EXHIBIT 4.1.1
AMENDMENT NO. 1
RECOVERY ENGINEERING, INC.
RIGHTS AGREEMENT
This Amendment No. 1, dated as of February 3, 1998, between Recovery
Engineering, Inc., a Minnesota corporation (the "Company"), and Norwest Bank
Minnesota, National Association (the "Rights Agent"), amends certain terms and
provisions of the Rights Agreement (the "Rights Agreement"), dated as of January
30, 1996, between Recovery Engineering, Inc., a Delaware corporation to which
the Company is a successor entity by merger, and the Rights Agent as follows
(each capitalized term used herein but not defined herein shall have the same
meaning assigned to such term in the Rights Agreement):
1. Section 1 of the Rights Agreement entitled "Certain Definitions" is hereby
amended as follows:
1.1. by deleting each reference to "20%" set forth in the definition
of "Acquiring Person" contained in paragraph (a) thereof and in each case
substituting therefor: "15%";
1.2. by supplementing the definition of "Acquiring Person" set forth
in paragraph (a) with the following subparagraph (iii):
(iii) Notwithstanding the foregoing, at no time shall Xxxxx X.
Xxxxxxxx, Xxxxxxx X. Xxxxxx, Xx., Xxxxxxx, Xxxxx & Co. or any of their
respective Affiliates or Associates be deemed to be an "Acquiring
Person" by reason of any such Person being the beneficial owner of 15%
or more of the shares of Common Stock of the Company then outstanding
unless (in addition to (i) any shares of Common Stock of the Company
beneficially owned by such Person as of February 3, 1998, and (ii) any
shares of Common Stock of the Company in respect of which such Person
becomes the beneficial owner after February 3, 1998 as a result of any
acquisition of securities directly from the Company by such Person)
such Person is also then the beneficial owner of shares of Common
Stock of the Company that represent 3% or more of the shares of Common
Stock of the Company then outstanding;
1.3. by deleting the definition of "Continuing Directors" set forth in
paragraph (g) thereof in its entirety and substituting therefor the
following definition:
"Continuing Director" shall mean (i) any Person who is a member
of the Board of Directors of the Company, while such Person is a
member of the Board of Directors of the Company, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative or nominee of an Acquiring Person or of any such
Affiliate or Associate, and who was a member of the Board of Directors
of the Company on February 3, 1998; (ii) any Person who becomes a
member of the Board of Directors of the Company after February 3,
1998, while such Person is a member of the Board of the Directors of
the Company, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative or nominee of an
Acquiring Person or of any such Affiliate or Associate, if such
Person's nomination for election to the Board of Directors of the
Company is recommended or approved by a majority of the Continuing
Directors; or, (iii) any Person who becomes a member of the Board of
Directors of the Company after February 3, 1998, while such Person is
a member of the Board of the Directors of the Company, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative or nominee of an Acquiring Person or of any such
Affiliate or Associate, if such Person has been a member of the Board
of Directors of the Company for a period of two continuous years or
longer.
and
1.4. by adding the following definitions of "Transaction,"
"Transaction Person" and "number of Adjustment Shares" as paragraphs (n),
(o) and (p) thereof, respectively;
"Transaction" shall mean any Section 13 Event (as defined herein)
or any acquisition of shares of Common Stock of the Company which
would result in a Person becoming a Transaction Person.
"Transaction Person" shall mean, with respect to any Transaction,
(x) any Person who (i) is or will become an Acquiring Person or a
Principal Party (as such term is defined herein) if the Transaction
were to be consummated and (ii) directly or indirectly proposed or
nominated a member of the Board of Directors of the Company which
member is in office at the time of the consideration of the
Transaction (a Person shall be deemed to have indirectly nominated a
member of the Board of Directors of the Company if such Person has
proposed becoming or indicated an intention to become an Acquiring
Person or a Principal Party by reason of the occurrence of a Section
13 Event or otherwise and a third party (other than a majority of the
Continuing Directors) proposes, nominates or appoints a member of the
Board of Directors of the Company for the purpose of facilitating a
Transaction with such Person), or (y) any Affiliate or Associate of
such a Person.
"number of Adjustment Shares" shall mean, with respect to each
adjustment pursuant to Section 11(a)(ii) in the number of shares of
Common Stock for which a Right is then exercisable, the number of
shares of Common Stock that the holder of such Right has the right to
receive after such adjustment upon exercise of such Right.
2. Section 3 of the Rights Agreement entitled "Issue of Rights Certificates" is
hereby amended by deleting the first sentence of paragraph (a) thereof in its
entirety and substituting therefor the following sentence:
Until the earlier of (i) the tenth calendar day after the Shares
Acquisition Date, (ii) the close of business on the tenth Business Day
(or such later date as shall be determined by a majority of the
Continuing Directors of the Company which date shall not be later than
the earlier of the dates specified in clauses (i) and (iii)) after 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 trustee or administrator of any such
plan in his, her or its capacity as such) of, or 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 trustee or
administrator of any such plan in his, her or its capacity as such) to
commence (which intention to commence remains in effect for five
Business Days after such announcement), a tender or exchange offer the
consummation of which would result in any Person becoming an Acquiring
Person, or (iii) twenty Business Days prior to the date on which a
Transaction with a Transaction Person is reasonably expected to become
effective or be consummated (or such earlier or later date as shall be
determined by a majority of the Continuing Directors) (the earliest of
the dates specified in clause (i), (ii) and (iii) being referred to
herein as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates
for Common Stock registered in the names of the holders thereof (which
certificates for Common Stock shall be deemed also to be certificates
for Rights) and not by separate certificates, and (y) the Rights (and
the right to receive Rights Certificates) will be transferable only in
connection with the transfer of shares of Common Stock.
3. Section 11 of the Rights Agreement entitled "Adjustment of Purchase Price,
Number and Kind or Number of Rights" is hereby amended as follows:
3.1. by deleting the second paragraph of subparagraph (ii) of
paragraph (a) thereof in its entirety and substituting therefor the
following paragraph:
Notwithstanding anything in this Agreement to the contrary, from
and after the time an Acquiring Person first becomes such, any Rights
beneficially owned by (i) an Acquiring Person, (ii) a transferee of an
Acquiring Person who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person who becomes
a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Right pursuant to either (a) a
transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in an Acquiring Person or any Person with whom an Acquiring
Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (b) a transfer which a majority of
Continuing Directors of the Company has determined is part of a plan,
arrangement or understanding which has a primary purpose or effect the
avoidance of the provisions of this paragraph, shall become null and
void without further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. No Rights Certificates shall
be issued pursuant to Section 3 that represent Rights beneficially
owned by any Person whose Rights would be null and void pursuant to
the preceding sentence; no Rights Certificates shall be issued at any
time upon transfer of any Rights to any Person whose Rights would be
null and void pursuant to the preceding sentence; any Rights
Certificates delivered to the Rights Agent for transfer to any Person
whose Rights would be null and void pursuant to the preceding sentence
shall be canceled.;
3.2. by deleting subparagraph (iv) of paragraph (a) thereof in its
entirety and substituting therefor the following paragraph:
In the event that there shall not be sufficient authorized but
unissued shares of Common Stock to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Company
shall promptly take all actions as may be necessary, including calling
a special meeting of the shareholders of the Company, to have
authorized additional shares of Common Stock for issuance upon
exercise of the Rights. In the event that, by reason of the Company's
failure to comply with the foregoing sentence or otherwise, there
shall not be sufficient authorized but unissued shares of Common Stock
to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), notwithstanding any other provision of
this Agreement, to the extent necessary and permitted by applicable
law, each Right shall thereafter represent the right to receive, upon
exercise thereof, at the then current Purchase Price in accordance
with the terms of this Agreement, (A) a number of shares of Common
Stock (up to the maximum number of such shares which may permissibly
be issued), and (B) a number of other equity securities of the Company
or, in the discretion of a majority of the Continuing Directors (or if
there are then no Continuing Directors, the Board of Directors of the
Company), debt which a majority of the Continuing Directors (or if
there are then no Continuing Directors, the Board of Directors of the
Company) has determined in good faith to have the same aggregate
current per share market price (determined pursuant to Section 11(d)
hereof) as a share of Common Stock (such number of equity securities
or debt of the Company being referred to as "Equivalent Securities"),
equal in the aggregate to the number of Adjustment Shares; provided,
however, that if the Company is unable to cause sufficient shares of
Common Stock and/or Equivalent Securities to be available for issuance
upon exercise in full of the Rights, then each Right shall thereafter
represent the right to receive the Adjusted Number of Shares upon
exercise at the Adjusted Purchase Price (both as defined below). As
used herein, the "Adjusted Number of Shares" shall be equal to that
number of shares of Common Stock equal to the product of (x) the
number of Adjustment Shares and (y) a fraction, the numerator of which
is the number of shares of Common Stock and/or Equivalent Securities
available for issuance upon the exercise of the Rights and the
denominator of which is the aggregate number of Adjustment Shares
otherwise issuable upon exercise in full of all Rights (assuming there
were a sufficient number of shares of Common Stock available) (such
fraction being referred to as the "Proration Factor"). The "Adjusted
Purchase Price" shall mean the product of the Purchase Price and the
Proration Factor. A majority of the Continuing Directors (or if there
are then no Continuing Directors, the Board of Directors of the
Company) may, but shall not be required to, establish procedures to
allocate the right to receive shares of Common Stock and/or Equivalent
Securities upon exercise of the Rights among holders of Rights;
3.3. by adding after the words "a majority of the Continuing Directors
of the Company" in each place they appear in paragraphs (b), (c) and (d)
thereof the following: "(or if there are then no Continuing Directors, by
the Board of Directors of the Company)";
3.4. by adding immediately prior to the last sentence of paragraph (d)
thereof, the following sentence:
If on any such date, no market maker is making a market in the
Security, the fair market value of the Security on such date as
determined by a majority of the Continuing Directors of the Company
(or, if there are then no Continuing Directors, by the Board of
Directors of the Company in good faith) shall be used and shall be
binding on the Rights Agent.
;and
3.5. by adding the following paragraphs (o) and (p) after paragraph
(n) thereof:
(o) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which
does not violate Section 11(p) hereof), (ii) merge with or into any
other Person (other than a Subsidiary of the Company in a transaction
which does not violate Section 11(p) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one
or more transactions each of which does not violate Section 11(p)
hereof), if (x) at the time of or immediately after such
consolidation, merger, sale or transfer there are any charter or
by-law provisions, any rights, warrants or other instruments or
securities outstanding or agreements in effect, or any other actions
taken, which would materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger,
sale or transfer, the stockholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section 13(a)
hereof shall have received a distribution of Rights previously owned
by such Person or any of its Affiliates and Associates. The Company
shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such other Person shall have
executed and delivered to the Rights Agent a certificate certifying
compliance with this Section 11(o).
(p) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action the purpose
of which is to, or if at the time such action is taken it is
reasonably foreseeable that the effect of such action is to,
materially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
4. Section 13 of the Rights Agreement entitled "Consolidation, Merger or Sale or
Transfer of Assets or Earning Power" is hereby deleted in its entirety and
substituted therefor is the following:
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Shares Acquisition Date or,
if a Transaction with a Transaction Person has then been proposed, the
Distribution Date, directly or indirectly, (a) the Company shall
consolidate with, or merge with and into, any other Person, (b) 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 outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property, or (c) 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% 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, then, and in the case of the occurrence of any of events
specified in clauses (a), (b) and (c), above (each such case being
referred to herein as a "Section 13 Event") proper provision shall be
made so that (i) following the date of the consummation of any Section
13 Event, 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 by the
number of shares of Common Stock for which a Right is then
exercisable, in accordance with the terms of this Agreement and in
lieu of shares of Common Stock, such number of shares of Common Stock
of the Principal Party (as defined
below) not subject to any lien, encumbrances, rights of first refusal
or other adverse claims as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of shares of
Common Stock for which a Right is then exercisable and (B) dividing
that product by 50% of the then current per share market price of the
shares of Common Stock of the Principal Party (determined pursuant to
Section 11(b) hereof) on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all of the
obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to the
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of its shares of Common
Stock) in connection with such consummation as may be necessary to
assure that the provisions hereof shall hereafter be applicable, as
nearly as reasonably may be, in relation to the shares of Common Stock
thereafter deliverable upon the exercise of the Rights. The Company
shall not consummate any transaction that would constitute a Section
13 Event unless prior thereto the Company and the Principal Party
shall have executed and delivered to the Rights Agent a supplemental
agreement so providing and further providing that, as soon as
practicable after the date of any Section 13 Event, the Principal
Party at its own expense will (i) prepare and file a registration
statement under the Securities Act with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate
form of registration statement, use its best efforts to cause such
registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Final Expiration
Date; (ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
material respects with requirements for registration on Form 10 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clauses (a) or
(b) of the first sentence of paragraph (a) of this Section 13, the
Person that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger or
consolidation, and if no securities are issued, the Person that is the
other party to the merger or consolidation (including, if applicable,
the Company if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (c) of
the first sentence of paragraph (a) of this Section 13, the Person
that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange
Act and such Person is a direct or indirect subsidiary or Affiliate of
another Person, the Common Stock of which has been so registered,
"Principal Party" shall refer to such other Person; (2) in case such
Person is a subsidiary, directly or indirectly, or Affiliate of more
than one Person, the Common Stock of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Stock having the greatest
aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules
set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such Person
were a Subsidiary of both or all of such joint venturers, and the
Principal Parties in each such chain shall bear the obligations set
forth in this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The
rights under this Section 13 shall be in addition to the
rights to exercise Rights and adjustments under Section 11(a)(ii) and
shall survive any exercise thereunder.
5. Section 23 of the Rights Agreement entitled "Redemption and Termination" is
hereby deleted in its entirety and substituted therefor is the following:
Section 23. Redemption and Termination. (a) The Board of Directors of
the Company may, at its option, at any time prior to the earlier of
(i) the time any Person becomes an Acquiring Person or (ii) the Final
Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, as such
amount may be appropriately adjusted to reflect any stock split,
dividend or similar transaction occurring after February 3, 1998 (such
redemption price being hereinafter referred to as the "Redemption
Price"), such Redemption Price to be payable in cash, shares of Common
Stock (based on the "current per share market price," as defined in
Section 11(d) hereof, of the Common Stock at the time of redemption)
or such other form of consideration as may be deemed appropriate by
the Board of Directors of the Company; provided, however, if the Board
of Directors of the Company authorizes the redemption of the Rights
for the purpose of facilitating a Transaction with a Transaction
Person, then there must be Continuing Directors then in office and
such authorization shall require the concurrence of a majority of such
Continuing Directors
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights in accordance with
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. The Company shall promptly give public
notice of such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity
of such redemption. Within ten calendar days after such action of the
Board of Directors ordering the redemption of the Rights in accordance
with paragraph (a) of this Section 23, the Company shall mail a notice
of redemption to all holders of the then outstanding Rights at their
last addresses as they appear on the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in a
manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, other than in connection with the purchase of
shares of Common Stock prior to the Distribution Date.
6. Section 24 of the Rights Agreement entitled "Exchange" is hereby amended as
follows:
6.1. by adding after the words "Continuing Director of the Company in
each place they appear in paragraphs (a) and (b) thereof: "(or, if there
are then no Continuing Directors, the Board of Directors)";
6.2. by deleting paragraph (c) thereof in its entirety and
substituting therefor the following paragraph:
No exchange transaction referred to in this Section 24 may be authorized
unless at the time such exchange transaction is authorized there shall be
sufficient shares of Common Stock issued but not outstanding, or authorized
but unissued, to permit the exchange of Rights as contemplated by this
Section 24.
7. Section 27 of the Rights Agreement entitled "Supplements and Amendments" is
hereby amended as follows:
7.1. by deleting all of the words after "provided, however," in the
first sentence thereof and substituting therefor the following: "that (x)
on and after such time at which any Person becomes an Acquiring Person,
this Agreement shall not be amended in any way which would adversely affect
the interests of holders of Rights (other than an Acquiring Person), and
(y) at no time may this Agreement be amended or supplemented for the
purpose of facilitating a Transaction with a Transaction Person unless at
the time such
amendment or supplement is authorized by the Board of Directors of the
Company there are Continuing Directors then in office and such a
authorization is approved by a majority of the Continuing Directors."
; and
7.2. by deleting the words "the greater of (i) any percentage greater
than the largest percentage of the outstanding shares of Common Stock 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 shares of
Common Stock for or pursuant to the terms of any such plan); and (ii)"
8. All references in the Rights Agreement to "the Company" shall be deemed
references to the Company as defined in this Amendment.
9. All terms and provisions of the Rights Agreement shall remain in full force
and effect, except to the extent specifically amended or modified by this
Amendment No. 1.
Attest: RECOVERY ENGINEERING, INC.
/s/ XXXX X. XXXXXX By: /s/ XXXXX X. XXXXXXXX
-------------------------- ------------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxxx
Title: Secretary Title: President and Chief Executive
Officer
NORWEST BANK MINNESOTA,
Attest: NATIONAL ASSOCIATION
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXX
-------------------------- ------------------------------------
Name: XXXXXXX X. XXXXX Name: XXXXX X. XXXXXX
Title: ACCOUNT REPRESENTATIVE Title: ASST. VICE PRESIDENT
