EXHIBIT 4
--------------------------------------------------------------------------------
TITAN EXPLORATION, INC.
and
FIRST UNION NATIONAL BANK
Rights Agent
RIGHTS AGREEMENT
Dated as of June 10, 1999
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions ......................................................... 1
Section 2. Appointment of Rights Agent.................................................. 5
Section 3. Issue of Rights and Right Certificates....................................... 5
Section 4. Form of Right Certificates................................................... 7
Section 5. Execution, Countersignature and Registration................................. 7
Section 6. Transfer, Split-up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates...................... 8
Section 7. Exercise of Rights; Expiration Date of Rights................................ 9
Section 8. Cancellation and Destruction of Right Certificates........................... 10
Section 9. Reservation and Availability of Capital Stock................................ 11
Section 10. Preferred Shares Record Date................................................. 12
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights........... 13
Section 12. Certificate of Adjustment.................................................... 19
Section 13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power........ 20
Section 14. Fractional Rights and Fractional Shares...................................... 21
Section 15. Rights of Action............................................................. 22
Section 16. Agreement of Right Holders................................................... 23
Section 17. Right Certificate Holder Not Deemed a Stockholder............................ 23
Section 18. Concerning the Rights Agent.................................................. 24
Section 19. Merger or Consolidation or Change of Name of Rights Agent.................... 24
Section 20. Duties of Rights Agent....................................................... 25
i
Section 21. Change of Rights Agent....................................................... 27
Section 22. Issuance of New Right Certificates and Additional Rights..................... 28
Section 23. Redemption................................................................... 29
Section 24. Exchange..................................................................... 29
Section 25. Notice of Certain Events..................................................... 31
Section 26. Notices...................................................................... 31
Section 27. Supplements and Amendments................................................... 32
Section 28. Successors................................................................... 33
Section 29. Benefits of this Agreement................................................... 33
Section 30. Severability................................................................. 33
Section 31. Governing Law................................................................ 33
Section 32. Counterparts................................................................. 33
Section 33. Descriptive Headings......................................................... 33
Signatures.................................................................................. 32
Exhibit A - Form of Certificate of Designations of Titan Exploration, Inc.
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
AGREEMENT
---------
This AGREEMENT, dated as of June 10, 1999 (the "Agreement"), between TITAN
EXPLORATION, INC., a Delaware corporation (the "Company"), and FIRST UNION
NATIONAL BANK, as Rights Agent (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one Right (as such term is hereinafter defined) for each share of
Common Stock, par value $.01 per share, of the Company (the "Common Stock")
outstanding at the close of business (as such term is hereinafter defined) on
July 1, 1999 (the "Record Date"), and has authorized the issuance of one Right
(as such number may hereafter be adjusted pursuant to the provisions of this
Agreement) with respect to each share of Common Stock 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 shares of
Common Stock that shall become outstanding after the Distribution Date and prior
to the earlier of the Redemption Date and the Final Expiration Date in
accordance with the provisions of Section 22 of this Agreement. Each Right
shall initially represent the right to purchase one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $1.00 per share, of the
Company (the "Preferred Shares"), having the powers, rights and preferences set
forth in the Certificate of Designations attached to this Agreement as Exhibit
A;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
"Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15 percent or more of the Common Shares (as
such term is hereinafter defined) of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares of the Company for or pursuant to
the terms of any such plan. Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares of
the Company by the Company which, by reducing the number of such shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15 percent or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15 percent or more of the Common Shares of the Company then outstanding
by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any additional Common
Shares of the Company, then such Person shall be deemed to be an
1
"Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
definition, has become such inadvertently, and such Person divests as promptly
as practicable a sufficient number of Common Shares of the Company so that such
Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this definition, then such person shall not be deemed to
be an "Acquiring Person" for any purposes of this Agreement.
Notwithstanding anything contained in this Agreement to the contrary,
Natural Gas Partners, L.P., Natural Gas Partners II, L.P. and NGP Louisiana
Partners, L.P. and their respective Affiliates and Associates (collectively, the
"Excluded Parties") shall not become Acquiring Persons unless and until the
Excluded Parties become the Beneficial Owners of an aggregate of 35 percent or
more of the shares of Common Stock of the Company then outstanding; provided,
however, that the Excluded Parties shall not become Acquiring Persons as the
result of an acquisition of shares of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by the Excluded Parties to 35 percent or more of the
shares of Common Stock of the Company then outstanding, unless and until such
time as (i) any of the Excluded Parties shall purchase or otherwise become the
Beneficial Owner of any additional shares of Common Stock of the Company or (ii)
any other Person who is the Beneficial Owner of any shares of Common Stock of
the Company shall become an Affiliate or Associate of the Excluded Parties;
provided further, this exception for the Excluded Parties shall terminate once
the Excluded Parties are the Beneficial Owners of an aggregate of less than 15
percent of the shares of Common Stock of the Company.
"Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii)
hereof.
"Affiliate" and "Associate," when used with reference to any Person, shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act (as such term is hereinafter
defined), as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," and shall be deemed to have "Beneficial Ownership" of, any
securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(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) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed
2
the Beneficial Owner of, or to beneficially own, securities tendered pursuant to
a tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D 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 proviso in clause
(ii)(B) of this definition) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the Borough of Manhattan, The City of New York
are authorized or obligated by law or executive order to close.
"Certificate of Designations" shall mean the Certificate of Designations of
Series A Junior Participating Preferred Stock of the Company setting forth the
powers, preferences, rights, qualifications, limitations and restrictions of
such series of Preferred Stock of the Company, a copy of the form of which is
attached to this Agreement as Exhibit A.
"Close of business" on any given date shall mean 5:00 P.M., New York City
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
"Common Shares" when used with reference to the Company shall mean the
shares of Common Stock of the Company. "Common Shares" when used with reference
to any Person other than the Company shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
"Common share equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
3
"Common Stock" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Distribution Date" shall have the meaning set forth in Section 3(b)
hereof.
"Equivalent preferred shares" shall have the meaning set forth in Section
11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect
on the date in question, unless otherwise specifically provided.
"Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof.
"Final Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
"Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
"Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Flip-Over Event" shall have the meaning set forth in Section 13(a) hereof.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Preferred Shares" shall have the meaning set forth in the introductory
paragraph of this Agreement. Any reference in this Agreement to Preferred
Shares shall be deemed to include any authorized fraction of a Preferred Share,
unless the context otherwise requires.
"Principal Party" shall have the meaning set forth in Section 13(b) hereof.
"Purchase Price" with respect to each Right shall mean $20.00, as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Redemption Date" shall have the meaning set forth in Section 7(a) hereof.
"Redemption Price" shall have the meaning set forth in Section 23 hereof.
"Right Certificate" shall mean a certificate evidencing a Right in
substantially the form attached to this Agreement as Exhibit B.
4
"Rights" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in effect on the
date in question, unless otherwise specifically provided.
"Shares Acquisition Date" shall mean the first date of public announcement
by the Company or an Acquiring Person that an Acquiring Person has become such.
"Subsidiary" of any Person shall mean any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall, prior to the Distribution
Date, also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights and Right Certificates.
(a) One Right shall be associated with each Common Share outstanding on the
Record Date, each additional Common Share that shall become outstanding between
the Record Date and the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date, and each additional Common Share with which
Rights are issued after the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date as provided in Section 22 hereof;
provided, however, that, if the number of outstanding Rights are combined into a
smaller number of outstanding Rights pursuant to Section 11 hereof, the
appropriate fractional Right determined pursuant to such Section shall
thereafter be associated with each such Common Share.
(b) Until the earlier of (i) the tenth day after the Shares Acquisition
Date and (ii) the tenth Business Day (or such later date as may be determined by
action of the Board of Directors of the Company prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any Subsidiary of the Company, or any entity holding
Common Shares of the Company for or pursuant to the terms of any such plan) of,
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares of
the Company for or pursuant to the terms of any such plan)
5
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
percent or more of the then outstanding Common Shares (including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights; the earlier of such dates being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of Section
3(c) hereof) by the certificates for Common Shares registered in the names of
the holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (y) the Rights,
including the right to receive Right Certificates, will be transferable only in
connection with the transfer of 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, send) by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the Distribution
Date, at the address of such holder shown on the records of the Company, a Right
Certificate evidencing one whole Right for each Common Share (or for the number
of Common Shares with which one whole Right is then associated if the number of
Rights per Common Share held by such record holder has been adjusted in
accordance with the provision in Section 3(a) hereof) so held. If the number of
Rights associated with each Common Share has been adjusted in accordance with
the proviso in Section 3(a) hereof, at the time of distribution of the Right
Certificates, the Company may make any necessary and appropriate rounding
adjustments so that Right Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Right in accordance
with Section 14 hereof. As of and after the Distribution Date, the Rights will
be evidenced solely by such Right Certificates.
(c) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached to this Agreement as Exhibit C (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to any certificate for
Common Shares outstanding as of the Record Date, until the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date, the Rights
will be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto. Until
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(d) Certificates issued for Common Shares after the Record Date (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (d)), but prior to the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date, shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement dated as of June 10, 1999, as it
may be amended from time to time (the "Rights Agreement"), between Titan
6
Exploration, Inc. and First Union National Bank, as Rights Agent, the terms
of which are hereby incorporated herein by reference and a copy of which is
on file at the principal executive offices of Titan Exploration, Inc.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Titan Exploration, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain circumstances,
as set forth in the Rights Agreement, Rights beneficially owned by an
Acquiring Person or their affiliates or Associates (as such terms are
defined in the Rights Agreement) and by any subsequent holder of such
Rights are null and void and nontransferable.
With respect to such certificates containing the foregoing legend, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
form of election to purchase and form of assignment to be printed on the reverse
side thereof) shall be in substantially the form attached to this Agreement as
Exhibit B and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange on which the Rights may from time to time be listed or of
any automated quotations system of a national securities association on which
the Rights may from time to time be registered or quoted, or to conform to
usage. Subject to the provisions of Section 22 hereof, the Right Certificates,
whenever issued, on their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein for the Purchase Price per one one-hundredth of a Preferred Share,
subject to adjustment from time to time as herein provided.
Section 5. Execution, Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President, its Chief Executive Officer, or any
of its Vice Presidents, or its Treasurer, 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 or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
countersigned manually or by facsimile signature by the Rights Agent and shall
not be valid or obligatory for any
7
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such an 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 an 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 Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates, the certificate
number of 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 7(e) 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 and the Final
Expiration Date, any Right Certificate or Right Certificates (except as
otherwise provided herein, including, without limitation, Right Certificates
representing Rights that have become null and void and nontransferable pursuant
to Section 7(e) 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 representing, in the aggregate, the same
number of Rights as the Right Certificate or Right Certificates surrendered then
represented. Any registered holder desiring to transfer, split-up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split-up, combined or exchanged at the
principal office or offices of the Rights Agent designated for such purpose;
provided, however, that neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any
Right Certificate surrendered for transfer until the registered holder shall
have completed and signed the certification of status contained in the form of
assignment on the reverse side of such Right Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e)
and 14 hereof, 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.
8
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a 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 a new Right
Certificate of like tenor and deliver such new Right Certificate 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; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof and except as otherwise provided
herein (including Section 24 hereof), each Right shall entitle the registered
holder thereof, upon exercise thereof as provided herein, to purchase for the
Purchase Price, at any time after the Distribution Date and at or prior to the
earliest of (i) the close of business on June 9, 2009 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date") and (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof, one one-hundredth of a Preferred
Share, subject to adjustment from time to time as provided in Section 11 or 13
hereof.
(b) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together with payment of the Purchase
Price for each one one-hundredth of a Preferred Share as to which the Rights are
exercised, at or prior to the earliest of (i) the Final Expiration Date, (ii)
the Redemption Date and (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares (or other securities) 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 lawful money of the United States of America, in cash or by certified
check, cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon (i) either (A) promptly requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is a transfer agent for such 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) if the Company shall
have elected to deposit the Preferred Shares with a depositary agent under a
depositary arrangement, promptly requisition from the depositary agent
depositary receipts representing the number of one one-hundredths of a Preferred
Share 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 will direct the depositary agent to comply
with all such requests, (ii) when appropriate, promptly
9
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, any
Rights that are at any time beneficially owned by an Acquiring Person or any
Affiliate or Associate of an Acquiring Person shall be null and void and
nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of any Right Certificate upon the occurrence of
any purported exercise unless such registered holder shall have (i) completed
and signed the certification of status contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not to
exceed 90 calendar days after the Distribution Date, the exercisability of the
Rights in order to prepare and file a Registration Statement under the
Securities Act, on appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such Registration Statement
to become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such Registration Statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the Blue Sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, and any
10
Right Certificate representing Rights that have become null and void and
nontransferable pursuant to Section 7(e) hereof surrendered or presented for any
purpose shall, if surrendered or presented to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered or presented 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 Right Certificate purchased or acquired by the
Company. The Rights Agent shall deliver all canceled Right Certificates to the
Company, or shall, at the written request of the Company, destroy such canceled
Right Certificates, and in either such case shall deliver a certificate of
destruction thereof or a certificate of cancellation thereof, as may be
appropriate, to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares or any
authorized and issued Preferred Shares held in it treasury, free from preemptive
rights or any right of first refusal, a number of Preferred Shares sufficient to
permit the exercise in full of all outstanding Rights in accordance with Section
7 hereof.
(b) In the event that there shall not be sufficient Preferred Shares
issued but not outstanding or authorized but unissued to permit the exercise or
exchange of Rights in accordance with Section 11 or 24 hereof, as the case may
be, the Company covenants and agrees that it will take all such action as may be
necessary to authorize additional Preferred Shares for issuance upon the
exercise or exchange of Rights pursuant to Section 11 or 24 hereof, as the case
may be; provided, however, that if the Company is unable to cause the
authorization of additional Preferred Shares, then the Company shall, or in lieu
of seeking any such authorization, the Company may, to the extent necessary and
permitted by applicable law and any agreements or instruments in effect prior to
the Distribution Date to which it is a party, (i) upon surrender of a Right, pay
cash equal to the Purchase Price in lieu of issuing Preferred Shares and
requiring payment therefor, (ii) upon due exercise of a Right and payment of the
Purchase Price for each Preferred Share as to which such Right is exercised,
issue equity securities having a value equal to the value of the Preferred
Shares which otherwise would have been issuable pursuant to Section 11 or 24
hereof, which value shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors of the Company, or (iii) upon
due exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, distribute a combination of Preferred
Shares, cash and/or other equity and/or debt securities having an aggregate
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11 or 24 hereof, which value shall be determined by
a nationally recognized investment banking firm selected by the Board of
Directors of the Company. To the extent that any legal or contractual
restrictions (pursuant to agreements or instruments in effect prior to the
Distribution Date to which it is a party) prevent the Company from paying the
full amount payable in accordance with the foregoing sentence, the Company shall
pay to holders of the Rights as to which such payments are being made all
amounts which are not then restricted on
11
a pro rata basis as such payments become permissible under such legal or
contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
or exchange of Rights shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights may be listed on any national securities exchange or
automated quotations system of a registered national securities association on
which the Preferred Shares may from time to time be listed, traded or quoted,
the Company covenants and agrees that it will use reasonable efforts to cause,
from and after such time as the Rights become exercisable or exchangeable, all
Preferred Shares reserved for such issuance to be listed on such exchange or
approved for quotation in such quotation system, upon official notice of
issuance upon such exercise.
(e) The Company further covenants and agrees, subject to the provisions
of this Agreement, 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 Right Certificates or of any Preferred Shares or Common Shares or
other securities upon the exercise or exchange of the 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 in respect of the issuance or delivery of certificates for Preferred
Shares or Common Shares or other securities, as the case may be, in a name other
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or exchange or to issue or deliver any certificates for
Preferred Shares or Common Shares or other securities, as the case may be, upon
the exercise or exchange of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it had been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares or Common Shares or other securities is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares or Common Shares or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of any 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 transfer books of the Company for the
Preferred Shares or Common Shares or other securities, as the case may be, are
closed, such Person shall be deemed to have become the record holder of such
Preferred Shares or Common Shares or other securities, as the case may be, on,
and such certificate shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, 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 stockholder of the Company with respect to shares
for which the
12
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 covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection
with a consolidation 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
transfer books of the Company for the Preferred Shares were open, he 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. If an
event occurs that would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person (a "Flip-In Event"), each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied times the number of one one-hundredths of
a Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company (such number of Common Shares being referred
to herein as the "Adjustment Shares") as shall equal the result obtained by
(x) multiplying the then current Purchase Price times the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable
and dividing that product by (y) 50 percent of the then current per share
market price of the Company's Common Shares (determined pursuant to Section
11(d) hereof) on the date of the occurrence of such event. In the event
that any Person shall become an Acquiring Person and the Rights shall then
be outstanding, the Company shall
13
not take any action which would eliminate or diminish the benefits intended
to be afforded by the Rights.
(iii) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercisein full of the Rights in accordance with Section 11(a)(ii) hereof,
the Company shall, to the extent permitted by applicable law and
regulation: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2)
the Purchase Price (such excess to be referred to hereinafter as the
"Spread"), and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) other
equity securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock which the Board of Directors of the
Company has deemed to have the same value as the Common Shares (such shares
of preferred stock being referred to herein as "common share
equivalents")), (4) debt securities of the Company, (5) other assets or (6)
any combination of the foregoing, having an aggregate value equal to the
Current Value as determined by the Board of Directors of the Company;
provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days
following the first occurrence of a Flip-In Event (the "Flip-In Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread.
If the Board of Directors of the Company determines in good faith that it
is likely that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights, the 30-day period set forth
above may be extended to the extent necessary, but not to more than 120
days after the Flip-In Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension,
the Company shall deliver a notice to the Rights Agent and issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a notice to the Rights Agent and a public
announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Shares shall
be the current per share market price (as determined pursuant to Section
11(d) hereof) of the Common Shares on the Flip-In Trigger Date, and the
value of any common share equivalent shall be deemed to have the same value
as the Common Shares on such date.
14
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date times a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. 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 times a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the 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 of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of
15
one Right. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, 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, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current per share market price" of a Security on
any date shall be deemed to be the average of the daily closing prices per
share of such Security for the 10 consecutive Trading Days immediately
following such date; provided, however, that in the event that the current
per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend
or distribution on such Security payable in shares of such Security or
securities convertible into shares of such Security (other than the
Rights), or (B) any subdivision, combination or reclassification of such
Security, and the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification,
shall not have occurred prior to the commencement of the requisite 30
Trading Day or 10 Trading Day period, as set forth above, then, and in each
such case, the "current per share market price" shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such
other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company. 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, 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) hereof. If the
Preferred Shares are not publicly traded, the
16
"current per share market price" of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares, as determined pursuant to Section 11(d)(i) hereof (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied times 100. If neither the
Common Shares nor the Preferred Shares are publicly held or so listed or
traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
(e) Except as hereinafter provided, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one one-millionth of a Preferred Share or one ten-thousandth of any
other share or security, as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment and (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 stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10 and 13 hereof 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) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one one-
hundredths of a Preferred Share (calculated to the nearest one one-millionth of
a Preferred Share) obtained by (i) multiplying (x) the number of one one-
hundredths of a share covered by a Right immediately prior to this adjustment
times (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.
17
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares 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 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
18
other appropriate instrument evidencing such holder's right to receive such
additional shares or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
dividends on Preferred Shares payable in Preferred Shares, or (v) issuance of
rights, options or warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Preferred Shares, shall not be taxable to
such 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 (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event times a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjustment. Whenever an adjustment is made as
provided in Section 11 or 13 hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be obligated or responsible for calculating any adjustment nor shall
it be deemed to have knowledge of any such adjustment unless and until it shall
have received such a certificate.
19
Section 13. Consolidation, Merger, or Sale or Transfer of Assets or
Earning Power.
(a) In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (i) the Company shall consolidate with, or merge
with and into, any other Person, (ii) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
capital stock or other securities of any other Person (or 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 earning power aggregating 50 percent or more of the
assets or earning 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 (any such event described in clauses (i), (ii) or (iii) being
referred to herein as a "Flip-Over Event"), then, and in each such case, proper
provision shall be made so that (A) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price multiplied times the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable Common Shares of the Principal Party (as such
term is hereinafter defined), free and clear of liens, encumbrances or other
adverse claims, as shall equal the result obtained by (1) multiplying the then
current Purchase Price times the number of one one-hundredths of a Preferred
Share for which a Right is exercisable immediately prior to the first occurrence
of a Flip-Over Event (or, if a Flip-In Event has occurred prior to the first
occurrence of a Flip-Over Event, multiplying the number of such one one-
hundredths of a share for which a Right was exercisable immediately prior to the
first occurrence of a Flip-In Event times the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Flip-Over Event, shall be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by (2)
50 percent of the then current per share market price of the Common Shares of
such Principal Party (determined pursuant to Section 11(d) hereof) on the date
of consummation of such consolidation, merger, 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, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Flip-Over Event; (D) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights; and (E) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Flip-Over Event. The Company shall
not consummate any such consolidation, merger, sale or transfer unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement so providing. The Company shall
not enter into any transaction
20
of the kind referred to in this Section 13 if at the time of such transaction
there are any rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights. The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (i) or (ii) of
the first sentence of Section 13(a) hereof, the Person that is the issuer
of any securities into which Common Shares of the Company are converted in
such transaction, or if there is more than one issuer, the issuer of Common
Shares with the greatest aggregate market value, and if no securities are
so issued, the Person that is the other party to such transaction, or if
there is more than one such Person, the Person having Common Shares with
the greatest aggregate market value; and
(ii) in the case of any transaction described in clause (iii) of the
first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time and have not been continuously over the
preceding twelve-month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary of any Person the
Common Shares of which are and have been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Shares of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Shares having the greatest aggregate market value.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company may, but shall not be required to, issue fractions of
Rights or distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company may pay 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 purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
21
reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates which
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-hundredth of a Preferred Share or any integral
multiple thereof), pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of a whole Preferred Share, if any are
outstanding and publicly traded (or the Formula Number (as such term is defined
in Section 2 of the Certificate of Designations) then in effect times the
current market value of a whole Common Share if the Preferred Shares are not
outstanding and publicly traded). For purposes of this Section 14(b), the
current market value of a Preferred Share (or Common Share) shall be the closing
price of a Preferred Share (or Common Share) (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise. If, as a result of an adjustment made
pursuant to Section 11 hereof, the holder of any Right thereafter exercised
shall become entitled to receive any securities other than Preferred Shares, the
provisions of this Section 14(b) shall apply, as nearly as reasonably may be, on
like terms to such other securities.
(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 or exchange of a Right except as provided in this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such 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
22
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations hereunder, and injunctive relief against
actual or threatened violations of the obligations of any Person subject to,
this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e) hereof, only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer;
(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 Certificate 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; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligations; provided, however, the Company must use reasonable efforts to have
any such order, decree or ruling lifted or otherwise overturned as soon as
reasonably practicable.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote or 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,
including, without limitation, any right to vote for the election of directors
or upon any other matter submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in Section
25 hereof), or to receive dividends or other distributions or subscription
rights, or otherwise, until
23
the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(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.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. 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.
24
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates
(or, prior to the Distribution Date, of the Common Shares), by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or 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 advice
or 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 be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void and nontransferable pursuant to Section 7(e)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or
the ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares or
Common Shares to be issued pursuant to this Agreement or any Right Certificate
or as to whether any Preferred Shares or Common Shares will, when so issued, be
validly authorized and issued, fully paid and nonassessable.
25
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions or for any delay in acting while awaiting
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 Agreement
and the date on or after which such action shall be taken or such omission shall
be effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written 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 or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing in this Agreement 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 the Rights Agent was not grossly negligent in
the selection and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent and its
directors, officers, employees and agents harmless against any loss, liability
or expense (including reasonable fees and expenses of counsel) that any of them
may incur resulting from actions taken pursuant to this Agreement or the
performance of the Rights Agent's duties hereunder; provided, however, that no
such party shall be indemnified or held harmless with respect to any such loss,
liability, damage or expense incurred by any of them as a result of, or arising
out of, their negligence, bad faith or willful misconduct. The Rights Agent
shall notify the Company, by letter or by facsimile
26
confirmed by letter, of the assertion of any action, proceeding, suit or claim
against the Rights Agent or another indemnified party, promptly after the Rights
Agent shall have notice of any such assertion of an action, proceeding, suit or
claim or have been served with the summons or other first legal process giving
information as to the nature and basis of the action, proceeding, suit or claim.
The failure of the Rights Agent to so notify the Company shall not relieve the
Company of any indemnification obligation hereunder except to the extent the
Company demonstrates that the defense of such claim or demand is materially
prejudiced by the failure to give such notice. The Company shall be entitled to
participate at its own expense in the defense of any such action, proceeding,
suit or claim, and, if the Company so elects, the Company shall assume the
defense of any such action, proceeding, suit or claim. In the event that the
Company assumes such defense, the Company shall not thereafter be liable for the
fees and expenses of any additional counsel retained by the Rights Agent, so
long as the Company shall retain counsel satisfactory to the Rights Agent, in
the exercise of its reasonable judgment, to defend such action, proceeding, suit
or claim. The Rights Agent agrees not to settle any litigation in connection
with any action, proceeding, suit or claim with respect to which it may seek
indemnification from the Company without the prior written consent of the
Company, which shall not be unreasonably withheld. The indemnity provided in
this Section shall survive the expiration of the Rights and the termination of
the Agreement.
(k) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
(l) Anything in this Agreement to the contrary notwithstanding, 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).
(m) No provisions 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.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates (or, prior to the Distribution Date, of
the Common Shares) by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) 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
27
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
(or, prior to the Distribution Date, of the Common Shares) (who shall, with such
notice, submit his Right Certificate or, prior to the Distribution Date, the
certificate representing his Common Shares, for inspection by the Company), then
the registered holder of any Right Certificate (or, prior to the Distribution
Date, of the Common Shares) 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 of the State of New
York (or of any other state of the United States so long as such corporation is
authorized to conduct a stock transfer or corporate trust business in the State
of New York), in good standing, having an office or agency in the State of New
York, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million; provided that the
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares). 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 and Additional Rights.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors of
the Company to reflect any adjustment or change 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 Final Expiration Date, the Company (i) shall,
with respect to Common Shares so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company,
and (ii) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that no such Right Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued, and no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
28
Section 23. Redemption.
(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) and (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
by the Board of Directors of the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors of the Company in
its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. Within 10 Business Days
after the action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Each such notice of redemption will state
the method by which payment of the Redemption Price will be made. The notice, if
mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder of Rights receives such notice. In
any case, failure to give such notice by mail, or any defect in the notice, to
any particular holder of Rights shall not affect the sufficiency of notice to
other holders of Rights. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares of the Company for or pursuant
to the terms of any such plan), together with all Affiliates and Associates of
such
29
Person, becomes the Beneficial Owner of 50 percent or more of the Common
Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section
24, and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied times the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become null and void and nontransferable pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or equivalent preferred shares) for
Common Shares exchangeable for Rights, at the initial rate of one one-hundredth
of a Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that the number of Common Shares or Preferred Shares
which are issued but not outstanding or authorized but unissued are not
sufficient to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional Common Shares or Preferred Shares.
(e) The Company may, but shall not be required to, issue fractions of
Common Shares upon exchange of Rights pursuant to this Section 24 or distribute
certificates which evidence fractional Common Shares. In lieu of such fractional
Common Shares, the Company may pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Common Share for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24. For purposes of this paragraph (e), the
current market value of a whole Common Share shall be the closing price of a
Common Share (as determined pursuant to the second sentence of Section 11(d)(i)
hereof).
30
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable
in capital stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of capital stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50 percent or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination 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 (or, prior to the Distribution Date, of the Common Shares), in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) In case a Flip-In Event shall occur, then the Company shall as soon
as practicable thereafter give to each holder of a Right Certificate (or, prior
to the Distribution Date, 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) 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:
Titan Exploration, Inc.
000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Corporate Secretary
31
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Union National Bank
0000 Xxxx X.X. Xxxxxx Xxxxxxxxx, 0X0
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Shareholder Services Group
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.
Section 27. Supplements and Amendments. At any time prior to the
Distribution Date and subject to the last sentence of this Section 27, the
Company may by action of its Board of Directors, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Agreement
(including, without limitation, the date upon which the Distribution Date shall
occur, the time during which the Rights may be redeemed pursuant to Section 23
or any provision of the Certificate of Designations) in any manner without the
approval of any holder of the Rights. From and after the Distribution Date and
subject to applicable law, the Company may by action of its Board of Directors,
and the Rights Agent shall if the Company so directs, from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order (i) to cure any ambiguity or to correct or supplement any
provision contained in this Agreement which may be defective or inconsistent
with any other provision of this Agreement or (ii) to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of the Rights or Right Certificates (other than an Acquiring Person or
any Affiliate or Associate of an Acquiring Person). Any supplement or amendment
adopted during any period after any Person has become an Acquiring Person but
prior to the Distribution Date shall be null and void unless such supplement or
amendment could have been adopted under the prior sentence from and after the
Distribution Date. Without limiting the foregoing, the Company may at any time
prior to the Distribution Date amend this Agreement to lower the thresholds set
forth in the definition of Acquiring Person in Section 1 hereof and in Section
3(b) hereof to not less than the greater of (i) the sum of 0.001 percent and the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares of the Company for or pursuant to
the terms of any such plan) and (ii) 10 percent. 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 its own rights, duties or
immunities under
32
this Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of the
Common Shares of the Company. In addition, notwithstanding anything to the
contrary contained in this Agreement, no supplement or amendment to this
Agreement shall be made which (i) reduces the Redemption Price (except as
required hereunder by appropriate adjustment to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement) or
(ii) provides for an earlier Final Expiration Date.
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, of 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, of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. THIS AGREEMENT AND EACH RIGHT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER LAWS OF THE STATE
OF DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
TITAN EXPLORATION, INC.
Attest:
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
___________________________ _____________________________________
Name: Xxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxxxx
---------------------- ---------------------------------
Title: Corporate Secretary Title: Chairman, President and CEO
-------------------- ------------------------------
FIRST UNION NATIONAL BANK
Attest:
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxxxxxx
------------------------------- --------------------------------------
Name: Xxxxxxx Xxxxx Name: Xxxxx Xxxxxxxx
-------------------------- --------------------------------
Title: Assistant Vice President Title: Corporate Trust Officer
------------------------- -------------------------------
34
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
TITAN EXPLORATION, INC.
--------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------------
TITAN EXPLORATION, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that, pursuant to the authority conferred on the Board of
Directors of the Corporation by the Restated Certificate of Incorporation, as
amended, of the Corporation (the "Certificate of Incorporation") and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation on June 10, 1999, adopted
the following resolution establishing and creating a series of Preferred Stock,
par value $1.00 per share, of the Corporation designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation, as amended, of the Corporation, a series of
Preferred Stock, par value $1.00 per share, of the Corporation is hereby
established and created, and that the designation and number of shares
thereof and the voting and other powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions thereof, are
as follows:
Series A Junior Participating Preferred Stock
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 515,000; provided, however, that, if more than a total
of 515,000 shares of Series A Preferred Stock shall be issuable upon the
exercise of Rights (the "Right") issued pursuant to the Rights Agreement dated
as of June 10, 1999 between the Corporation and First Union National Bank, as
Rights Agent (the "Rights Agreement"), the Board
of Directors of the Corporation, pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware, shall direct by resolution or
resolutions that a certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 103 thereof, providing
for the total number of shares of Series A Preferred Stock authorized to be
issued to be increased (to the extent that the Certificate of Incorporation then
permits) to the largest number of whole shares (rounded up to the nearest whole
share) issuable upon exercise of such Rights.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of shares of
any other series of Preferred Stock or other class of stock of the Corporation
ranking prior and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation legally available therefor, (i) quarterly dividends
payable in cash on the last day of each fiscal quarter in each year, or such
other dates as the Board of Directors of the Corporation shall approve (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or a fraction of a share of Series A Preferred Stock, in the amount
of $.01 per whole share (rounded to the nearest cent) less the amount of all
cash dividends declared on the Series A Preferred Stock pursuant to the
following clause (ii) since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock
(the total of which shall not, in any event, be less than zero) and (ii)
dividends payable in cash on the payment date for each cash dividend declared on
the Common Stock in an amount per whole share (rounded to the nearest cent)
equal to the Formula Number (as hereinafter defined) then in effect multiplied
times the cash dividends then to be paid on each share of Common Stock. In
addition, if the Corporation shall pay any dividend or make any distribution on
the Common Stock payable in assets, securities or other forms of noncash
consideration (other than dividends or distributions solely in shares of Common
Stock), then, in each such case, the Corporation shall simultaneously pay or
make on each outstanding whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect multiplied
times such dividend or distribution on each share of the Common Stock. As used
herein, the "Formula Number" shall be 100; provided, however, that, if at any
time after July 1, 1999, the Corporation shall (x) declare or pay any dividend
on the Common Stock payable in shares of Common Stock or make any distribution
on the Common Stock in shares of Common Stock, (y) subdivide (by a stock split
or otherwise) the outstanding shares of Common Stock into a larger number of
shares of Common Stock or (z) combine (by a reverse stock split or otherwise)
the outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such event the Formula Number shall be adjusted to a number
determined by multiplying the Formula Number in effect immediately prior to such
event by a fraction, the numerator of which is the number of shares of Common
Stock that are outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further, that, if at any time after July 1 1999, the Corporation shall
issue any shares of
2
its stock in a merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be appropriately
adjusted to reflect such merger, reclassification or change so that each share
of Series A Preferred Stock continues to be the economic equivalent of a Formula
Number of shares of Common Stock prior to such merger, reclassification or
change.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (a) of this Section immediately prior
to or at the same time it declares a dividend or distribution on the Common
Stock (other than a dividend or distribution solely in shares of Common Stock);
provided, however, that, in the event no dividend or distribution (other than a
dividend or distribution solely in shares of Common Stock) shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend
of $.01 per share on the Series A Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date. The Board of Directors may
fix a record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive 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.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series A Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
which are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on the Common Stock unless, in each case,
the dividend required by this Section 2 to be declared on the Series A Preferred
Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
3
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a number
of votes equal to the Formula Number then in effect, for each share of Series A
Preferred Stock held of record on each matter on which holders of the Common
Stock or stockholders generally are entitled to vote, multiplied times the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class for the election of directors of the
Corporation and on all other matters submitted to a vote of stockholders of the
Corporation.
(c) If, at the time of any annual meeting of stockholders for the election
of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at any subsequent annual meeting of stockholders),
unless all dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to cast
a number of votes per share of Series A Preferred Stock equal to the Formula
Number. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except
4
to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for authorizing or taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become
5
authorized but unissued shares of Preferred Stock, without designation as to
series, and may thereafter be issued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock of the Corporation or
as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (x) $1.00 per whole
share and (y) an aggregate amount per share equal to the Formula Number then in
effect multiplied times the aggregate amount to be distributed per share to
holders of Common Stock, or (ii) to the holders of stock ranking on a parity
(either as to dividends or 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.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case the then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged for or changed into an amount per share equal
to the Formula Number then in effect multiplied times the aggregate amount of
stock, securities, cash or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is exchanged or changed.
In the event both this Section 7 and Section 2 appear to apply to a transaction,
this Section 7 shall control.
Section 8. No Redemption; No Sinking Fund.
(a) The shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation; provided, however, that the Corporation may
purchase or otherwise acquire outstanding shares of Series A Preferred Stock in
the open market or by offer to any holder or holders of shares of Series A
Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
Section 9. Ranking. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, junior to all other series of
Preferred Stock of the Corporation, unless the Board of
6
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of any such other series and the qualifications, limitations and
restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-hundredth of a share
or any integral multiple of such fraction which shall entitle the holder, in
proportion to such holder's fractional shares, to receive dividends, exercise
voting rights, participate in distributions and to have the benefit of all other
rights of holders of Series A Preferred Stock. In lieu of fractional shares,
the Corporation, prior to the first issuance of a share or a fraction of a share
of Series A Preferred Stock, may elect (i) to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-hundredth of a
share or any integral multiple thereof or (ii) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that the
holders of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series A Preferred
Stock.
Section 11. Amendment. None of the powers, preferences or relative,
participating, optional or other special rights of the Series A Preferred Stock
as provided herein or in the Certificate of Incorporation of the Corporation
shall be amended in any manner that would alter or change the powers,
preferences, rights or privileges of the holders of Series A Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of at
least 66-2/3 percent of the outstanding shares of Series A Preferred Stock,
voting as a separate class.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be duly executed in its corporate name on this 11th day of June,
1999.
TITAN EXPLORATION, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------------
Xxxx X. Xxxxxxxxx
Chairman, President and Chief Executive Officer
7
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- ____________ Rights
NOT EXERCISABLE AFTER __________________, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID
AND NONTRANSFERABLE.
Right Certificate
TITAN EXPLORATION, INC.
This certifies that ___________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of June ___, 1999 (the "Rights Agreement"),
between Titan Exploration, Inc., a Delaware corporation (the "Company"), and
First Union National Bank, as Rights Agent (the "Rights Agent"), unless the
Rights evidenced hereby have been previously redeemed by the Company, to
purchase from the Company at any time after the Distribution Date (as defined in
the Rights Agreement) and prior to 5:00 P.M., New York City time, on
_____________________ (the "Final Expiration Date"), at the principal office or
agency of the Rights Agent, or its successors as Rights Agent, in the City of
New York, one one-hundredth of a fully paid, nonassessable share of Series A
Junior Participating Preferred Stock, par value $1.00 per share, of the Company
(the "Preferred Shares"), at a purchase price per one one-hundredth of a share
equal to [$20.00] (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares that may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares that may be
purchased as of ______________, 19 . As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares that may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
B-1
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement 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 above-mentioned office and agency of
the Rights Agent and are also available from the Company upon request.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Associate or Affiliate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of 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 Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors of the Company to be at least
equivalent in value) of $.01 per Right (which amount may be subject to
adjustment as provided in the Rights Agreement) at any time prior to the earlier
of (i) the close of business on the tenth day following the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such and (ii) the Final Expiration Date.
The Company may, but shall not be required to, issue fractions of a
Preferred Share (other than one one-hundredth of a Preferred Share or any
integral multiple thereof) or distribute certificates which evidence fractions
of a Preferred Share upon the exercise of any Right or Rights evidenced hereby.
In lieu of issuing fractional shares, the Company may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-hundredth of a share or any integral multiple thereof or to issue
certificates or utilize a depositary arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
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 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, including, without limitation, any right to
vote for the
B-2
election of directors or upon any other matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
[CORPORATE SEAL]
ATTEST: TITAN EXPLORATION, INC.
___________________________ By ____________________________
Name: Name:
Title: Title:
Countersigned:
FIRST UNION NATIONAL BANK
By_________________________
Authorized Signature
B-3
[On Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED___________________________________________________hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint____________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _____________________
_________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
Certification of Status
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [_] is [_] is not being sold, assigned or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [_]
did [_] did not acquire the Rights evidenced by this Right Certificate from any
person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
_______________________________
Signature
B-4
Dated: __________________
[On Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires
to exercise the Rights represented by the Right Certificate.)
To: TITAN EXPLORATION, INC.
The undersigned hereby irrevocably elects to exercise_______________ Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
shares) issuable upon the exercise of such Rights and requests that certificates
for such shares be issued in the name of:
Please insert social security
or other identifying number_____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number_____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________________
_______________________________________
Signature
B-5
[On Reverse Side of Right Certificate -- continued]
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [_] is [_] is not being exercised by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did [_] did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
_______________________________________
Signature
Dated: __________________
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 of Status 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 such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
B-6
EXHIBIT C
TITAN EXPLORATION, INC.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 10, 1999, the Board of Directors of Titan Exploration, Inc. (the
"Company") authorized and declared a dividend of one Right (a "Right") for each
outstanding share of Common Stock, par value $.01 per share ("Common Stock"), of
the Company (the "Common Shares"). The dividend is payable on July 1, 1999 (the
"Record Date") to the holders of record of the Common Shares at the close of
business on that date. In addition, the Company has authorized the issuance of
one Right with respect to each share of Common Stock 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). When exercisable each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company (the
"Preferred Shares"), at a price of $30.00 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and First Union National Bank, as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15 percent or more of the
outstanding Common Shares and (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors of the Company prior to such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person) following the commencement of, or first public announcement of
an intention to commence, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of
affiliated or associated persons of 15 percent or more of the outstanding Common
Shares (the earlier of such dates being herein referred to as the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share certificate
with a copy of a Summary of Rights to Purchase Preferred Shares ("Summary of
Rights"), in substantially the form attached to the Rights Agreement as Exhibit
C, attached thereto.
The Rights Agreement excludes Natural Gas Partners, L.P., Natural Gas
Partners II, L.P. and NGP Louisiana Partners, L.P. and their respective
affiliates and associates (collectively, the "Excluded Parties") from causing
the Rights to become exercisable until such time as the Excluded Parties
collectively own 35% or more of Titan's outstanding stock. The Excluded Parties
presently own an aggregate of approximately 30% of Titan's common stock. The
exception for the Excluded Parties shall terminate once the Excluded Parties are
the Beneficial Owners of an aggregate of less than 15 percent of the shares of
Common Stock of the Company.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date, upon transfer or new issuance of Common Shares, will contain a
notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding on or
after the Record Date, even without such notation or a copy of the Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on June 9, 2009 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
subject to redemption by the Company. Each Preferred Share will be entitled to
a minimum preferential quarterly dividend payment of $.01 per share but will be
entitled to an aggregate dividend of 100 multiplied times the dividend declared
per Common Share. In the event of liquidation, the holder of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of $1.00
per share but will be entitled to an aggregate payment of 100 multiplied times
the payment made per Common Share. Each Preferred Share will have 100 votes,
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 multiplied times the amount
received per Common Share. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
In the event that the Company is acquired in a merger or other business
combination transaction or 50 percent or more of its consolidated assets or
earning power are sold after a person or group of affiliated or associated
persons has become an Acquiring Person, proper provision will
2
be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right. In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be made
so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be null and void and nontransferable),
will thereafter have the right to receive upon exercise that number of Common
Shares of the Company having a market value of two times the exercise price of
the Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50 percent or more of the outstanding Common Shares, the Board of Directors
of the Company may exchange the Rights (other than Rights owned by such person
or group which will have become null and void and nontransferable), in whole or
in part, at an exchange ratio of one Common Share, or one one-hundredth of a
Preferred Share (or of a share of a class or series of the Company's preferred
stock having equivalent rights, preferences and privileges), per Right (subject
to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. The Company may, but shall not be required to,
issue fractions of a Preferred Share (other than one one-hundredth of a
Preferred Share or any integral multiple thereof, which may, at the election of
the Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the close of business on the tenth day following a
public announcement that an Acquiring Person has become such an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (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. The time at which the Rights are redeemed by the Company is herein
referred to as the "Redemption Date." Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price.
At any time prior to the Distribution Date and subject to the last sentence
of this paragraph, the terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
including without limitation an amendment to lower certain thresholds described
above to not less than the greater of (i) the sum of 0.001 percent and the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any person or group of affiliated or associated persons
and (ii) 10 percent. From and after the Distribution Date and subject to
applicable law, the terms of the Rights may be amended by the Board of Directors
of the Company without the consent of the holders of Rights Certificates to,
3
among other things, make any other provisions in regard to matters under the
Rights Agreement that the Company may deem necessary or desirable and that shall
not adversely affect the interests of the holders of the Rights or Right
Certificates (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person). The terms of the Rights may not be amended to (i) reduce the
Redemption Price (except as required by antidilution provisions) or (ii) provide
for an earlier Final Expiration Date.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Preferred Shares shall rank, with respect to the payment of dividends
and as to distributions of assets upon liquidation, dissolution or winding up of
the Company, junior to all other series of preferred stock of the Company,
unless the Board of Directors of the Company shall specifically determine
otherwise in fixing the powers, preferences and relative, participating,
optional and other special rights of the shares of any such other series and the
qualifications, limitations and restrictions thereof.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
June 10, 1999. 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 hereby incorporated herein by reference.
4
