AMENDMENT NO. 1 TO
RIGHTS AGREEMENT FOR
RECOTON CORPORATION
THIS AMENDMENT NO. 1 TO RIGHTS AGREEMENT ("Amendment No. 1"), dated as
of June 9, 1999, is entered into by and between Recoton Corporation., a New York
corporation (the "Company"), and ChaseMellon Shareholder Services L.L.C., f/k/a
Chemical Mellon Shareholder Services L.L.C. (the "Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to that certain
Rights Agreement dated as of October 27, 1995 (the "Rights Agreement");
WHEREAS, the Rights Agreement contains terms restricting the ability
of the Board of Directors of the Company to redeem the Rights issued thereunder
under certain circumstances;
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and its shareholders to amend the Rights
Agreement as set forth in this Amendment to address certain developments in law
and to adopt certain changes requested by the Rights Agent; and
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Rights
Agreement may be amended as set forth in this Amendment without approval of the
holders of the Rights;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements in this Amendment set forth, the Company and the Rights Agent hereby
agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment No. 1 and not
otherwise defined herein shall have the meanings ascribed thereto in the
Rights Agreement.
2. AMENDMENT OF RIGHTS AGREEMENT. The following provisions of the Rights
Agreement are amended as set forth below:
(a) Section 1(c) is amended to read in its entirely as follows:
(c) A PERSON SHALL BE DEEMED THE "BENEFICIAL OWNER" OF, AND
SHALL BE DEEMED TO "BENEFICIALLY OWN," ANY SECURITIES:
(i) WHICH SUCH PERSON OR ANY OF SUCH PERSON'S
AFFILIATES OR ASSOCIATES, DIRECTLY OR INDIRECTLY, HAS THE RIGHT
TO ACQUIRE (WHETHER SUCH RIGHT IS EXERCISABLE IMMEDIATELY OR ONLY
AFTER THE PASSAGE OF TIME) PURSUANT TO ANY AGREEMENT, ARRANGEMENT
OR UNDERSTANDING (WHETHER OR NOT IN WRITING) OR UPON THE EXERCISE
OF CONVERSION RIGHTS, EXCHANGE RIGHTS, RIGHTS, WARRANTS OR
OPTIONS, OR OTHERWISE; PROVIDED, HOWEVER, THAT A PERSON SHALL NOT
BE DEEMED THE "BENEFICIAL OWNER" OF, OR TO "BENEFICIALLY OWN,"
(A) SECURITIES TENDERED PURSUANT TO A TENDER OR EXCHANGE OFFER
MADE BY SUCH PERSON OR ANY OF SUCH PERSON'S AFFILIATES OR
ASSOCIATES UNTIL SUCH TENDERED SECURITIES ARE ACCEPTED FOR
PURCHASE OR EXCHANGE, OR (B) SECURITIES ISSUABLE UPON EXERCISE OF
RIGHTS AT ANY TIME PRIOR TO THE OCCURRENCE OF A TRIGGERING EVENT,
OR (C) SECURITIES ISSUABLE UPON EXERCISE OF RIGHTS FROM AND AFTER
THE OCCURRENCE OF A TRIGGERING EVENT WHICH RIGHTS WERE ACQUIRED
BY SUCH PERSON OR ANY OF SUCH PERSON'S AFFILIATES OR ASSOCIATES
PRIOR TO THE DISTRIBUTION DATE OR PURSUANT TO SECTION 3(A) OR
SECTION 22 HEREOF (THE "ORIGINAL RIGHTS") OR PURSUANT TO SECTION
11(I) HEREOF IN CONNECTION WITH AN ADJUSTMENT MADE WITH RESPECT
TO ANY ORIGINAL RIGHTS;
(ii) WHICH SUCH PERSON OR ANY OF SUCH PERSON'S
AFFILIATES OR ASSOCIATES, DIRECTLY OR INDIRECTLY, HAS THE RIGHT
TO VOTE OR DISPOSE OF OR HAS "BENEFICIAL OWNERSHIP" OF (AS
DETERMINED PURSUANT TO RULE 13D-3 OF THE GENERAL RULES AND
REGULATIONS UNDER THE EXCHANGE ACT), INCLUDING PURSUANT TO ANY
AGREEMENT, ARRANGEMENT OR UNDERSTANDING, WHETHER OR NOT IN
WRITING; PROVIDED, HOWEVER, THAT A PERSON SHALL NOT BE DEEMED THE
"BENEFICIAL OWNER" OF, OR TO "BENEFICIALLY OWN," ANY SECURITY
UNDER THIS SUBPARAGRAPH (II) AS A RESULT OF AN AGREEMENT,
ARRANGEMENT OR UNDERSTANDING TO VOTE SUCH SECURITY IF SUCH
AGREEMENT, ARRANGEMENT OR UNDERSTANDING: (A) ARISES SOLELY FROM A
REVOCABLE PROXY GIVEN IN RESPONSE TO A PUBLIC PROXY OR CONSENT
SOLICITATION MADE PURSUANT TO, AND IN ACCORDANCE WITH, THE
APPLICABLE PROVISIONS OF THE GENERAL RULES AND REGULATIONS UNDER
THE EXCHANGE ACT, AND (B) IS NOT ALSO THEN REPORTABLE BY SUCH
PERSON ON SCHEDULE 13D UNDER THE EXCHANGE ACT (OR ANY COMPARABLE
OR SUCCESSOR REPORT); OR
(iii) WHICH ARE BENEFICIALLY OWNED, DIRECTLY OR
INDIRECTLY, BY ANY OTHER PERSON (OR ANY AFFILIATE OR ASSOCIATE
THEREOF) WITH WHICH SUCH PERSON (OR ANY OF SUCH PERSON'S
AFFILIATES OR ASSOCIATES) HAS ANY AGREEMENT, ARRANGEMENT OR
UNDERSTANDING (WHETHER OR NOT IN WRITING), FOR THE PURPOSE OF
ACQUIRING, HOLDING, VOTING (EXCEPT PURSUANT TO A REVOCABLE PROXY
AS DESCRIBED IN THE PROVISO TO SUBPARAGRAPH (II) OF THIS
PARAGRAPH (C)) OR DISPOSING OF ANY VOTING SECURITIES OF THE
COMPANY;
PROVIDED, HOWEVER, THAT NOTHING IN THIS PARAGRAPH (C) SHALL CAUSE A
PERSON ENGAGED IN BUSINESS AS AN UNDERWRITER OF SECURITIES TO BE THE
"BENEFICIAL OWNER" OF, OR TO "BENEFICIALLY OWN," ANY SECURITIES
ACQUIRED THROUGH SUCH PERSON'S PARTICIPATION IN GOOD FAITH IN A FIRM
COMMITMENT UNDERWRITING UNTIL THE EXPIRATION OF FORTY DAYS AFTER THE
DATE OF SUCH ACQUISITION.
NOTWITHSTANDING ANYTHING CONTAINED IN SUBPARAGRAPHS (II) AND
(III) OF THIS PARAGRAPH (C), NO NATURAL PERSON WHO HAS THE RIGHT TO
VOTE ANY SECURITIES PURSUANT TO AN AGREEMENT APPROVED BY THE BOARD OF
DIRECTORS SHALL BE A "BENEFICIAL OWNER" OF, OR TO "BENEFICIALLY OWN,"
ANY OF SUCH SECURITIES.
(b) Section 1(g) is deleted.
(c) Section 2 is amended to delete the words "and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date (as defined below) also be the holders of the Common
Shares)."
(d) Section 18(a) is amended to add at the end of the paragraph
the following words: "ANYTHING TO THE CONTRARY NOTWITHSTANDING, IN NO EVENT
SHALL THE RIGHTS AGENT BE LIABLE FOR SPECIAL, PUNITIVE, INDIRECT,
CONSEQUENTIAL OR INCIDENTAL 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, PROVIDED THAT THE
RIGHTS AGENT HAS ACTED IN GOOD FAITH UNDER THIS AGREEMENT."
(e) Section 23 is amended to read in its entirely as follows:
SECTION 23. REDEMPTION AND TERMINATION. (A) THE BOARD OF
DIRECTORS OF THE COMPANY MAY, AT ITS OPTION, AT ANY TIME PRIOR TO
THE EARLIER OF (I) THE CLOSE OF BUSINESS ON THE TENTH DAY
FOLLOWING THE SHARES ACQUISITION DATE (OR, IF THE SHARES
ACQUISITION DATE SHALL HAVE OCCURRED PRIOR TO THE RECORD DATE,
THE CLOSE OF BUSINESS ON THE TENTH DAY FOLLOWING THE RECORD
DATE), OR (II) THE FINAL EXPIRATION DATE, REDEEM ALL BUT NOT LESS
THAN ALL THE THEN OUTSTANDING RIGHTS AT A REDEMPTION PRICE OF
$.01 PER RIGHT, AS SUCH AMOUNT MAY BE APPROPRIATELY ADJUSTED TO
REFLECT ANY SHARES SPLIT, SHARES DIVIDEND OR SIMILAR TRANSACTION
OCCURRING AFTER THE DATE HEREOF (SUCH REDEMPTION PRICE BEING
HEREINAFTER REFERRED TO AS THE "REDEMPTION PRICE").
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, THE RIGHTS SHALL NOT BE EXERCISABLE AFTER THE FIRST
OCCURRENCE OF A SECTION 11(A)(II) EVENT UNTIL SUCH TIME AS THE
COMPANY'S RIGHT OF REDEMPTION HEREUNDER HAS EXPIRED. THE COMPANY
MAY, AT ITS OPTION, PAY THE REDEMPTION PRICE IN CASH, COMMON
SHARES (BASED ON THE "CURRENT MARKET PRICE", AS DEFINED IN
SECTION 11(D)(I) HEREOF, OF THE COMMON SHARES AT THE TIME OF
REDEMPTION) OR ANY OTHER FORM OF CONSIDERATION DEEMED APPROPRIATE
BY THE BOARD OF DIRECTORS.
(b) IMMEDIATELY UPON THE ACTION OF THE BOARD OF DIRECTORS OF
THE COMPANY ORDERING THE REDEMPTION OF THE RIGHTS, EVIDENCE OF
WHICH SHALL HAVE BEEN FILED WITH THE RIGHTS AGENT AND WITHOUT ANY
FURTHER ACTION AND WITHOUT ANY NOTICE, THE RIGHT TO EXERCISE THE
RIGHTS WILL TERMINATE AND THE ONLY RIGHT THEREAFTER OF THE
HOLDERS OF RIGHTS SHALL BE TO RECEIVE THE REDEMPTION PRICE FOR
EACH RIGHT SO HELD. PROMPTLY AFTER THE ACTION OF THE BOARD OF
DIRECTORS ORDERING THE REDEMPTION OF THE RIGHTS, THE COMPANY
SHALL GIVE NOTICE OF SUCH REDEMPTION TO THE RIGHTS AGENT AND THE
HOLDERS OF THE THEN OUTSTANDING RIGHTS BY MAILING SUCH NOTICE TO
ALL SUCH HOLDERS AT EACH HOLDER'S LAST ADDRESS AS IT APPEARS UPON
THE REGISTRY BOOKS OF THE RIGHTS AGENT OR, PRIOR TO THE
DISTRIBUTION DATE, ON THE REGISTRY BOOKS OF THE TRANSFER AGENT
FOR THE COMMON SHARES. ANY NOTICE WHICH IS MAILED IN THE MANNER
HEREIN PROVIDED SHALL BE DEEMED GIVEN, WHETHER OR NOT THE HOLDER
RECEIVES THE NOTICE. EACH SUCH NOTICE OF REDEMPTION WILL STATE
THE METHOD BY WHICH THE PAYMENT OF THE REDEMPTION PRICE WILL BE
MADE.
(f) Section 26 is amended to read in its entirely as follows:
SECTION 26. SUPPLEMENTS AND AMENDMENTS. PRIOR TO THE
DISTRIBUTION DATE AND SUBJECT TO THE PENULTIMATE SENTENCE OF THIS
SECTION 26, THE COMPANY AND THE RIGHTS AGENT SHALL, IF THE
COMPANY SO DIRECTS, SUPPLEMENT OR AMEND ANY PROVISION OF THIS
AGREEMENT WITHOUT THE APPROVAL OF ANY HOLDERS OF CERTIFICATES
REPRESENTING COMMON SHARES. FROM AND AFTER THE DISTRIBUTION DATE
AND SUBJECT TO THE PENULTIMATE SENTENCE OF THIS SECTION 26, THE
COMPANY AND THE RIGHTS AGENT SHALL, IF THE COMPANY SO DIRECTS,
SUPPLEMENT OR AMEND THIS AGREEMENT WITHOUT THE APPROVAL OF ANY
HOLDERS OF RIGHTS CERTIFICATES IN ORDER (I) TO CURE ANY
AMBIGUITY, (II) TO CORRECT OR SUPPLEMENT ANY PROVISION CONTAINED
HEREIN WHICH MAY BE DEFECTIVE OR INCONSISTENT WITH ANY OTHER
PROVISIONS HEREIN, (III) TO SHORTEN OR LENGTHEN ANY TIME PERIOD
HEREUNDER, OR (IV) TO CHANGE OR SUPPLEMENT THE PROVISIONS
HEREUNDER IN ANY MANNER WHICH THE COMPANY MAY DEEM NECESSARY OR
DESIRABLE AND WHICH SHALL NOT ADVERSELY AFFECT THE INTERESTS OF
THE HOLDERS OF RIGHTS CERTIFICATES (OTHER THAN AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF SUCH PERSON); PROVIDED,
THIS AGREEMENT MAY NOT BE SUPPLEMENTED OR AMENDED TO LENGTHEN,
PURSUANT TO CLAUSE (III) OF THIS SENTENCE, (A) A TIME PERIOD
RELATING TO WHEN THE RIGHTS MAY BE REDEEMED AT SUCH TIME AS THE
RIGHTS ARE NOT THEN REDEEMABLE, OR (B) ANY OTHER TIME PERIOD
UNLESS SUCH LENGTHENING IS FOR THE PURPOSE OF PROTECTING,
ENHANCING OR CLARIFYING THE RIGHTS OF, AND/OR THE BENEFITS TO,
THE HOLDERS OF RIGHTS. UPON THE DELIVERY OF A CERTIFICATE FROM AN
APPROPRIATE OFFICER OF THE COMPANY WHICH STATES THAT THE PROPOSED
SUPPLEMENT OR AMENDMENT IS IN COMPLIANCE WITH THE TERMS OF THIS
SECTION 26, THE RIGHTS AGENT SHALL EXECUTE SUCH SUPPLEMENT OR
AMENDMENT. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT
TO THE CONTRARY, NO SUPPLEMENT OR AMENDMENT SHALL BE MADE WHICH
CHANGES THE REDEMPTION PRICE, THE FINAL EXPIRATION DATE, THE
PURCHASE PRICE OR THE NUMBER OF ONE ONE-HUNDREDTHS OF A SHARE OF
PREFERRED SHARES FOR WHICH A RIGHT IS EXERCISABLE. PRIOR TO THE
DISTRIBUTION DATE, THE INTERESTS OF THE HOLDERS OF RIGHTS SHALL
BE DEEMED COINCIDENT WITH THE INTERESTS OF THE HOLDERS OF COMMON
SHARES.
(g) Section 28 is amended to read in its entirely as
follows:
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. FOR ALL PURPOSES OF THIS AGREEMENT, ANY
CALCULATION OF THE NUMBER OF COMMON SHARES OUTSTANDING AT ANY
PARTICULAR TIME, INCLUDING FOR PURPOSES OF DETERMINING THE
PARTICULAR PERCENTAGE OF SUCH OUTSTANDING COMMON SHARES OF WHICH
ANY PERSON IS THE BENEFICIAL OWNER, SHALL BE MADE IN ACCORDANCE
WITH THE LAST SENTENCE OF RULE 13D-3(D)(L)(I) OF THE GENERAL
RULES AND REGULATIONS UNDER THE EXCHANGE ACT. THE BOARD OF
DIRECTORS OF THE COMPANY SHALL HAVE THE EXCLUSIVE POWER AND
AUTHORITY TO ADMINISTER THIS AGREEMENT AND TO EXERCISE ALL RIGHTS
AND POWERS SPECIFICALLY GRANTED TO THE BOARD OR TO THE COMPANY,
OR AS MAY BE NECESSARY OR ADVISABLE IN THE ADMINISTRATION OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE RIGHT AND POWER TO
(I) INTERPRET THE PROVISIONS OF THIS AGREEMENT, AND (II) MAKE ALL
DETERMINATIONS DEEMED NECESSARY OR ADVISABLE FOR THE
ADMINISTRATION OF THIS AGREEMENT (INCLUDING A DETERMINATION TO
REDEEM OR NOT REDEEM THE RIGHTS OR TO AMEND THE AGREEMENT). ALL
SUCH ACTIONS, CALCULATIONS, INTERPRETATIONS AND DETERMINATIONS
(INCLUDING, FOR PURPOSES OF CLAUSE (Y) BELOW, ALL OMISSIONS WITH
RESPECT TO THE FOREGOING) WHICH ARE DONE OR MADE BY THE BOARD IN
GOOD FAITH, SHALL (X) BE FINAL, CONCLUSIVE AND BINDING ON THE
COMPANY, THE RIGHTS AGENT, THE HOLDERS OF THE RIGHTS AND ALL
OTHER PARTIES, AND (Y) NOT SUBJECT THE BOARD OR THE CONTINUING
DIRECTORS TO ANY LIABILITY TO THE HOLDERS OF THE RIGHTS.
(h) Exhibit C is amended to read in its entirely as attached
as Annex 1.
(i) All references in the Rights Agreement to "Chemical
Mellon Shareholder Services L.L.C." are changed to "ChaseMellon
Shareholder Services L.L.C."
3. OTHER TERMS UNCHANGED. Except as amended by this Amendment No. 1, the
Rights Agreement shall remain in full force and effect.
4. GOVERNING LAW. This Amendment No. 1 shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such
State.
5. COUNTERPARTS. This Amendment No. 1 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.
6. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this
Amendment No. 1 are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties signing below have caused this Amendment
No. 1 to be duly executed and their respective corporate seals to be affixed to
this Amendment No. 1 and attested, all as of the day and year first above
written.
Attest: RECOTON CORPORATION
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Stuart Mont
--------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxx Name: Stuart Mont
Title: Secretary Title: Executive Vice President-
Operations
Attest: CHASEMELLON SHAREHOLDER
SERVICES L.L.C.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxxxx
---------------------------- -------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxxx Xxxxxxxx
Title: Vice President Title: Relationship Manager
ANNEX 1
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On October 27, 1995, the Board of Directors of Recoton Corporation
(the "Company") declared a dividend of one Right for each outstanding Common
Share of the Company, par value $.20 per share (the "Common Shares"), to
shareholders of record at the close of business on November 10, 1995. Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one one-hundredth of a share of Series A Junior Participating Preferred Share,
par value $1.00 per share (the "Preferred Shares"), at a Purchase Price of
$100.00 per unit of one one-hundredth of a share, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement, as
amended (the "Rights Agreement") between the Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
Initially, the Rights will be attached to all Common Shares
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. A Distribution Date will occur and the Rights
will separate from the Common Shares upon the earliest of (i) ten days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the Common Shares then outstanding* (the
"Shares Acquisition Date"), or (ii) ten business days following the commencement
of a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding Common Shares (unless such
tender offer or exchange offer is an offer for all outstanding Common Shares
which a majority of the unaffiliated Directors who are not officers of the
Company determine to be fair to and otherwise in the best interests of the
Company and its shareholders).
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Shares certificates issued after November
10, 1995 will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common
Shares outstanding will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on November 10, 2005, unless earlier redeemed by
the Company as described below.
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* Under the Rights Agreement, for purposes of calculating percentages of
Common Shares outstanding, Common Shares outstanding shall include all
Common Shares deemed to be beneficially owned by a person and its
affiliates and associates, even if not actually then outstanding.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except (i) with respect to certain
Common Shares issued or sold pursuant to the exercise of stock options or under
any employee plan or arrangement, or upon the exercise, conversion or exchange
of certain securities of the Company, or (ii) as otherwise determined by the
Board of Directors, only Common Shares issued prior to the Distribution Date
will be issued with Rights.
In the event that a person becomes the beneficial owner of 20% or more
of the then outstanding Common Shares (except pursuant to an offer for all
outstanding Common Shares which a majority of the Directors who are not officers
of the Company and who are not affiliates or associates of such person determine
to be fair to and otherwise in the best interests of the Company and its
shareholders) (a "Flip-in Event"), each holder of a Right will thereafter have
the right to receive, upon payment of the Purchase Price, Common Shares (or, in
certain circumstances, cash, property or other securities of the Company) having
a value (based on a formula set forth in the Rights Agreement) equal to two
times the Purchase Price of the Right. Notwithstanding any of the foregoing,
following the occurrence of the Flip-in Event, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by an Acquiring Person (or by certain related parties) will be null and
void. However, Rights are not exercisable following the occurrence of the
Flip-in Event until such time as the Rights are no longer redeemable by the
Company as set forth below.
For example, at a Purchase Price of $100.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following a Flip-in
Event would entitle its holder to purchase $200.00 worth of Common Shares (or
other consideration, as noted above) determined pursuant to a formula set forth
in the Rights Agreement, for $100.00. Assuming that the Common Shares had a per
share value of $25.00 at such time (as determined pursuant to such formula), the
holder of each valid Right would be entitled to purchase eight Common Shares for
$100.00.
In the event that, at any time following the Shares Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or in which it
is the surviving corporation but its Common Shares are changed or exchanged
(other than a merger meeting certain conditions which follows an offer for all
outstanding Common Shares which a majority of the unaffiliated Directors who are
not officers of the Company determine to be fair to and otherwise in the best
interests of the Company and its shareholders), or (ii) 50% or more of the
Company's assets, earning power or cash flow is sold or transferred, each holder
of a Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon payment of the Purchase Price,
common shares of the acquiring company having a value equal to two times the
exercise price of the Right. The events set forth in this paragraph and the
Flip-in Event described in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of units of one
one-hundredths of a stock of Preferred Shares or other securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a shares dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) if
holders of the Preferred Shares are granted certain rights or warrants to
subscribe for Preferred Shares or convertible securities at less than the
current market price of the Preferred Shares, or (iii) upon the distribution to
holders of the Preferred Shares of evidences of indebtedness or assets
(excluding cash dividends not in excess of 200% of regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Preferred Shares (other than fractions of one one-hundredth
of a share, or integral multiples thereof) will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading date prior to the date of exercise.
At any time until ten days following the Shares Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (payable in cash, Common Shares or other consideration deemed appropriate
by the Board of Directors). Immedi ately upon the action of the Board of
Directors ordering redemption of the Rights, with, where required, the
concurrence of such Continuing Directors, the Rights will terminate and the only
right of the holders of Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common shares of the acquiring company as set forth above, or are redeemed as
provided in the second preceding paragraph.
Other than certain provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (other than an Acquiring Person or an
affiliate or associate thereof), or to shorten or lengthen any time period under
the Rights Agreement; PROVIDED, however, that no amendment to adjust the time
period governing redemption shall be made at such time as the Rights are not
redeemable.
The Rights have certain anti-takeover effects. Exercise of the Rights
will cause substantial dilution to a person or group that attempts to acquire
the Company on terms not approved by the Company's Board of Directors. The
existence of Rights, however, should not affect an offer at a fair price and
otherwise in the best interests of the Company and its shareholders as
determined by the Board of Directors. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors since
the Board of Directors may, at its option, at any time until ten days following
the Shares Acquisition Date redeem all but not less than all of the then
outstanding Rights at the $.01 redemption price.
A copy of the Rights Agreement and Amendment No. 1 have been filed
with the Securities and Exchange Commission as Exhibits to a Registration
Statement on Form 8-A. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
