RIGHTS AGREEMENT
DYNAMIC MATERIALS CORPORATION
AND
XXXXXX TRUST AND SAVINGS BANK
AS RIGHTS AGENT
DATED AS OF JANUARY 8, 1999
TABLE OF CONTENTS
PAGE
Section 1. Certain Definitions..........................................1
Section 2. Appointment of Rights Agent..................................4
Section 3. Issue of Right Certificates..................................4
Section 4. Form of Right Certificates...................................6
Section 5. Countersignature and Registration............................6
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates.................................................7
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights.......................................................7
Section 8. Cancellation and Destruction of Right Certificates...........8
Section 9. Availability of Preferred Shares.............................9
Section 10. Preferred Shares Record Date................................10
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights......................................................10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..17
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power..............................................17
Section 14. Fractional Rights and Fractional Shares.....................21
Section 15. Rights of Action............................................22
Section 16. Agreement of Right Holders..................................22
Section 17. Right Certificate Holder Not Deemed a Stockholder...........22
Section 18. Concerning the Rights Agent.................................23
Section 19. Merger or Consolidation or Change of Name of Rights Agent...23
Section 20. Duties of Rights Agent......................................24
Section 21. Change of Rights Agent......................................26
-i-
Section 22. Issuance of New Right Certificates..........................27
Section 23. Redemption..................................................27
Section 24. Exchange....................................................28
Section 25. Notice of Certain Events....................................29
Section 26. Notices.....................................................29
Section 27. Supplements and Amendments..................................30
Section 28. Successors..................................................31
Section 29. Benefits of This Agreement..................................31
Section 30. Severability................................................31
Section 31. Governing Law...............................................31
Section 32. Counterparts................................................31
Section 33. Descriptive Headings........................................31
Section 34. Administration..............................................31
-ii-
RIGHTS AGREEMENT
This RIGHTS AGREEMENT (the "AGREEMENT"), dated as of January 8,
1999, between DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the
"COMPANY"), and XXXXXX TRUST AND SAVINGS BANK, an Illinois banking corporation,
as Rights Agent (the "RIGHTS AGENT").
The Board of Directors of the Company has authorized and declared
a dividend of one preferred stock purchase right (a "RIGHT") for each Common
Share (as such term is hereinafter defined) of the Company outstanding as of the
Close of Business (as defined below) on January 15, 1999 (the "RECORD DATE"),
each Right representing the right to purchase one one-hundredth (subject to
adjustment) of a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right (subject to adjustment as provided herein)
with respect to each Common Share (as defined below) that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to Common
Shares that shall become outstanding after the Distribution Date and prior to
the Redemption Date and the Final Expiration Date in accordance with Section 22.
In consideration of the premises and the mutual agreements herein
set forth, the undersigned parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms have the meaning indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such
term is hereinafter defined) who or which, without the prior approval of the
Company, shall be the Beneficial Owner (as such term is hereinafter defined) of
15% or more of the Common Shares then outstanding, but shall not include:
(i) Heartland Advisors, Inc. ("HEARTLAND") (and
any successor thereto, but no purchaser or assignee thereof or purchaser or
assignee of any Common Shares of the Company held by Heartland), but only
so long as Heartland does not become the Beneficial Owner of 21% or more of the
Common Shares of the Company then outstanding. Notwithstanding the foregoing,
Heartland shall not become an "Acquiring Person" as the result of an acquisition
of Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
Heartland to 21% or more of the Common Shares of the Company then outstanding;
provided, however, that if Heartland shall become the Beneficial Owner of 21% or
more of the Common Shares of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the Company, then
Heartland shall be deemed an "Acquiring Person." If the Board of Directors of
the Company determines in good faith that Heartland has inadvertently exceeded
the 21% threshold and if Heartland divests itself as promptly as practicable of
beneficial ownership of a sufficient number of Common Shares so that
Heartland would no longer be an Acquiring Person, then Heartland shall not be
deemed to be or have become an "Acquiring Person" for any purpose in this
Agreement.
(ii) an Exempt Person (as such term is hereinafter
defined); provided, however, that if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," has become such inadvertently, and such Person divests himself or
itself as promptly as practicable of beneficial ownership of a sufficient number
of Common Shares so that such Person would no longer be an Acquiring Person,
then such Person shall not be deemed to be or have become an "Acquiring Person"
for any purposes of this Agreement. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 15% or more of the Common Shares then outstanding, provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
then outstanding by reason of such share acquisitions by the Company and
thereafter becomes the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed to be an "Acquiring Person."
The phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding of which such Person
would be deemed to be the Beneficial Owner hereunder.
(b) "AFFILIATE" and "ASSOCIATE" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "BENEFICIAL OWNER"
of, shall be deemed to have "BENEFICIAL OWNERSHIP" of and shall be deemed to
"beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates is deemed to beneficially own, directly or indirectly
within the meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or upon the
satisfaction of a specified condition) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, (x) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase, (y) securities which such Person has a right to acquire
on the exercise of Rights at any time prior to the time a Person becomes an
Acquiring Person or (z) securities issuable upon exercise of Rights
-2-
from and after the time a Person becomes an Acquiring Person if such 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(b) or Section 22 hereof
("ORIGINAL RIGHTS") or pursuant to Section 11(i) or Section 11(n) with respect
to an adjustment to Original Rights; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any security by
reason of such agreement, arrangement or understanding if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by the
provision to Section 1(c)(ii)(B)) or disposing of shares of the Common Stock.
(d) "BUSINESS DAY" shall mean any day other than a
Saturday, a Sunday, or a day on which banking institutions in the City of
Denver, Colorado, or Chicago, Illinois are authorized or obligated by law or
executive order to close.
(e) "CLOSE OF BUSINESS" on any given date shall mean
5:00 p.m., Denver time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 p.m., Denver time, on the next succeeding
Business Day.
(f) "COMMON SHARES" when used with reference to the
Company shall mean shares of Common Stock (as hereinafter defined) of the
Company. "Common Shares" when used with reference to any Person other than the
Company shall mean the capital stock (or, in the case of an unincorporated
entity, the equivalent equity interest) with the greatest voting power of such
other Person or, if such other Person is a subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "COMMON STOCK" shall mean the common stock, par
value $.05 per share, of the Company.
(h) "CURRENT VALUE" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(i) "DISTRIBUTION DATE" shall have the meaning set
forth in Section 3 hereof.
(j) "EXEMPT PERSON" shall mean the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or of any
-3-
Subsidiary of the Company, any entity or trustee holding Common Shares for or
pursuant to the terms of any such plan or for the purpose of funding any such
plan or funding other employee benefits for employees of the Company or of any
Subsidiary of the Company.
(k) "FINAL EXPIRATION DATE" shall have the meaning set
forth in Section 7 hereof.
(l) "FLIP IN EVENT" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(m "NMS" shall mean the Nasdaq Market System.
(n) "PERSON" shall mean any individual, firm,
\corporation or other entity, and shall include any successor (by merger or
otherwise) to such entity.
(o) "PREFERRED SHARES" shall mean shares of Series A
Junior Participating Preferred Stock, par value $.05 per share, of the Company
having the rights and preferences set forth in the Form of Certificate of
Designations attached to this Agreement as Exhibit A.
(p) "REDEMPTION DATE" shall have the meaning set forth
in Section 7 hereof.
(q) "SECURITIES ACT" shall mean the Securities Act of
1933, as amended.
(r) "SHARES ACQUISITION DATE" shall mean the first date
of a public announcement (which, for purposes of this definition shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such or such earlier date as a majority of the Board of Directors shall become
aware of the existence of an Acquiring Person.
(s) "SUBSIDIARY" of any Person shall mean any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient to elect a majority of the board of
directors or other persons performing similar functions are beneficially owned,
directly or indirectly, by such Person, and any corporation or other entity that
is otherwise controlled by such Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
-4-
SECTION 3. ISSUE OF RIGHT CERTIFICATES.
(a) "DISTRIBUTION DATE" shall mean the date, after the
date hereof, that is the earliest of (i) the tenth Business Day after the Shares
Acquisition Date, (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than an Exempt Person or Heartland, but only if and to the extent that
the consummation thereof would not result in such Person becoming an Acquiring
Person) of, or of the first public announcement of the intention of such Person
(other than an Exempt Person or Heartland, but only if and to the extent that
the consummation thereof would not result in such Person becoming an Acquiring
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares aggregating
15% or more of the Common Shares then outstanding or (iii) the tenth Business
Day after a change in the composition of the Board over a period of 18
consecutive months or less such that fifty percent (50%) or more of the members
of Board of Directors who were directors at the beginning of such 18-month
period cease to be directors during such period, and are replaced by directors
that have not been unanimously elected or nominated by persons who were
directors at the commencement of such 18-month period or other directors so
elected or nominated.
(b) Until the Distribution Date (i) the Rights will be
evidenced (subject to the provisions of Section 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof and not by
separate Rights Certificates, and (ii) the Rights will be transferable only in
connection with the transfer of the associated Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested and at the expense of the Company,
send) by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date (other than any
Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the
address of such holder shown on the records of the Company (which records shall
be provided to the Rights Agent should the Rights Agent be requested to do the
mailing), a Rights Certificate, in substantially the form of Exhibit B hereto (a
"RIGHTS CERTIFICATE"), evidencing one Right (subject to adjustment as provided
herein) for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(c) Until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on the Record Date shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(d) Certificates issued for Common Shares (including,
without limitation, upon transfer of outstanding Common Shares, disposition of
Common Shares out of treasury stock or issuance or reissuance of Common Shares
out of authorized but unissued shares) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them the following legend:
-5-
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in that certain Rights
Agreement between DYNAMIC MATERIALS CORPORATION and XXXXXX
TRUST & SAVINGS BANK, dated as of January 8, 1999 (the
"RIGHTS AGREEMENT") as the same may be amended from time to
time, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal
executive offices of DYNAMIC MATERIALS CORPORATION. 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. DYNAMIC
MATERIALS CORPORATION will mail to the holder of this
certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights
owned by or transferred to any Person who becomes an
Acquiring Person (as defined in the Rights Agreement) and
certain transferees thereof will become null and void and
will no longer be transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
otherwise acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
Notwithstanding this paragraph (d), the omission of a legend
shall not affect the enforceability of any part of this Rights Agreement or the
rights of any holder of the Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates
(and the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall be substantially 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 the NMS or 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 Sections 11 and 22 hereof, the
Right Certificates shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the
price per one one-hundredths of a Preferred Share set forth therein (the
"PURCHASE PRICE"), but the number of such one one-hundredths of a Preferred
Share and the Purchase Price shall be subject to adjustment as provided herein.
-6-
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf
of the Company by the Chairman of the Board of Directors, the President, any of
the Vice Presidents, the Treasurer or the Controller of the Company, either
manually or by facsimile signature, shall have affixed thereto the Company's
seal or a facsimile thereof, and shall be attested by the Secretary, an
Assistant Secretary, the Treasurer, an Assistant Treasurer, the Controller or a
Vice President of the Company, either manually or by facsimile signature. The
Right Certificates shall be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at an office or agency designated for such
purpose, books for registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights evidenced on its face by
each of the Right Certificates and the date of each of the Right Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to the provisions of Sections 11(a)(ii)
and 14 hereof, at any time after the Close of Business on the Distribution Date,
and at or prior to the Close of Business on the earlier of the Redemption Date
or the Final Expiration Date, any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office or
agency of the Rights Agent designated for such purpose. Thereupon the Rights
Agent shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right 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 may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
-7-
(b) Subject to the provisions of Section 11(a)(ii)
hereof, upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
SECTION 7. EXERCISE OF RIGHTS, PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS.
(a) Except as otherwise provided herein, the Rights
shall become exercisable on the Distribution Date, and thereafter the registered
holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part, upon surrender of the
Right Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office or agency of the Rights
Agent designated for such purpose, together with payment of the Purchase Price
for each one one-hundredths of a Preferred Share as to which the Rights are
exercised, at any time which is both after the Distribution Date and prior to
the earliest of (i) 5:00 p.m., Denver, Colorado time, on January 8, 2009 (the
"FINAL EXPIRATION DATE"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "REDEMPTION DATE") or (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $22.50 for
each one one-hundredths of a Preferred Share purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-hundredths of a Preferred
Share or other securities or property to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt
of a Right Certificate representing exercisable Rights, with the form of
election to purchase duly executed, accompanied by payment of the aggregate
Purchase Price for the Preferred Shares to be purchased and an amount equal to
any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (1) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from the depositary agent
depositary receipts representing interests in such number of one one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (2) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (3) promptly after receipt of such
certificates or depositary receipts, cause the same to be
-8-
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (4) when appropriate, after receipt, promptly deliver cash to be paid
in lieu of fractional shares to or upon the order of the registered holder of
such Right Certificate.
(d) Except as otherwise provided herein, in case the
registered holder of any Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) 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 RIGHT CERTIFICATES.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury, the number of
Preferred Shares that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the Preferred Shares (and, following the
time that a Person becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or admitted to
trading on the NMS, 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 the NMS or such other exchange or admitted to trading
on the NMS upon official notice of issuance upon such exercise.
-9-
(c) From and after such time as the Rights become
exercisable, the Company shall use its best efforts to, if then necessary to
permit the issuance of Preferred Shares (and following the time that a Person
first becomes an Acquiring Person, shares of Common Stock and other securities)
upon the exercise of Rights, register and qualify such Preferred Shares (and
following the time that a Person first becomes an Acquiring Person, shares of
Common Stock and other securities) under the Securities Act and any applicable
state securities or "Blue Sky" laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing, keep such registration and
qualifications effective until the earlier of the date as of which the Rights
are no longer exercisable for such securities and the Final Expiration Date, and
comply with any requirements of the NMS (or any national securities exchange on
which such securities may be listed or admitted for trading) applicable to the
Company. The Company may temporarily suspend, for a period of time not to exceed
90 days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective, to comply with any applicable state securities or "Blue Sky" laws, or
to comply with any requirements of the NMS applicable to the Company. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective and
any requirements of the NMS or any securities exchange on which such securities
may be listed or admitted for trading, applicable to the Company have been
satisfied.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred Shares (and,
following the time that a Person becomes an Acquiring Person, shares of Common
Stock and other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(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 Right
Certificates or of any Preferred Shares (or shares of Common Stock or other
securities) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or deliver any
certificates or depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by that holder of such Right Certificate at the time of surrender) or until it
has been established to the Company's reasonable satisfaction that no such tax
is due.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose
name any certificate for Preferred Shares is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares represented thereby on, and such
-10-
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Shares transfer books
of the Company are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number of Preferred Shares or other
securities or property purchasable upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement and
except as otherwise provided in this Section 11(a)(ii), in the event any Person
becomes an Acquiring Person (the first occurrence of such event being referred
to as the "Flip In Event"), each holder of a Right shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase Price
immediately prior to the Flip In Event multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such event, whether or not such Right was then exercisable,
in accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares (or at the option of the Company, such number of
one one-hundredths of Preferred Shares) as shall equal the result obtained by
(x) multiplying the Purchase Price immediately prior to the Flip In Event by the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such event, whether or not such Right
-11-
was then exercisable, and (y) dividing that product by 50% of the then current
per share market price of the Company's Common Stock (determined pursuant to
Section 11(d) hereof) on the date of the occurrence of such event.
Notwithstanding anything in this Agreement to the contrary, however, from and
after the Flip In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Flip In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip In Event pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder. From and after the Flip In Event, no Right Certificate shall be
issued pursuant to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the provisions of this paragraph, and any Right
Certificate delivered to the Rights Agent that represents Rights that are or
have become void pursuant to the provisions of this paragraph shall be canceled.
From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights that theretofore have not been exercised pursuant to this Section
11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for
a share of Common Stock issuable upon the exercise of Rights in accordance with
the foregoing subparagraph (ii) such number of fractions of Preferred Shares
having an aggregate current market value equal to the current per share market
price of a share of Common Stock. In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess of (1) the value of the shares
of Common Stock issuable upon the exercise of a Right in accordance with the
foregoing subparagraph (ii) (the "CURRENT VALUE") over (2) the Purchase Price
immediately prior to the Flip In Event multiplied by the number of one
one-hundredths of Preferred Shares for which a Right was exercisable immediately
prior to such event, whether or not such Right was then exercisable (such
excess, the "SPREAD"), and (B) with respect to each Right (other than Rights
which have become void pursuant to Section 11(a)(ii)), make adequate provision
to substitute for the shares of Common Stock issuable in accordance with
subparagraph (ii) upon exercise of the Right and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Preferred
Shares or other equity securities of the Company (including, without limitation,
shares or fractions of shares of preferred stock which, by virtue of having
dividend, voting and liquidation rights substantially comparable to those of the
shares of Common Stock, are deemed in good faith by the Board of Directors to
have substantially the same value as the shares of Common Stock (such Preferred
Shares
-12-
and shares or fractions of shares of preferred stock are hereinafter referred to
as "Common Share equivalents"), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock actually issued upon exercise
of such Right, shall have an aggregate value equal to the Current Value (less
the amount of any reduction in the Purchase Price), where such aggregate value
has been determined by the Board of Directors upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors; provided, however, if the Company shall not make adequate provision
to deliver Current Value pursuant to Clause (B) above within thirty (30) days
following the Flip In Event (the "SECTION 11(A)(II) TRIGGER DATE"), then the
Company shall be obligated to deliver, to the extent permitted by applicable law
and any material agreements then in effect to which the Company is a party, upon
the surrender or exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available), and then, if
necessary, such number or fractions of Preferred Shares (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If, upon the occurrence of the Flip In
Event, the Board of Directors shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, then, if the Board of Directors so
elects, the 30 day period set forth above may be extended to the extent
necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek stockholder approval for the authorization of
such additional shares (such 30 day period, as it may be extended, is herein
called the "SUBSTITUTION PERIOD"). To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section
11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that
such action shall apply uniformly to all outstanding Rights and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution Period
in order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second 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 11(a)(iii),
the value of the shares of Common Stock shall be the current per share market
price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii)
Trigger Date and the per share or fractional value of any "Common Share
equivalent" shall be deemed to equal the current per share market price of the
Common Shares. The Board of Directors of the Company may, but shall not be
required to, establish procedures to allocate the right to receive shares of
Common Stock upon the exercise of the Rights among holders of Rights pursuant to
this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares (determined pursuant
to Section 11(d) hereof on such record date), the Purchase Price to be in effect
after such record date shall be determined by multiplying the
-13-
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Preferred Shares and equivalent
preferred shares which the aggregate offering price of the total number of
Preferred Shares and/or the total number of equivalent preferred shares so to be
offered and/or the aggregate initial conversion price of the convertible
securities so to be offered would purchase at such current market price, and the
denominator of which shall be the number of Preferred Shares and equivalent
preferred shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right. In case such subscription
price may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent. Preferred Shares and
equivalent preferred shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares
(determined pursuant to Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of the Company whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share, and
the denominator of which shall be such current per share market price
(determined pursuant to Section 11(d) hereof) of a Preferred Share; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company to be issued upon exercise of one Right. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) Except as otherwise provided herein, for
the purpose of any computation hereunder, the "current per share market price"
of any security (a "SECURITY" for the purpose of this Section 11(d)(i)) on any
date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the event
that the current per share market price of the Security is determined during a
period following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such
-14-
Security or securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security, and prior to the expiration of
30 Trading Days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported by the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NMS or, if the Security is not listed or
admitted to trading on the NMS, as reported in the principal consolidated
transaction reporting system or the principal national securities exchange on
which the Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. The term "TRADING DAY" shall mean a day on
which the principal national securities exchange on which the Security is listed
or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder,
if the Preferred Shares are publicly traded, the "current per share market
price" of the Preferred Shares shall be determined in accordance with the method
set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded
but the Common Stock is publicly traded, the "current per share market price" of
the Preferred Shares shall be conclusively deemed to be the current per share
market price of the shares of Common Stock as determined pursuant to Section
11(d)(i) multiplied by one hundred (appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof).
If neither the Common Stock nor the Preferred Shares are publicly traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a Preferred Share or share of Common Stock or other share or
security as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which requires
such adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital
-15-
stock of the Company other than Preferred Shares, thereafter the number of such
other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a)(i), 11(b), 11(c) and 11(i), and the provisions of Sections 7, 9,
10 and 13 with respect to the Preferred Shares shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a Preferred Share purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one
ten-thousandth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a share covered by a Right immediately prior to such
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
may, as promptly as practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
-16-
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a Preferred Share issuable
upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number of
one one-hundredths of a Preferred Share which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value, if any, of the
Preferred Shares or other shares of capital stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Preferred Shares or other such shares at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date of the Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case, the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following the
occurrence of such event.
-17-
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment
and (b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNINGS POWER.
(a) In the event, directly or indirectly, at any time
after the Flip In Event, (i) the Company shall merge with and into any other
Person, (ii) any Person shall consolidate with the Company, or any Person shall
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such merger, all or
part of the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earnings power aggregating 50% or more of the assets or
earnings power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly-owned
Subsidiaries), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of record of a Right (other than Rights
which have become void pursuant to Section 11(a)(ii)) shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the Purchase
Price immediately prior to the Flip In Event multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such event, whether or not such Right was then exercisable
(as subsequently adjusted thereafter pursuant to Sections 11(a)(i), 11(b), 11(c)
and 11(i)), in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of validly issued, fully-paid and non-assessable
and freely tradeable Common Shares of the Principal Party (as defined herein)
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 Purchase
Price immediately prior to the Flip In Event by the number of one one-hundredths
of a Preferred Share for which a Right was exercisable immediately prior to such
event, whether or not such Right was then exercisable (as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c) and 11(i)), and (2)
dividing that product by 50% of the then current per share market price of the
Common Shares of such Principal Party (determined pursuant to Section 11(d)(i)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; provided that the Purchase Price and the number of Common Shares of
such Principal Party issuable upon exercise of each Right shall be further
adjusted as provided in Section 11(f) of this Rights Agreement to reflect any
events occurring in respect of such Principal Party after the date of such
consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (C) the term "Company" shall thereafter be deemed to refer to
such Principal Party; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient
-18-
number of its shares of Common Stock in accordance with Section 9 hereof) in
connection with such consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the shares of Common Stock thereafter
deliverable upon the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the
Common Shares of the Principal Party purchasable upon the exercise of a Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.
(b) "PRINCIPAL PARTY" shall mean
(i) in the case of any transaction described in
(i) or (ii) of the first sentence of Section 13(a) hereof, (A) the Person that
is the issuer of the securities into which Common Shares are converted in such
merger or consolidation, or, if there is more than one such issuer, the issuer
the Common Shares of which has the greatest aggregate market value of shares
outstanding or (B) if no securities are so issued, (x) the Person that is the
other party to the merger, if such Person survives said merger, or, if there is
more than one such Person, the Person the Common Shares of which has the
greatest aggregate market value of shares outstanding or (y) if the Person that
is the other party to the merger does not survive the merger, the Person that
does survive the merger (including the Company if it survives) or (z) the Person
resulting from the consolidation; and
(ii) in the case of any transaction described in
(iii) of the first sentence in 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, or, if each Person that is a party
to such transaction or transactions receives the same portion of the assets or
earning power so transferred or if the Person receiving the greatest portion of
the assets or earning power cannot be determined, whichever of such Persons as
is the issuer of Common Shares having the greatest aggregate market value of
shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), (1) if the Common Shares of such Person are not at such time
or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of all of which are and have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in
-19-
clauses (1) and (2) above shall apply to each of the owners having an interest
in the venture as if the Person owned by the joint venture was a Subsidiary of
both or all of such joint venturers, and the Principal Party in each such case
shall bear the obligations set forth in this Section 13 in the same ratio as its
interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) hereof unless prior
thereto the Company and the Principal Party involved therein shall have executed
and delivered to the Rights Agent an agreement confirming that the requirements
of Sections 13(a) and (b) hereof shall promptly be performed in accordance with
their terms and that such consolidation, merger, sale or transfer of assets
shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal Party pursuant to Sections 13(a)
and (b) hereof and providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement
under the Securities Act, if necessary, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, use
its best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date, and
similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Shares
of the Principal Party shall be listed or admitted to trading on the NMS or on
another national securities exchange, to list or admit to trading (or continue
the listing of) the Rights and the securities purchasable upon exercise of the
Rights on the NMS or such other securities exchange and, if the Common Shares of
the Principal Party shall not be listed or admitted to trading on the NMS or
another national securities exchange, to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by such other system then
in use;
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
(iv) obtain waivers of any rights of first
refusal or preemptive rights in respect of the Common Shares of the Principal
Party subject to purchase upon exercise of outstanding Rights.
(d) Furthermore, in case the Principal Party which is
to be a party to a transaction referred to in this Section 13 has provision in
any of its authorized securities or in its certificate of incorporation or
by-laws or other instrument governing its corporate affairs, which provision
would have the effect of (i) causing such Principal Party to issue (other than
to holders of Rights pursuant to this Section 13), in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, Common Shares of such Principal Party at less than the then current market
price per share (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Shares of such Principal Party at
less than such then
-20-
current market price, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Shares of such
Principal Party pursuant to the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not,
at any time after the Flip In Event, enter into any transaction of the type
contemplated by (i)-(iii) of Section 13(a) hereof if (1) at the time of or
immediately after such consolidation, merger, sale, transfer or other
transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (2)
prior to, simultaneously with or immediately after such consolidation, merger,
sale, transfer of other transaction, 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 or Associates or (3) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Right for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NMS or, if the Rights are not listed or admitted to trading on
the NMS, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the NYSE or other 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 NYSE or
such other system then in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board of Directors of the Company. If on any such date no such market
maker is making a market in the Rights, the fair value of the Rights on such
date as determined in good faith by the Board of Directors of the Company shall
be used.
-21-
(b) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share). Interests in fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the
Right expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided above).
SECTION 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement, excepting the rights of action given to the Rights Agent, are
vested in the respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the Common Shares);
and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the associated Common
Shares;
-22-
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the office or agency of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat
the Person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary.
(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 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 the obligation;
provided, however, the Company must use its best efforts to have any order,
decree or ruling lifted or otherwise overturned.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a 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 this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and 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, without limitation, the costs and expenses of defending
against any claim of liability arising therefrom, directly or indirectly. The
costs and expenses of enforcing this right of indemnification shall also be paid
by the Company. The indemnity provided hereby shall survive expiration of the
Rights and the termination of this Agreement.
(b) The Rights Agent may conclusively rely upon and
shall be protected and shall incur no liability for, or in respect of any action
taken, suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Right Certificate or certificate for the
Preferred Shares, Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and where
necessary,
-23-
verified or acknowledged, by the proper Person or Persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
(c) Notwithstanding anything in this Agreement to the
contrary, in no event shall the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage and regardless of the form of the action.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any
successor of the Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the stock transfer or corporate trust powers of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Right Certificates shall have been
countersigned but not delivered the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes
only the duties and obligations specifically imposed by this Agreement and no
implied duties or obligations shall be read into this Agreement against the
Rights Agent, subject to the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:
(a) Before the Rights Agent acts or refrains from
acting, the Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of current per share market price) be proved or
established by the Company prior to taking or suffering any action hereunder,
-24-
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board of Directors,
the President, any Vice President, the Treasurer, the Controller or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of facts or recitals contained in this Agreement
or in the Right Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Sections 3, 11, 13, 23 and 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate furnished pursuant to Section 12,
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from any person reasonably believed by the Rights Agent to be one of the
Chairman of the Board of Directors, the President, any Executive Vice President,
the Secretary, the Controller or the Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. 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 and/or after which such action
shall be taken or such omission shall be effective. The Rights
-25-
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 received such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate
surrendered to the Right 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 not been completed to
certify the holder is not an Acquiring Person (or an Affiliate or Associate
thereof), the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
(k) 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.
(l) The Rights Agent shall have no responsibility to
the Company, any holders of Rights or any holders of shares of Common Stock for
interest or earnings on any moneys held by the Rights Agent pursuant to this
Agreement.
(m) The Rights Agent shall not be required to take
notice or be deemed to have notice of any event or condition hereunder,
including, but not limited to, a Distribution Date, a Redemption Date, any
adjustment of the Purchase Price of the Common Stock, and adjustment to the
Purchase Price of the Preferred Shares, the existence of an Acquiring Person or
any other event or condition that may require action by the Rights Agent, unless
the Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other instruments required by this
Agreement to be delivered to the Rights Agent must, in order to be
-26-
effective, be received by the Rights Agent as specified in Section 26 hereof,
and in the absence of such notice so delivered, the Rights Agent may
conclusively assume no such event or condition exists.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' prior notice in writing mailed to the Company and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' prior notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail, and, at the expense of the
Company, to the holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or the State of New York (or of any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of New York), in good standing,
having an office in the State of New York, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the 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.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such forms as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights Certificates
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the earlier of the Redemption Date and the Expiration Date,
the Company may with respect to Common Shares so issued or sold pursuant to (i)
the exercise of stock options, (ii) any employee plan or arrangement, (iii) the
exercise, conversion
-27-
or exchange of securities, notes or debentures issued by the Company or (iv) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Rights Certificates representing the appropriate number
of Rights in connection with such issuance or sale.
SECTION 23. REDEMPTION.
(a) The Board of Directors of the Company may, at any time
prior to the Flip In Event, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (the redemption price being hereinafter referred
to as the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23 (or at such later time as the Board of Directors may establish for the
effectiveness of such redemption), 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.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after such action of the
Board of Directors ordering the redemption of the Rights, the Company shall mail
a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of each transfer agent
for the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption shall state the method by which the payment of the
Redemption Price will be made.
SECTION 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its
option, at any time after the Flip In Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right
(such exchange ratio being hereinafter referred to as the "EXCHANGE RATIO").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of Common Shares aggregating 50% or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The
-28-
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of the Rights so exchanged at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company may, in its discretion, take such action as may be necessary to
authorize additional shares of Common Stock for issuance upon exchange of the
Rights. In the event that the Company shall determine not to take such action or
shall, after good faith effort, be unable to take such action as may be
necessary to authorize such additional shares of Common Stock, the Company shall
substitute, to the extent of such insufficiency, for each share of Common Stock
that would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fractions thereof (or equivalent preferred shares as such term is
defined in Section 11(b)), having an aggregate value equal to the current per
share market price of one share of Common Stock (determined pursuant to Section
11(d) hereof) as of the date of issuance of such Preferred Shares or fractions
thereof (or equivalent preferred shares).
(d) The Company shall not, in connection with any
exchange pursuant to this Section 24, be required to issue fractions of shares
of Common Stock or to distribute certificates which evidence fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this paragraph (d), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall at any time after the
earlier of the Distribution Date or the Shares Acquisition Date propose (i) to
pay any dividend payable in stock of any class to the holders of its Preferred
Shares or to make any other distribution to the holder of its Preferred Shares
(other than a regular quarterly cash dividend), (ii) to offer to the holders of
its Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect the liquidation, dissolution or
winding up of the Company, or (v) to declare or pay any dividend on the Common
Shares payable in Common Shares
-29-
or to effect a subdivision, combination or consolidation of the Common Shares
(by reclassification or otherwise than by payment of dividends in Common Shares)
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the stock dividend or
distribution of rights or warrants, or the date on which such liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least 10 days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case any event described in Section 11(a)(ii)
or Section 13 shall occur then the Company shall as soon as practicable
thereafter give to each holder of a Right Certificate (or if occurring prior to
the Distribution Date, the holders of Common Shares) in accordance with Section
26 hereof, a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights under Section
11(a)(ii) and Section 13 hereof.
SECTION 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
DYNAMIC MATERIALS CORPORATION
000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given upon
receipt by the Corporate Trust Department of the Rights Agent or made if sent by
registered or certified mail and shall be deemed given upon receipt, addressed
(until another address is filed in writing with the Company) as follows:
XXXXXX TRUST AND SAVINGS BANK
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
-30-
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Except as provided in
the penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights. At
any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (iii) shorten or
lengthen any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable;
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), and no such amendment may cause
the Rights again to become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made which changes the Redemption Price. 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 27, the Rights
Agent shall execute such supplement or amendment; provided, however, that the
Rights Agent may, but shall not be obligated to, enter into any such supplement
or amendment which affects the Rights Agent's own rights, duties or immunities
under this Agreement. Prior to the consent of the Rights Agent to any supplement
or amendment, the Rights Agent may require delivery to it of an opinion of
counsel stating that such supplement or amendment is authorized or permitted by
the Agreement, and will, upon execution and delivery thereof, be valid and
binding upon the Company in accordance with its terms. Notwithstanding anything
in this Agreement to the contrary, no supplement or amendment that changes the
rights and duties of the Rights Agent under this Agreement will be effective
against the Rights Agent without the execution of such supplement or amendment
by the Rights Agent.
SECTION 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement or applicable to 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.
SECTION 31. GOVERNING LAW. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all
-31-
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and performed entirely within such
State.
SECTION 32. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the
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.
SECTION 34. ADMINISTRATION. Except as otherwise provided
herein, the Board of Directors of the Company shall have the exclusive power and
authority to administer and interpret the provisions of this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors or
the Company as may be necessary or advisable in the administration of this
Agreement. All such actions, calculations, determinations and interpretations
which are done or made by the Board of Directors in good faith shall be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties and shall not subject the Board of Directors to any
liability to the holders of the Rights.
[Remainder of Page Intentionally Left Blank]
-32-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
DYNAMIC MATERIALS CORPORATION
By: /S/ XXXXXX X. XXXXXXX
---------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
XXXXXX TRUST AND SAVINGS BANK, as Rights
Agent
By: /S/ XXXXXXXX XXXXX-XXXX
---------------------------------------
Xxxxxxxx Xxxxx-Xxxx
Trust Officer
-33-
FORM
OF
DYNAMIC MATERIALS CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Dynamic Materials Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "COMPANY"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on January 8, 1999.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company (hereinafter called the "BOARD OF DIRECTORS"
or the "BOARD") in accordance with the provisions of the Certificate of
Incorporation, as amended to date (hereinafter called the "CERTIFICATE OF
INCORPORATION"), the Board of Directors hereby creates a series of preferred
stock, par value $.05 per share, of the Company and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"SERIES A PREFERRED STOCK") and the number of shares constituting the Series A
Preferred Stock shall be 200,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, however, that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Company convertible into or exchangeable for Series A Preferred Stock.
A-1
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any
series of preferred stock of the Company (the "PREFERRED STOCK") (or any similar
stock) ranking prior and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock, in preference
to the holders of Common Stock, par value $.05 per share of the Company (the
"COMMON STOCK"), and of any other stock of the Company ranking junior to the
Series A Preferred Stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
semi-annual dividends payable in cash on the first day of June and December in
each year (each such date being referred to herein as a "DIVIDEND PAYMENT
DATE"), commencing on the first Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock, declared
on the Common Stock since the immediately preceding Dividend Payment Date or,
with respect to the first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by the classification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Dividend Payment Date and the next subsequent
Dividend Payment Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue of
such shares is prior to the record date for the first Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a semi-annual dividend and before such
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Dividend Payment Date. Accrued but unpaid
A-2
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth and except as otherwise provided in the Certificate of Incorporation or
required by law, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters upon which the holders of the Company are
entitled to vote. In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock, and except as otherwise required by law,
the holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Company having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever semi-annual dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (as to
dividends) to the Series A Preferred Stock;
A-3
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (as to
dividends) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Company
ranking junior (as to dividends and upon dissolution, liquidation
or winding up) to the Series A Preferred Stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(B) The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to the holders of the Common Stock or of shares of any other stock of
the Company ranking junior upon liquidation, dissolution or winding up to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received the greater of (x) $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, or (y) an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders
A-4
of shares of Common Stock, or (B) to the holders of shares of stock ranking on a
parity upon liquidation, dissolution or winding up with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under the
proviso in clause (A) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged for or
changed into such other stock or securities, cash and/or any other property in
an amount per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 8. NO REDEMPTION. The shares of Series A Preferred
Stock shall not be redeemable from any holder.
SECTION 9. RANK. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, junior to all other
series of Preferred Stock and senior to the Common Stock.
SECTION 10. AMENDMENT. If any proposed amendment to the
Certificate of Incorporation (including this Certificate of Designations) would
alter, change or repeal any of the preferences, powers or special rights given
to the Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely, then the holders of the Series A Preferred Stock shall be entitled to
vote separately as a class upon such amendment, and the affirmative vote of
two-thirds of the outstanding shares of the Series A Preferred Stock, voting
separately as a class, shall be necessary
A-5
for the adoption thereof, in addition to such other vote as may be required by
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Designations is executed
on behalf of the Company by its Chief Executive Officer on this 8th day of
January, 1999.
------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
A-6
FORM OF RIGHT CERTIFICATE
Certificate No. R Rights
-------- ----------
NOT EXERCISABLE AFTER January 8, 2009 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON
WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
Right Certificate
DYNAMIC MATERIALS CORPORATION
This Rights Certificate certifies that
-------------------------
or registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of that certain Rights Agreement, dated as of January
8, 1999 (the "RIGHTS AGREEMENT"), between DYNAMIC MATERIALS CORPORATION, a
Delaware corporation (the "COMPANY"), and XXXXXX TRUST AND SAVINGS BANK (the
"RIGHTS AGENT"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m.,
Denver time, on January 8, 2009 at the office or agency of the Rights Agent
designated for such purpose, or of its successor as Rights Agent, one
one-hundredth of a fully paid and non-assessable share of Series A Junior
Participating Preferred Stock, par value $.05 per share (the "PREFERRED
SHARES"), of the Company, at a purchase price of $22.50 per one one-hundredth of
a Preferred Share (the "PURCHASE PRICE"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of January 8, 1999, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price, the number of one one-hundredths of a Preferred Share which may be
purchased upon the exercise of the Rights and the number of Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, as the same may be amended from time to
time, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices
B-1
of the Company and the designated office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates,
upon surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.05 per Right or (ii) may be exchanged in whole or in part for
Preferred Shares or shares of the Company's Common Stock, par value $.05 per
share.
No fractional Preferred Shares will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
certificate shall have been exercised as provided in the Rights Agreement. This
Right Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Rights Agent.
[Remainder of Page Intentionally Left Blank]
B-2
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of , .
-------------- -------
ATTEST: DYNAMIC MATERIALS CORPORATION
By: By:
------------------------------- ----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
COUNTERSIGNED:
XXXXXX TRUST AND SAVINGS BANK,
AS RIGHTS AGENT
By:
---------------------------------------
B-3
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED hereby sells,
--------------------------------
assigns and transfers unto
---------------------------------------------------
--------------------------------------------------------------------------------
(Please print name, address
and social security number of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
-------------------------------
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
---------------------
-----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an Eligible Guarantor
Institution, as defined by SEC Rule 17Ad-15 (12 CFR 240.17Ad-15) or any similar
rule which the Rights Agent deems applicable.
--------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by, and were not acquired by
the undersigned from, an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
-----------------------------------
Signature
B-4
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
DYNAMIC MATERIALS CORPORATION:
This undersigned hereby irrevocably elects to exercise Rights
---------
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Please print name, address and social security number)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Please print name, address and social security number)
Dated:
----------------------
-----------------------------------
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
-------------------------------------------------------------------------------
(To be completed)
B-5
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement)
-----------------------------------
Signature
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
