemp-
50
tion Price in cash, shares of Common Stock (based on the Current Market Price of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board.
(b) Immediately upon the action of the Board 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.
Promptly after the action of the Board ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the Transfer Agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section ll(o) 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 transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company
51
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company or any of its Subsidiaries in one or more transactions each of
which complies with Section ll(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, 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 shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section ll(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible, in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section ll(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
52
Houghton Mifflin Company
βββ ββββββ ββββββ
ββββββ, βββββββββββββ βββββ
Attention: Corporate Clerk
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
The First National Bank of Boston
β.β. βββ ββββ
ββββββ, βββββββββββββ βββββ
Attention: Shareholder Services Division
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) 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 records of the Company.
Section 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall at any time and from time to time, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights 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 Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights
53
Certificates (other than an Acquiring Person, an Adverse Person or an Affiliate
or Associate of any such Person); provided, however, that this Agreement may not
be supplemented or amended (A) whether before or after the Distribution Date, to
lengthen a time period relating to when the Rights may be redeemed or to modify
the ability (or inability) of the Board to redeem the Rights, in either case at
such time as the Rights are not then redeemable or (B) after the Distribution
Date, to lengthen, pursuant to clause (iii) of this sentence, any other time
period unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of or the benefits to the holders of Rights (other than an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person). Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the number of
Units for which a Right is exercisable. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors or Outside
Directors) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board (with, where specifically provided for herein, the concurrence of the
54
Continuing Directors or Outside Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including without limitation a determination
to redeem or not redeem the Rights, to declare that a Person is an Adverse
Person or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for the purpose of clause (y)
below, all omissions with respect to the foregoing) which are done or made by
the Board (with, where specifically provided for herein, the concurrence of the
Continuing Directors or Outside Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject any director to any liability
to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would materially and adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the Close
55
of Business on the tenth day following the date of such determination by the
Board.
Section 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the Commonwealth of Massachusetts and for all purposes shall be
governed by and construed in accordance with the laws of such Commonwealth
applicable to contracts made and to be performed entirely within such
Commonwealth.
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: HOUGHTON MIFFLIN COMPANY
By /s/ ββββ β. ββββββ By /s/ ββββββ β. ββββββ
Name: ββββ β. ββββββ Name: ββββββ β. ββββββ
Title: Clerk, Secretary Title: Chairman of the Board,
and General Counsel President and Chief
Executive Officer
Attest: THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
By /s/ βββββ β. ββββββββ By /s/ βββββββ β. βββββββ
Name: βββββ β. ββββββββ Name: βββββββ β. βββββββ
Title: Assistant Vice President Title: Vice President
57
EXHIBIT A
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
Filed as Exhibit 3(i) to Form 10-K for the year ended
December 31, 1995
Exhibit B
[Form of Rights Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER DECEMBER 18, 1998 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.05 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON AN ADVERSE
PERSON OR AN AFFILIATE OR ASSOCIATE OF ANY SUCH PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO
LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION
TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN
SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
Rights Certificate
HOUGHTON MIFFLIN COMPANY
This certifies that ______________________ , or registered assigns, is the
registered owner of the number
------------
* The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as
applicable, and shall replace the preceding sentence.
of Rights set forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement, dated as of
December 9, 1988, (the "Rights Agreement"), between Houghton Mifflin Company, a
Massachusetts corporation (the "Company"), and The First National Bank of
Boston, a national banking corporation (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 P.M. (Boston time) on December 18, 1998,
at the office of the Rights Agent, or its successors as Rights Agent, designated
for such purpose, one one-thousandth of a fully paid, non-assessable share (a
"Unit") of Series A Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, at a purchase price of $125 per Unit of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase set forth on the reverse hereof and the Certificate
contained therein duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of Units which may be purchased upon exercise
thereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of _______________ ___, 198_, based on the Preferred Stock
as constituted at such date.
From and after the occurrence of an event described in
Section ll(a)(ii)(A) or (C) of the Rights Agreement and from and after the tenth
day after the
2
occurrence of an event described in Section ll(a)(ii)(B) or (D) of the Rights
Agreement, if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person, an Adverse Person or an Associate or Affiliate
of any such Person (as such terms are defined in the Rights Agreement), which
the Continuing Directors (as defined in the Rights Agreement), in their sole
discretion, determines is or was involved in or caused or facilitated, directly
or indirectly (including through any change in the Board), such Section
ll(a)(ii) Event, (ii) a transferee of any such Acquiring Person, Adverse Person,
Associate or Affiliate who becomes a transferee after such Acquiring Person,
Adverse Person, Associate or Affiliate becomes such, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person, Adverse Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with such Acquiring Person or Adverse 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 ll(a)(ii) Event.
The Rights evidenced by this Rights Certificate shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
3
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
4
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of Units as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may (unless the Continuing Directors shall have
made a determination pursuant to Section ll(a)(iii)(c) of the Rights Agreement
that a Person is an Adverse Person) be redeemed by the Company at its option at
a redemption price of $.05 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date (as defined in the Rights Agreement). Under certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require
5
the concurrence of a majority of the Continuing Directors. After the expiration
of the redemption period, the Company's right of redemption may be reinstated if
an Acquiring Person reduces his beneficial ownership to 10% or less of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company, and such reinstatement is approved by the Company's
Board of Directors (with the concurrence of a majority of the Continuing
Directors).
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one Unit, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of shares
of Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof,
6
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
7
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ___________ __, 19__
ATTEST: HOUGHTON MIFFLIN COMPANY
__________________________ By ___________________________
Secretary Title:
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON, as Rights Agent
By _______________________
Authorized Signature
8
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
----------------------------------------------------
(Please print name and address of transferee)
----------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ____________________ , 19__
________________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated: ____________________ , 19__
________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To HOUGHTON MIFFLIN COMPANY:
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
___________________________________________________________
(Please print name and address)
___________________________________________________________
Please insert social security or
other identifying number:__________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
___________________________________________________________
(Please print name and address)
___________________________________________________________
___________________________________________________________
Please insert social security or
other identifying number:__________________________________
Dated: _________________________ , 19__
________________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person
who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person.
Dated: _________________________ , 19__
________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 9, 1988, the Board of Directors of Houghton Mifflin
Company (the "Company") declared a dividend distribution of one Right for each
outstanding share of Houghton Mifflin Common Stock to stockholders of record at
the close of business on December 19, 1988. Each Right, when exercisable,
entitles the registered holder to purchase from the Company a unit consisting of
one one-thousandth of a share (a "Unit") of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Preferred Stock") at a Purchase
Price of $125 per Unit, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and The First National Bank of Boston, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common Stock
and a Distribution Date will occur upon the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"), or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 30% or more of such outstanding shares of Common
Stock or (iii) immediately after the Continuing Directors (as defined below)
declare any Person to be an Adverse Person, upon a determination that such
person, alone or together with its affiliates and associates, has become the
beneficial owner of an amount of Common Stock which the Continuing Directors
determine to be substantial (which amount shall in no event be less than 15% of
the shares of Common Stock then outstanding) and a determination by the Outside
Directors (as defined below), after reasonable inquiry and investigation,
including consultation with such
persons as such directors shall deem appropriate, that (a) such beneficial
ownership by such person is intended to cause the Company to repurchase the
Common Stock beneficially owned by such person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such person with short-term financial gain under
circumstances where such directors determine that the best long-term interests
of the Company and its stockholders would not be served by taking such action or
entering into such transactions or series of transactions at that time or (b)
such beneficial ownership is causing or reasonably likely to cause a material
adverse impact (including, but not limited to, impairment of relationships with
authors or customers or impairment of the Company's ability to maintain its
competitive position) on the business or prospects of the Company.
Until the Distribution Date, (i) the Rights will be evidenced
by the Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after
December 19, 1988 will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on December 18, 1998, unless earlier
redeemed by the Company as described below. The Rights will not be exercisable
by a holder in any jurisdiction where the requisite qualification to the
issuance to such holder, or the exercise by such holder, of the Rights has not
been obtained or is not obtainable.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
2
In the event that the Continuing Directors (with the concurrence
of the Outside Directors) determine that a person is an Adverse Person or, at
any time following the Distribution Date, (i) the Company is the surviving
corporation in a merger with an Acquiring Person and its Common Stock is not
changed or exchanged, (ii) a Person becomes the beneficial owner of 30% or more
of the then outstanding shares of Common Stock (except pursuant to an offer for
all outstanding shares of Common Stock which the Outside Directors determine to
be fair to and otherwise in the best interests of the Company and its
stockholders), (iii) an Acquiring Person engages in one or more "self-dealing"
transactions as set forth in the Rights Agreement, or (iv) during such time as
there is an Acquiring Person, an event occurs which results in such Acquiring
Person's ownership interest being increased by more than 1% (e.g., a reverse
stock split), each holder of a Right will thereafter have the right to receive,
upon exercise, Common Stock (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to two times the exercise
price of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or an Adverse Person will be null and
void. However, Rights are not exercisable following the occurrence of either of
the events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at an exercise price of $125 per Right, each Right
not owned by an Acquiring Person or an Adverse Person (or by certain related
parties) following an event set forth in the preceding paragraph would entitle
its holder to purchase $250 worth of Common Stock (or other consideration, as
noted above) for $125. Assuming that the Common Stock had a per share value of
$50 at such time, the holder of each valid Right would be entitled to purchase 5
shares of Common Stock for $125.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger described in the second preceding paragraph or a merger which follows an
offer described in subparagraph
3
(ii) of the second preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right, e.g., common
stock of the acquiring company having a value of $250 for the $125 exercise
price.
The Purchase Price payable, and the number of Units of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not
in part, at any time until ten days following the Stock Acquisition Date, at a
price of $.05 per Right (payable in cash, Common Stock or other consideration
deemed appropriate by the Board of Directors). Under certain circumstances set
forth in the Rights Agreement, the decision to redeem shall require the
concurrence of a majority of the Continuing Directors. The Company may not
redeem the Rights if the Continuing Directors have previously declared a person
to be an Adverse Person. After the redemption period has expired, the Company's
right of redemption may be reinstated (with the concurrence of the Continuing
Directors) if an Acquiring Person reduces its beneficial ownership to 10% or
less of the outstanding shares of Common Stock in a
4
transaction or series of transactions not involving the Company and there are no
other Acquiring Persons. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.05 per Right redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person, an Adverse Person or an
affiliate or associate of an Acquiring Person or an Adverse Person, or a
representative of any of the foregoing entities. The term "Outside Directors"
means Continuing Directors who are not officers of the Company.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board prior to 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, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring Person
or any Adverse Person), or to shorten or lengthen any time period under the
Rights Agreement; however no supplement or amendment to adjust the time period
governing redemption may be made if the Rights are not then redeemable.
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
5
_______________ __, 198_. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
6