EXHIBIT 10.3
SECOND AMENDMENT TO THE RIGHTS AGREEMENT
SECOND AMENDMENT
TO
RIGHTS AGREEMENT
This Second Amendment, made and entered into as of this 1st
day of June, 1998, by and between FLOWSERVE CORPORATION (formerly known as The
Duriron Company, Inc. and then Durco International Inc. (the "Company")) and
National City Bank, as successor rights agent to Keybank National Association
(the "Rights Agent"), is being executed under the following circumstances:
WHEREAS, the Board of Directors of the Company on August 1,
1986 (i) authorized the issuance and declared a dividend of one right ("Right")
for one share of Common Stock, $1.25 par value per share, of the Company
outstanding as of the close of business on August 13, 1986, each Right
representing the right to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock, $1.00 par value per share, of the Company
having the rights and preferences set forth in Exhibit A to the Rights
Agreement, dated as of August 1, 1986 (the "Rights Agreement"), between the
Company and Bank One, Dayton, National Association, as rights agent, upon the
terms and subject to the conditions set forth in the Rights Agreement, and (ii)
further authorized the issuance of one Right with respect to each share of
Common Stock of the Company that shall become outstanding between August 13,
1986 and the Distribution Date (as defined herein); and
WHEREAS, the Rights Agreement has been amended pursuant to the
Amendment to Rights Agreement dated as of August 1, 1996, in accordance with
Section 26 of the Rights Agreement; and
WHEREAS, the Board of Directors of the Company, at a meeting
properly noticed and convened on April 23, 1998, authorized this amendment to
the Rights Agreement, as of the date set forth above;
NOW THEREFORE, the Company and the Rights Agent hereby amend
the Rights Agreement as follows, pursuant to Section 26 of the Rights Agreement:
1. The following definitions shall be inserted in appropriate alphabetical
order in Section 1:
"Adjustment Spread" shall have the meaning set forth in
Section 33(a)(ii) hereof.
"Excluded Rights" shall mean any Rights that are or were at
any time on or after the earlier of the Stock Acquisition Date
or the Distribution Date acquired or beneficially owned by any
Acquiring Person or any Associate or Affiliate of any such
Acquiring Person, or any transferee of such Rights.
"Section 33(a)(i) Exchange Ratio" shall have the meaning set
forth in Section 33(a)(i) hereof.
"Section 33(a)(ii) Exchange Ratio" shall have the meaning set
forth in Section 33(a)(ii) hereof.
"Unit" shall mean one one-hundredth of a share of Preferred
Stock.
2. Sections 7(e), 7(f) and 7(g) shall be deleted from the Rights Agreement
in their entirety.
3. Section 11(a)(ii) shall be amended by inserting the following paragraph
after Section 11(a)(ii)(B):
(C) Any Person shall become an Acquiring Person.
4. A new Section 33 shall be inserted in appropriate numerical order as
follows:
SECTION 33. Exchange.
(a) (i) The Company may, at its option, at
any time after any person becomes an Acquiring Person, upon
resolution adopted by a majority of the Company's Board of
Directors, exchange all or any portion of the then outstanding
and exercisable Rights (which shall not include the Excluded
Rights) for shares of Common Stock at an exchange ratio of one
share of Common Stock 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 "Section 33(a)(i) Exchange
Ratio"). Notwithstanding the foregoing, the Company may not
effect such exchange at any time after any Person (other than
an Exempt Person), together with all Affiliates and Associates
of such Person, becomes the Beneficial Owner of 80% or more of
the shares of Company Common Stock then outstanding.
(ii) The Company may, at its option, at any
time after any person becomes an Acquiring Person, upon
resolution adopted by a majority of the Company's Board of
Directors, exchange all or any portion of the then outstanding
and exercisable Rights (which shall not include the Excluded
Rights) for Units of Preferred Stock at an exchange ratio
specified in the following sentence, as appropriately adjusted
to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof. Subject to such
adjustment, each Right may be exchanged for that number of
Units of Preferred Stock obtained by dividing the Adjustment
Spread (as defined below) by the then current market price
(determined pursuant to Section 11(b)) per Unit of Preferred
Stock on the earlier of (i) the date on which any Person
becomes an
2
Acquiring Person and (ii) the date on which a tender or
exchange offer by any Person (other than an Exempt Person) is
first published or sent or given within the meaning of Rule
14d-4(a) of the Exchange Act Regulations or any successor
rule, if upon consummation thereof such Person would be the
Beneficial Owner of 30% or more of the shares of Company
Common Stock then outstanding (such exchange ratio being the
"Section 33(a)(ii) Exchange Ratio"). The "Adjustment Spread"
shall equal (x) the aggregate market price on the date of such
event of the number of Units of Preferred Stock as shall equal
the result obtained by (1) multiplying the then current
Purchase Price by the then number of Units of Preferred Stock
for which such Right was exercisable immediately prior to the
occurrence of any adjustment pursuant to Section 11(a)(ii),
and (2) dividing that product by 50% of the then current
market price (determined pursuant to Section 11(b), minus (y)
the Purchase Price. Notwithstanding the foregoing, the Company
may not effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates
and Associates of such Person, becomes the Beneficial Owner of
80% or more of the shares of the Company Common Stock then
outstanding.
(b) Immediately upon the action of a
majority of the Company's Board of Directors electing to
exchange any Rights pursuant to Section 33(a) 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 Units
of Preferred Stock equal to the number of such Rights held by
such holder multiplied by the Section 33(a)(i) Exchange Ratio
or Section 33(a)(ii) Exchange Ratio, as the case may be. 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 of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights
Agent. Any notice that is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange shall state the method by
which the exchange of Units of Preferred Stock for Rights will
be effected and, in the event of any partial exchange, the
number of Rights that will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights
(other than Excluded Rights) held by each holder of Rights.
(c) In the event that the number of shares
of Preferred Stock or Common Stock that are authorized by the
Company's Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit any exchange of Rights
as contemplated in accordance with this Section 33, the
Company shall take all such action as may be necessary to
authorize additional shares of
3
Preferred Stock or Common Stock, as the case may be, for
issuance upon exchange of the Rights or make adequate
provision to substitute (1) cash, (2) Company Common Stock or
other equity securities of the Company, (3) debt securities of
the Company, (4) other assets or (5) any combination of the
foregoing, having an aggregate value equal to the Adjustment
Spread, where such aggregate value has been determined by a
majority of the Board of Directors of the Company.
(d) The Company shall not be required to
issue fractions of Units of Preferred Stock or to distribute
certificates that evidence fractional Units. In lieu of
fractional Units, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are
exchanged as herein provided an amount in cash equal to the
same fraction of the current market price (determined pursuant
to Section 11(b)) of one Unit of Preferred Stock.
The remainder of the Rights Agreement shall remain unchanged,
and the Rights Agreement, so amended above, shall remain in full force and
effect.
This amendment shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed entirely within such state.
IN WITNESS WHEREOF, the parties have duly executed this
Amendment to the Rights Agreement as of the day and year first above written.
FLOWSERVE CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President, Secretary
and General Counsel
NATIONAL CITY BANK
By: /s/ X. Xxxx Pilesson
-----------------------------------
Name: X. Xxxx Pilesson
Title: Vice President
