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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20569
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
PUROFLOW INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 13-1947195
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(State of Incorporation or Organization) (IRS Employer Identification No.)
16559 Saticoy Street
Van Nuys, California 91406-1739
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ---------------------------------- --------------------------------
None
Securities to be registered pursuant to Section 12(g) of the Act:
PREFERRED STOCK PURCHASE RIGHTS
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Item 1. Description of Securities to be Registered.
On May 28, 1999, , the Board of Directors of Puroflow Incorporated,
a Delaware corporation (the "Corporation"), declared a dividend distribution
of one preferred share purchase right (a "RIGHT") for each outstanding share
of Common Stock, par value $.01 per share (the "COMMON SHARES"), of the
Corporation. The dividend is payable to the stockholders of record as of 5:00
P.M., Eastern Standard Time, on June 7, 1999 (the "RECORD DATE"), and with
respect to Common Shares issued thereafter until the Distribution Date (as
defined below) and, in certain circumstances, with respect to Common Shares
issued after the Distribution Date. Except as set forth below, each Right,
when it becomes exercisable, entitles the registered holder to purchase from
the Corporation one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $.10 per share (the "PREFERRED
SHARES") at a price of $5.00 per one one-thousandth of a Preferred Share (the
"PURCHASE PRICE"), subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right
Certificates (as hereinafter defined) will be distributed. The Rights will
separate from the Common Shares on the earliest to occur of (i) the first
date of public announcement after May 28, 1999 that a person or "group" has
acquired beneficial ownership of 17.5% or more of the outstanding Common
Shares (except pursuant to a Permitted Offer, as hereinafter defined); or
(ii) 10 business days (or such later date as the Board may determine)
following the commencement of, or announcement of an intention to commence, a
tender offer or exchange offer the consummation of which would result in a
person or group becoming an Acquiring Person (as hereinafter defined) (the
earliest of such dates being called the "DISTRIBUTION DATE"). A person or
group whose acquisition of Common Shares causes a Distribution Date pursuant
to clause (i) above is an "ACQUIRING PERSON." The first date of public
announcement that a person or group has become an Acquiring Person is the
"SHARES ACQUISITION DATE." "DISINTERESTED DIRECTORS" are directors who are
not officers of the Corporation and who are not Acquiring Persons or their
affiliates, associates or representatives of any of them, or any Person who
directly or indirectly was proposed or nominated as a director of the
Corporation by a Transaction Person (as defined below).
The Rights Agreement provides that, until the Distribution Date,
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 as of the Record Date, even without such notation,
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 to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
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The Rights are not exercisable until the Distribution Date and will
expire at 5:00 P.M., New York City time, on May 28, 2001, unless earlier
redeemed by the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a Permitted Offer as defined below), each holder of a Right will
have (subject to the terms of the Rights Agreement) the right (the "FLIP-IN
RIGHT") to receive upon exercise the number of Common Shares, or, in the
discretion of the Board of Directors, of one-thousandth of a Preferred Share
(or, in certain circumstances, other securities of the Corporation) having a
value (immediately prior to such triggering event) equal to two times the
exercise price of the Right. Notwithstanding the foregoing, following the
occurrence of the event described above, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person or any affiliate or associate thereof or by any
Director of the Corporation in office on the date of the Rights Agreement
will be null and void. A "Permitted Offer" is a tender or exchange offer for
all outstanding Common Shares which is at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by a
majority of Disinterested Directors to be adequate (taking into account all
factors that such Disinterested Directors deem relevant) and otherwise in the
best interests of the Corporation, its stockholders and its other relevant
constituencies (other than the person or any affiliate or associate thereof
on whose basis the offer is being made) taking into account all factors that
such directors may deem relevant.
In the event that, at any time following the Shares Acquisition
Date, (i) the Corporation is acquired in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Shares immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to an Acquiring Person or any affiliate or associate or
any other person in which such Acquiring Person, affiliate or associate has
an interest or any person acting on behalf of or in concert with such
Acquiring Person, affiliate or associate, or, if in such transaction all
holders of Common Shares are not treated alike, then each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right (the "FLIP-OVER RIGHT") to receive, upon exercise,
common shares of the acquiring company having a value equal to two times the
exercise price of the Right.
The Purchase Price payable, and the number of one thousandths of a
Preferred Share or other securities 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 quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
The Purchase Price is 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
2
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subdivisions, consolidations or combinations of the Common Shares occurring,
in any such case, prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1%
in such Purchase Price. No fractional one-thousandths of a Preferred Share
will be issued and in lieu thereof, an adjustment in cash will be made based
on the market price of the Preferred Shares on the last trading day price to
the date of exercise.
Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but, if greater,
will be entitled to an aggregate dividend per share of 1000 times the
dividend declared per Common Share. In the event of liquidation, the holders
of the Preferred Shares will be entitled to a minimum preferential
liquidation payment of $1.00 per share; thereafter, and after the holders of
the Common Shares receive a liquidation payment of $0.001 per share, the
holders of the Preferred Shares and the holders of the Common Shares will
share the remaining assets in the ratio of one thousand to 1 (as adjusted)
for each Preferred Share and Common Share so held, respectively. 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 one
thousand times the amount received per Common Share. These rights are
protected by customary antidilution provisions. In the event that the amount
of accrued and unpaid dividends on the Preferred Shares is equivalent to at
least six full quarterly dividends, the holders of the Preferred Shares shall
have the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of the Common Shares until all cumulative
dividends on the Preferred Shares have been paid through the last quarterly
dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
At any time prior to the earlier to occur of (i) a person becoming
an Acquiring Person or (ii) the expiration of the Rights, the Corporation may
redeem the rights in whole, but not in part, at a price of $.001 per Right
(the "REDEMPTION PRICE"), which redemption shall be effective upon the action
of the Board of Directors. Additionally, the Corporation may redeem the then
outstanding Rights in whole but not in part, at the Redemption Price after
the triggering of the Flip-in Right and before the expiration of any period
during which the Flip-in Right may be exercised in connection with a merger
or other business combination transaction or series of transactions involving
the Corporation in which all holders of Common Shares are treated alike but
not involving a Transaction Person (as defined below). Upon the effective
date of the redemption of the Rights, the right to exercise the Rights will
- -terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
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Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Corporation, including, without limitation,
the right to vote or to receive dividends. While the distribution of the
Rights will not be taxable to stockholders of the Corporation, stockholders
may, depending upon the circumstances, recognize taxable income should the
Rights become exercisable or upon the occurrence of certain events thereafter.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on (i) the Rights being redeemed,
(ii) a substantial number of Rights being acquired or (iii) the offer being
deemed a "Permitted Offer" under the Rights Agreement. However, the Rights
should not interfere with any merger or other business combination in
connection with a Permitted Offer or that is approved by the Corporation
because the Rights are redeemable under certain circumstances.
Attached hereto as Exhibit 1 and incorporated herein by reference
are a copy of the Rights Agreement, dated as of May 28, 1999, between the
Corporation and Continental Stock Transfer & Trust Company, as Rights Agent,
specifying the terms of the Rights, and the exhibits thereto, as follows:
Exhibit A -- Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Family Bargain Corporation; Exhibit B
- --Form of Right Certificate; and Exhibit C -Summary of Rights to Purchase
Preferred Shares. The foregoing description of the Rights is qualified by
reference to the Rights Agreement and the exhibits thereto.
Item 2. Exhibits.
1. Rights Agreement, dated as of May 28, 1999, between Puroflow
Incorporated and Continental Stock Transfer & Trust Company, as
Rights Agent, which includes, as Exhibit A thereto, the
Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Puroflow Incorporated, as
Exhibit B thereto, the Form of Right Certificate, and as
Exhibit C thereto, the Summary of Rights to Purchase Preferred
Shares.
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Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized.
PUROFLOW INCORPORATED
By: /s/ Michael H. Figoff
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Michael H. Figoff
President and Chief Executive Officer
Dated: June 3, 1999
5
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
<S> <C> <C>
1 Rights Agreement, dated as of May 28, 1999, between
Puroflow Incorporated and Continental Stock Transfer &
Trust Company, as Rights Agent, which includes, as Exhibit
A thereto, the Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock of
Puroflow Incorporated, as Exhibit B thereto, the Form of
Right Certificate, and as Exhibit C thereto, the Summary
of Rights to Purchase Preferred Shares.
</TABLE>
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PUROFLOW INCORPORATED
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as
Rights Agent
Rights Agreement
Dated as of May 28, 1999
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . .4
Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . .5
Section 4. Form of Right Certificate . . . . . . . . . . . . . . . . . . . . . .6
Section 5. Countersignature and Registration . . . . . . . . . . . . . . . . . .7
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . .8
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 and Kind of Shares or
Number of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. . . . . 19
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . 21
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Agreement of Right Holders. . . . . . . . . . . . . . . . . . . . . 23
Section 17. Right Certificate Holder Not Deemed a Stockholder . . . . . . . . . 24
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
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . 27
Section 22. Issuance of New Right Certificates. . . . . . . . . . . . . . . . . 28
Section 23. Redemption and Termination. . . . . . . . . . . . . . . . . . . . . 28
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . 31
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . 32
Section 28. Determination and Actions by the Board of Directors, etc. . . . . . 33
Section 29. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 30. Benefits of this Agreement. . . . . . . . . . . . . . . . . . . . . 33
Section 31. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 33. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 34. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . 34
Exhibit A - Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Family Bargain
Corporation
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
</TABLE>
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DEFINED TERM CROSS REFERENCE SHEET
<TABLE>
<S> <C>
Acquiring Person . . . . . . . . . . . . . . . . . . . Section 1(a)
Act. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1(b)
Adjusted Number of Shares. . . . . . . . . . . . . . . Section 11(a)(iii)
Adjusted Purchase Price. . . . . . . . . . . . . . . . Section 11(a)(iii)
Adjustment Shares. . . . . . . . . . . . . . . . . . . Section 11(a)(ii)
Affiliate. . . . . . . . . . . . . . . . . . . . . . . Section 1(c)
Agreement. . . . . . . . . . . . . . . . . . . . . . . Preface
Associate. . . . . . . . . . . . . . . . . . . . . . . Section 1(c)
beneficially own . . . . . . . . . . . . . . . . . . . Section 1(d)
Beneficial Owner . . . . . . . . . . . . . . . . . . . Section 1(d)
Business Day . . . . . . . . . . . . . . . . . . . . . Section 1(e)
capital stock equivalent . . . . . . . . . . . . . . . Section 11(a)(iii)
Close of Business. . . . . . . . . . . . . . . . . . . Section 1(f)
Common Shares. . . . . . . . . . . . . . . . . . . . . Section 1(g)
Corporation. . . . . . . . . . . . . . . . . . . . . . Preface
current per share market price . . . . . . . . . . . . Section11(d)(i)
Disinterested Directors. . . . . . . . . . . . . . . . Section 1(h)
Distribution Date. . . . . . . . . . . . . . . . . . . Section 1(i)
equivalent preferred shares. . . . . . . . . . . . . . Section 11(b)
Exchange Act . . . . . . . . . . . . . . . . . . . . . Section 1(c)
Exchange Ratio . . . . . . . . . . . . . . . . . . . . Section 24(a)
Final Expiration Date. . . . . . . . . . . . . . . . . Section 1(j)
Interested Stockholder . . . . . . . . . . . . . . . . Section 1(k)
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . Section 11(d)(i)
Permitted Offer. . . . . . . . . . . . . . . . . . . . Section 1(e)
Person . . . . . . . . . . . . . . . . . . . . . . . . Section 1(m)
Preferred Shares . . . . . . . . . . . . . . . . . . . Section 1(n)
Principal Party. . . . . . . . . . . . . . . . . . . . Section 13(b)
Proration Factor . . . . . . . . . . . . . . . . . . . Section 11(a)(iii)
Purchase Price . . . . . . . . . . . . . . . . . . . . Section 4(a)
Record Date. . . . . . . . . . . . . . . . . . . . . . Preface
Redemption Date. . . . . . . . . . . . . . . . . . . . Section 1(o)
Redemption Price . . . . . . . . . . . . . . . . . . . Section 23(a)(i)
Right. . . . . . . . . . . . . . . . . . . . . . . . . Preface
Right Certificate. . . . . . . . . . . . . . . . . . . Section 3(a)
Rights Agent . . . . . . . . . . . . . . . . . . . . . Preface
Rights Agreement . . . . . . . . . . . . . . . . . . . Section 3(c)
Section 11(a)(ii) Event. . . . . . . . . . . . . . . . Section 1(p)
Section 13 Event . . . . . . . . . . . . . . . . . . . Section 1(q)
Security . . . . . . . . . . . . . . . . . . . . . . . Section 11(d)(i)
Shares Acquisition Date. . . . . . . . . . . . . . . . Section 1(r)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . Section 1(s)
Summary of Rights. . . . . . . . . . . . . . . . . . . Section 3(b)
then outstanding . . . . . . . . . . . . . . . . . . . Section 1(d)
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Trading Day. . . . . . . . . . . . . . . . . . . . . . Section 11(d)(i)
Transaction. . . . . . . . . . . . . . . . . . . . . . Section 1(t)
Transaction Person . . . . . . . . . . . . . . . . . . Section 1(u)
Triggering Event . . . . . . . . . . . . . . . . . . . Section 1(v)
voting securities. . . . . . . . . . . . . . . . . . . Section 13(a)
</TABLE>
iii
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of May 28, 1999 (the "AGREEMENT"), between
PUROFLOW INCORPORATED, a Delaware corporation (the "CORPORATION"), and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY (the "RIGHTS AGENT").
The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred share purchase right (a "RIGHT") for each Common
Share (as hereinafter defined) of the Corporation outstanding at 5:00 P.M.,
Eastern Standard Time, on June 7, 1999 (the "RECORD DATE"), each Right
representing the right to purchase one one-thousandth (subject to adjustment
as provided herein) of a Preferred Share (as hereinafter defined), upon the
terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date
(as such terms are hereinafter defined); PROVIDED, HOWEVER, that Rights may
be issued with respect to Common Shares that shall become outstanding after
the Distribution Date and prior to the earlier of the Redemption Date and the
Final Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual 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:
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 17.5% or more of the then outstanding Common Shares
(other than as a result of a Permitted Offer) or was such a Beneficial Owner
at any time after the date hereof, whether or not such person continues to be
the Beneficial Owner of 17.5% or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not
include (i) the Corporation, (ii) any Subsidiary of the Corporation, (iii)
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation, or (iv) any Person or entity organized, appointed or established
by the Corporation for or pursuant to the terms of any such plan acting in
such capacity, and (B) no Person shall become an "Acquiring Person" (i) as a
result of the acquisition of Common Shares by the Corporation which, by
reducing the number of Common Shares outstanding, increases the proportional
number of shares beneficially owned by such Person together with all
Affiliates and Associates of such Person, PROVIDED, that if (1) a Person
would become an Acquiring Person (but for the operation of this subclause
(i)) as a result of the acquisition of Common Shares by the Corporation, and
(2) after such share acquisition by the Corporation, such Person, or an
Affiliate or Associate of such Person, becomes the Beneficial Owner of any
additional Common Shares, then such Person shall be deemed an Acquiring
Person; or (ii) if (1) within five Business Days after such Person would
otherwise have become or, if such Person did so inadvertently, after such
Person discovers that such Person would otherwise have become, an Acquiring
Person (but for the operation of this subclause (ii)), such
<PAGE>
Person notifies the Board of Directors that such Person did so inadvertently,
and (2) within two Business Days after such notification, such Person divests
itself of a sufficient number of Common Shares so that such Person is the
Beneficial Owner of such number of Common Shares that such Person no longer
would be an Acquiring Person.
(b) "ACT" shall mean the Securities Act of 1933, as amended and as
in effect on the date of this Agreement.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended and as in effect on the
date of this Agreement (the "EXCHANGE ACT").
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates 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, 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 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 (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Corporation.
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 Corporation, shall mean the number of
such securities then issued and
2
<PAGE>
outstanding together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to own beneficially
hereunder.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or federal holiday.
(f) "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.
(g) "COMMON SHARES" when used with reference to the Corporation
shall mean the shares of Common Stock, par value $.01 per share, of the
Corporation or, in the event of a subdivision, combination or consolidation
with respect to such shares of Common Stock, the shares of Common Stock
resulting from such subdivision, combination or consolidation. "COMMON
SHARES" when used with reference to any Person other than the Corporation
shall mean the capital stock (or equity interest) with the greatest combined
economic and 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.
(h) "DISINTERESTED DIRECTORS" shall mean the members of the Board
of Directors who are not (i) officers of the Corporation, (ii) Acquiring
Persons or their Affiliates or Associates or representatives of any of them,
or (iii) any Person who was directly or indirectly proposed or nominated as a
director of the Corporation by a Transaction Person.
(i) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3 hereof.
(j) "FINAL EXPIRATION DATE" shall have the meaning set forth in
Section 7 hereof.
(k) "INTERESTED STOCKHOLDER" shall mean any Acquiring Person or an
Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest which
represents in excess of 5% of the total combined economic or voting power of
such person, or any other Person acting directly or indirectly on behalf of
or in concert with any such Acquiring Person, Affiliate or Associate.
(l) "PERMITTED OFFER" shall mean a tender or exchange offer for
all outstanding Common Shares which is at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at
least a majority of the Disinterested Directors, to be adequate and otherwise
in the best interests of the Corporation, its stockholders and its other
relevant constituencies (other than the Person or any Affiliate or Associate
thereof on whose behalf the offer is being made) taking into account all
factors that such Disinterested Directors may deem relevant.
(m) "PERSON" shall mean any individual, firm, partnership,
corporation, limited liability company, trust, association, joint venture or
other entity, and shall include any successor (by merger or otherwise) of
such entity.
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(n) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, with a par value of $.10 per share, of the
Corporation having the relative rights, preferences and limitations set forth
in the Form of Certificate of Designation, Preferences and Rights attached to
this Agreement as EXHIBIT A hereof.
(o) "REDEMPTION DATE" shall have the meaning set forth in Section
7 hereof.
(p) "SECTION 11(a)(ii) EVENT" shall mean any event described in
Section 11(a)(ii) hereof.
(q) "SECTION 13 EVENT" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof.
(r) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation
or an Acquiring Person that an Acquiring Person has become such.
(s) "SUBSIDIARY" of any Person shall mean any corporation or other
Person of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
(t) "TRANSACTION" shall mean any merger, consolidation or sale
described in Section 13(a) hereof or any acquisition of Common Shares of the
Corporation which would result in a Person becoming a Transaction Person.
(u) "TRANSACTION PERSON" with respect to a Transaction shall mean
(x) any Person who (i) is or will become an Acquiring Person if the
Transaction were to be consummated and (ii) directly or indirectly proposed
or nominated a director of the Corporation which director is in office at the
time of consideration of the Transaction, or (y) an Affiliate or Associate of
such a Person.
(v) "TRIGGERING EVENT" shall mean any Section 11(a)(ii) or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Corporation hereby
appoints the Rights Agent to act as agent for the Corporation and the holders
of the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable.
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Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier to occur of (i) the Shares Acquisition Date
or (ii) the Close of Business on the tenth Business Day (or such later date
as may be determined by action of the Corporation's Board of Directors) after
the date of the commencement by any Person (other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation
or of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation 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 Corporation, any Subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by
the Corporation for or pursuant to the terms of any such plan) 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 (including, in the
case of both (i) and (ii), 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(b) 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 right to receive Right Certificates
will be transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Corporation); PROVIDED, HOWEVER,
that if the tender offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender offer. As soon as practicable after the Distribution Date, the
Corporation will prepare and execute, the Rights Agent will countersign, and
the Corporation will send or cause to be sent by first-class, 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 Corporation, a Right Certificate, substantially in the form of EXHIBIT B
hereto (a "RIGHT CERTIFICATE")evidencing one Right for each Common Share so
held. As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of EXHIBIT C hereto (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 Corporation. With respect to
certificates for Common Shares outstanding as of the Record Date, until the
Distribution 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 Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), the surrender
for transfer of any certificate for Common Shares outstanding on the Record
Date, with or without a copy of the Summary of Rights attached thereto, shall
also constitute the transfer of the Rights associated with such Common Shares.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph
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(c)) after the Record Date but prior to the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date shall be deemed also
to be certificates for Rights and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between Puroflow Incorporated and Continental Stock Transfer
& Trust Company, dated as of May 28, 1999 (the "RIGHTS
AGREEMENT"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the
principal executive offices of Puroflow Incorporated. 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. Puroflow
Incorporated will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of
a written request therefor from such holder. Under certain
circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and certain related
persons, whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation 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 cancelled and retired so
that the Corporation shall not be entitled to exercise any Rights associated
with the Common Shares which are no longer outstanding.
Section 4. FORM OF RIGHT CERTIFICATE.
(a) The Right Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Corporation 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 stock exchange on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a Preferred Share as shall be set forth therein at the
price per one one-thousandth of a Preferred Share set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
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(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the
Rights represented hereby are null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Right
Certificate.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right
Certificates shall be executed on behalf of the Corporation by its Chairman
of the Board, its Chief Executive Officer, its President, any of its Vice
Presidents, or its Treasurer, either manually or by facsimile signature,
shall have affixed thereto the Corporation's seal or a facsimile thereof, and
shall be attested by the Secretary or an Assistant Secretary of the
Corporation, either manually or by facsimile signature. The Right
Certificates shall be countersigned by the Rights Agent and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Corporation who shall have signed any of the Right Certificates shall cease
to be such officer of the Corporation before countersignature by the Rights
Agent and issuance and delivery by the Corporation, such Right Certificates
may nevertheless be countersigned by the Rights Agent and issued and
delivered by the Corporation with the same force and effect as though the
person who signed such Right Certificates had not ceased to be such officer
of the Corporation; and any Right Certificate may be signed on behalf of the
Corporation by any person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Corporation to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its office designated as the appropriate place for surrender of
such Right Certificate for transfer, books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the
certificate number 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 CERTIFICATE.
Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the earlier of the Redemption Date or
the Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the
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registered holder to purchase a like number of one one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, as the
case may be) as the Right Certificate or Right Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Corporation shall be
obligated to take any action whatsoever with respect to the transfer of any
such surrendered Right Certificate until the registered holder shall have
completed and signed the certificate 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 Corporation
shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e) and Section 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 Corporation 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 Rigt
Certificates.
Upon receipt by the Corporation 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
Corporation's request, reimbursement to the Corporation 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
Corporation will make and deliver a new Right Certificate of like tenor to
the Rights Agent for countersignature and delivery to the registered holder
in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, 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 and the certificate 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
aggregate Purchase Price for the total number of one one-thousandths of a
Preferred Share (or other securities, as the case may be) as to which such
surrendered Rights are exercised, at or prior to the earliest of (i) the
Close of Business on May 28, 2001 (the "FINAL EXPIRATION DATE"), (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof (the
"REDEMPTION DATE"), (iii) the time at which the Rights are exchanged as
provided in Section 24 hereof, or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof.
(b) The Purchase Price for each one-thousandth of a Preferred Share
pursuant to the exercise of a Right shall initially be $5.00, shall be subject
to adjustment from time to time as provided in the next sentence and in Sections
11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Anything in this Agreement to the contrary
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notwithstanding, in the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Corporation 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, each Common Share outstanding following such subdivision, combination
or consolidation shall continue to have one Right (subject to adjustment as
provided herein) associated therewith and the Purchase Price following any
such event shall be proportionately adjusted to equal the result obtained by
multiplying the Purchase Price immediately prior to such event by a fraction
the numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following
the occurrence of such event. The adjustment provided for in the preceding
sentence shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment of the Purchase Price for the Preferred
Shares (or other securities, as the case may be) 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 6 hereof by certified
check, cashier's check or money order payable to the order of the
Corporation, the Rights Agent shall thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Shares certificates for the number
of Preferred Shares to be purchased and the Corporation hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B)
requisition from the depositary agent (if the Corporation, in its sole
discretion, shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depositary) depositary receipts
representing such number of one one-thousandths of a Preferred Share as are
to be purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Corporation will direct the depositary agent to
comply with such requests, (ii) when appropriate, requisition from the
Corporation the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) 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 thereof, deliver such cash to or upon the order of
the registered holder of such Right Certificate. In the event that the
Corporation is obligated to issue other securities (including Common Shares)
of the Corporation pursuant to Section 11(a) hereof, the Corporation will
make all arrangements necessary so that such other securities are available
for distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to
include the rights provided by Section 11(a)(ii).
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(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14
hereof, or the Rights Agent shall place an appropriate notation on the Right
Certificate with respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
Affiliate or Associate thereof) who becomes a transferee after the Acquiring
Person becomes such, (iii) a transferee of an Acquiring Person (or of any
Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Corporation has determined is
part of a plan, arrangement or understanding which has as a primary purpose
or effect the avoidance of this Section 7(e), or (iv) a Director of the
Corporation in office on the date hereof shall become null and void without
any 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. The Corporation shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the 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 Corporation shall reasonably
request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise (other than a
partial exercise), transfer, split up, combination or exchange shall, if
surrendered to the Corporation or to any of its agents, be delivered to the
Rights Agent for cancellation or in canceled form, or, if surrendered to the
Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Rights Agreement. The Corporation shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Corporation
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Corporation, or shall, at the written
request of the Corporation,
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destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Corporation.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. The
Corporation covenants and agrees that at all time prior to the occurrence of
a Section 11(a)(ii) Event 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 its treasury, the number of Preferred Shares that
will be sufficient to permit the exercise in full of all outstanding Rights
and, after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a Section
11(a)(ii) Event, Common Shares, or any other securities, as the case may be)
issuable upon the exercise of the Rights may be listed on any national
securities exchange, the Corporation shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares
and/or other securities, as the case may be) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares or
other securities (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable shares or
securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of Rights. The Corporation
shall not, however, be required to pay any transfer tax which may be payable
in respect of any transfer or delivery of Right Certificates to a person
other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares (or Common Shares and/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 to issue
or to deliver any certificates or depositary receipts for Preferred Shares
(or Common Shares and/or other securities, as the case may be) upon the
exercise of any Rights, until any 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 has been established to the Corporation's reasonable
satisfaction that no such tax is due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date (or, if required by law, at
such earlier time following the Distribution Date as so required), a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act and the
rules and regulations thereunder) until the date of the expiration
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of the rights provided by Section 11(a)(ii). The Corporation will also take
such action as may be appropriate under the blue sky laws of the various
states.
Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name
any certificate for Preferred Shares (or Common Shares and/or other
securities, as the case may be) is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the
Preferred Shares (or Common Shares and/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 the Purchase Price (and any applicable transfer taxes) was
made; PROVIDED, HOWEVER, that, if the date of such surrender and payment is a
date upon which the Preferred Shares (or Common Shares and/or other
securities, as the case may be) transfer books of the Corporation are closed,
such person shall be deemed to have become the record holder of such shares
on, and such certificate shall be dated, the next succeeding Business Day on
which the Preferred Shares (or Common Shares and/or other securities, as the
case may be) transfer books of the Corporation are open.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of 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 Corporation 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 Corporation is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive
the aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Corporation were open, such holder
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; PROVIDED,
HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Corporation issuable upon exercise of one Right. If an
event occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii), 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).
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall, for a period of 60 days after the
later of (A) the occurrence of any such event or (B) the effective date of an
appropriate registration statement under the Act pursuant to Section 9
hereof, have a right to
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receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Common
Shares (or, in the discretion of the Board of Directors, one one-thousandths
of a Preferred Share) as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of one one-thousandths of
a Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event and (y) dividing that product
by 50% of the then current per share market price of the Corporation's Common
Shares (determined pursuant to Section 11(d) hereof) on the date of such
first occurrence (such number of shares being referred to as the "ADJUSTMENT
SHARES"), PROVIDED, however, that if the transaction that would otherwise
give rise to the foregoing adjustment is also subject to the provisions of
Section 13 hereof, then only the provisions of Section 13 hereof shall apply
and no adjustment shall be made pursuant to this Section 11(a)(ii).
(iii) In the event that there shall not be sufficient treasury
shares or authorized but unissued (and unreserved) Common Shares to permit
the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable (and the Board has
determined to make the Rights exercisable into fractions of a Preferred
Share), 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, (x) a number
of (or fractions of) Common Shares (up to the maximum number of Common Shares
which may permissibly be issued) and (y) one one-thousandth of a Preferred
Share or a number of (or fractions of) other equity securities of the
Corporation (or, in the discretion of the Board of Directors, debt) which the
Board of Directors of the Corporation has determined to have the same
aggregate current market value (determined pursuant to Sections 11(d)(i) and
(ii) hereof, to the extent applicable) as one Common Share (such number of
(or fractions of) Preferred Shares (or other equity securities or debt of the
Corporation) being referred to as a "CAPITAL STOCK EQUIVALENT"), equal in the
aggregate to the number of Adjustment Shares; PROVIDED, however, if
sufficient Common Shares and/or capital stock equivalents are unavailable,
then the Corporation shall, to the extent permitted by applicable law, take
all such action as may be necessary to authorize additional Common Shares or
capital stock equivalents for issuance upon exercise of the Rights, including
the calling of a meeting of stockholders; and PROVIDED, FURTHER, that if the
Corporation is unable to cause sufficient Common Shares and/or capital stock
equivalents 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 (as such terms
are hereinafter defined). As used herein, the term "ADJUSTED NUMBER OF
SHARES" shall be equal to that number of (or fractions of) Common Shares
(and/or capital stock equivalents) equal to the product of (x) the number of
Adjustment Shares and (y) a fraction, the numerator of which is the number of
Common Shares (and/or capital stock equivalents) available for issuance upon
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 Common Shares 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.
The Board of Directors may, but shall not be required to, establish
procedures to allocate the right to receive
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Common Shares and capital stock equivalents upon exercise of the Rights among
holders of Rights.
(b) In case the Corporation shall fix a record date for the
issuance of rights (other than the 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 and privileges 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 determined pursuant to Section 11(d) hereof) on such record date,
the Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by 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 per share 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 Corporation issuable upon exercise of one Right. In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent. Preferred Shares owned by or held
for the account of the Corporation 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 Corporation 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
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price (as
determined pursuant to Section 11(d) hereof) 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 Corporation, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on 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
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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 Corporation to be issued upon
exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not
so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"CURRENT PER SHARE MARKET PRICE" of any security (a "SECURITY" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the thirty
(30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; PROVIDED, HOWEVER, that in the event that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend
or distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of thirty
(30) Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported 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 Corporation. If on any such date no
such market maker is making a market in the Security, the fair value of the
Security on such date as determined in good faith by the Board of Directors
of the Corporation shall be used. 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. Subject to Section 11(d)(ii), if any Security is
not publicly held or so listed or traded, "current per share market price" of
such Security shall mean the fair market value per share as determined in
good faith by the Board of Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent.
(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). If the Preferred
Shares are not publicly traded, the current per share
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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) (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof), multiplied
by one hundred. 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 Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent.
(e) Notwithstanding anything herein to the contrary, no adjustment
in the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Purchase Price; PROVIDED,
HOWEVER, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one one-thousandth 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 (3) years from the date of the transaction which mandates such
adjustment or (ii) the Final Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Corporation other than Preferred Shares, thereafter the number of other
shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained
in Sections 11(a) through (c), inclusive, and the provisions of Sections 7,
9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Corporation 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-thousandths 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 Corporation shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of one one-thousandths of a Preferred Share (calculated to the
nearest one ten-thousandth of a Preferred Share) obtained by (i) multiplying
(x) the number of Preferred Shares covered by a Right immediately prior to
this adjustment of the Purchase Price by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
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(i) The Corporation may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of one one-thousandths 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-thousandths 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 Corporation 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 ten (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 Corporation 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
Corporation, 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 Corporation, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Rigt 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-thousandths 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-thousandths of a Preferred Share which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number
of one one-thousandths of a Preferred Share, Common Shares or other
securities issuable upon exercise of the Rights, the Corporation shall take
any corporate action which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue such number of
fully paid and nonassessable one one-thousandths of a Preferred Share, Common
Shares or other securities 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 Corporation may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the Preferred Shares, Common Shares or other securities of the
Corporation, if any, issuable upon such exercise over and above the Preferred
Shares, Common Shares or other securities of the Corporation, if any,
issuable upon exercise on the basis of the
17
<PAGE>
Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Notwithstanding anything in this Section 11 to the contrary,
the Corporation 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 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) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Corporation to
holders of its Preferred Shares shall not be taxable to such stockholders.
(n) The Corporation 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 Corporation in a transaction which does not
violate Section 11 (o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Corporation in a transaction which does not
violate Section 11(o) 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 Corporation and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Corporation and/or any of its
Subsidiaries in one or more transactions each of which does not violate
Section 11(o) hereof), if (x) at the time of or immediately after such
consolidation, merger, sale or transfer there are any charter or by-law
provisions or any rights, warrants or other instruments or securities
outstanding or agreements in effect or 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 or sale, 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 Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(n).
(o) The Corporation 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.
(p) The exercise of Rights under Section 11(a)(ii) shall only
result in the reduction of rights under Section 11(a)(ii) to the extent so
exercised and shall not otherwise affect the rights represented by the Rights
under this Rights Agreement, including the rights represented by Section 13.
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Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Corporation shall promptly (a) prepare a certificate setting
forth such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for
the Common Shares and the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate 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 deemed to have knowledge of such adjustment unless and until
it shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, on or following the Shares Acquisition
Date, directly or indirectly, (x) the Corporation shall consolidate with, or
merge with and into, any Interested Stockholder or, if in such merger or
consolidation all holders of Common Shares are not treated alike, (y) the
Corporation shall consolidate with, or merge with, any Interested Stockholder
or, if in such merger or consolidation all holders of Common Shares are not
treated alike, and the Corporation shall be the continuing or surviving
corporation of such consolidation or merger (other than, in a case of any
transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("VOTING SECURITIES") of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into securities of the surviving entity) all of the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation and the holders (and relative
percentage holdings of each such holder) of such securities not having
changed as a result of such merger or consolidation), or (z) the Corporation
shall sell or otherwise transfer (or one or more of its Subsidiaries shall
sell or otherwise 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 Corporation and its Subsidiaries (taken as a whole)
to any Interested Stockholder or Persons or, if in such transaction all
holders of Common Shares are not treated alike (other than the Corporation or
any Subsidiary of the Corporation in one or more transactions each of which
does not violate Section 11(o) hereof), then, and in each such case (except
as provided in Section 13(d) hereof), proper provision shall be made so that
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of freely
tradeable Common Shares of the Principal Party (as hereinafter defined), not
subject to any liens, 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 one one-thousandths of a Preferred
Share for which a Right is then exercisable (without taking into account any
adjustment previously made pursuant to Section 11(a)(ii)) and dividing that
product by (B) 50% of the then current per share market price of the Common
Shares of such Principal Party (determined pursuant to Setion 11(d) 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 the obligations and duties of the Corporation pursuant
to this Agreement; (iii) the term "Corporation" 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 Section 13 Event; and (iv) such Principal
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Party shall take such steps (including, but not limited to, the reservation
of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise
of the Rights.
(b) "PRINCIPAL PARTY" shall mean
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which Common Shares of the Corporation are converted
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation (including, if
applicable, the Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), 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 of the foregoing cases, (1) if the Common
Shares of such Person are not at such time and have not been continuously
over the preceding twelve (12) month period registered under Section 12 of
the Exchange Act, and such Person is a direct or indirect Subsidiary of
another Person the Common Shares of which are and have been so registered,
"Principal Party" shall refer to such other Person; (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; 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 party 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 Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized Common Shares which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date
of any consolidation, merger, sale or transfer mentioned in paragraph (a) of
this Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as
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practicable after such filing and (B) remain effective (with a prospectus at
all times meeting the requirements of the 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 which comply in all respects with the
requirements for registration on Form 10 under the Exchange Act.
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 thereof.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if- (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to a
Permitted Offer (or a wholly owned Subsidiary of any such Person or Persons);
(ii) the price per Common Share offered in such transaction is not less than
the price per Common Share paid to all holders of Common Shares whose shares
were purchased pursuant to such Permitted Offer; and (iii) the form of
consideration offered in such transaction is the same as the form of
consideration paid pursuant to such Permitted Offer. Upon consummation of any
such transaction contemplated by this Section 13(d), all Rights hereunder
shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Corporation shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price
of the 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 reporting system with respect to
securities listed 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
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by a professional market maker making a market in the Rights selected by the
Board of Directors of the Corporation. 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 Corporation
shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are one one-thousandths or
integral multiples of one one-thousandth of a Preferred Share) upon exercise
of the Rights or to distribute certificates which evidence fractional
Preferred Shares (other than fractions which are one one-thousandths or
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the corporation, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Corporation and a
depositary selected by it; PROVIDED that such agreement shall provide that
the holders of such depositary receipts shall have the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional
Preferred Shares that are not one one-thousandth or integral multiples of one
one-thousandth of a Preferred Share, the Corporation shall pay to the
registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Common Shares,
capital stock equivalents (other than Preferred Shares) or other securities
upon the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Shares, capital stock equivalents
or other securities upon exercise of the Rights or to distribute certificates
which evidence fractions of such Common Shares, capital stock equivalents or
other securities. In lieu of fractional shares or units of such Common
Shares, capital stock equivalents or other securities, the Corporation may
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 share or unit of such Common Shares, capital
stock equivalents or other securities. For purposes of this Section 14(c),
the current market value shall be determined in the manner set forth in
Section 11(d) hereof for the Trading Day immediately prior to the date of
such exercise and, if such capital stock equivalent is not traded, each such
capital stock equivalent shall have the value of one one-thousandth of a
Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional share
upon exercise of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent
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,
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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 Corporation to enforce, or otherwise act in respect
of, his right to exercise the Rights evidenced by such Right Certificate in
the manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled
to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person
subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation 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 are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate form fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the Corporation
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 Corporation or the Rights Agent) for all purposes
whatsoever, and neither the Corporation nor the Rights Agent, subject to the
last sentence of Section 7(e) hereof, shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in 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 obligation; PROVIDED, HOWEVER, the Corporation must use its best efforts
to have any such order, decree or ruling lifted or otherwise overturned as
soon as possible.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
any other securities of the Corporation which may at any time be issuable on
the exercise of the Rights represented thereby, nor shall anything contained
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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
Corporation or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or other distributions or to exercise any
preemptive or subscription rights, or otherwise, until 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. The Corporation agrees to
pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time to time on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Corporation also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
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 Common Shares or for other securities of the Corporation,
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.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT. 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 all or substantially all of the corporate trust business 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
a 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 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.
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In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in its prior name
or in its changed name; and in all such cases such Right Certificates shall
have the full force provided in the Right Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Corporation), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation 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 Corporation 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 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 on such Right Certificates)
or be required to verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Corporation 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
Corporation of any covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of the certificate described in Section 12
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hereof); 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 or other securities to be issued pursuant
to this Agreement or any Right Certificate or as to whether any Preferred
Shares or Common Shares or other securities will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Corporation 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 Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer. Any
application by the Rights Agent for written instructions from the Corporation
may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on 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 Corporation 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 instruction 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 Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or
lend money to the Corporation or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Corporation 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 Corporation resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing
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that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has not
been completed, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with
the Corporation.
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 thirty (30) days' notice in writing mailed to the
Corporation and to each transfer agent of the Preferred Shares or Common
Shares by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Corporation may remove the Rights Agent
or any successor Rights Agent upon sixty (60) 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 Preferred Shares or Common Shares by registered or
certified mail, and to holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Corporation shall appoint a successor to the Rights
Agent. If the Corporation shall fail to make such appointment within a period
of sixty (60) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who
shall, with such notice, submit his Right Certificate for inspection by the
Corporation), then the registered holder of any Right Certificate may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Corporation or by
such a court, shall be a corporation organized and doing business under the
laws of the United States or any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $ 100,000,000 (or such lower
number as approved by the Corporation's Board of Directors). 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 Corporation shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent
of the Preferred Shares or Common Shares and mail a notice thereof in writing
to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of
the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing
Rights in such form as may be approved by its Board of Directors to reflect
any adjustment or change in the Purchase Price and the number or kind or
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class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earliest of the Redemption
Date, the Final Expiration Date and the consummation of a transaction
contemplated by Section 13(d) hereof, the Corporation (a) 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 Corporation, and
(b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Corporation, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that no Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) (i) The Board of Directors of the Corporation may, at its
option, redeem all but not less than all the then outstanding Rights at a
redemption price of $.001 per Right, as such amount may be 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"), at any time prior to the earlier of
(x) the occurrence of a Section 11(a)(ii) Event, or (y) the Final Expiration
Date, and the Corporation may, at its option, pay the Redemption Price either
in Common Shares (based on the "current per share market price," as defined
in Section 11(d) hereof, of the Common Shares at the time of redemption) or
cash; PROVIDED, HOWEVER, that if the Corporation elects to pay the Redemption
Price in Common Shares, the Corporation shall not be required to issue any
fractional Common Shares and the number of Common Shares issuable to each
holder of Rights shall be rounded down to the next whole share.
(ii) In addition, the Board of Directors of the Corporation
may, at its option, at any time following a Shares Acquisition Date but prior
to any Section 13 Event redeem all but not less than all of the then
outstanding Rights at the Redemption Price in connection with any Section 13
Event in which all holders of Common Shares are treated alike and not
involving (other than as a holder of Common Shares being treated like all
other such holders) a Transaction Person.
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(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the
manner specified in) in a resolution of the Board of Directors of the
Corporation ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. In the case of a redemption
permitted only under Section 23(a)(ii), evidence of which shall have been
filed with the Rights Agent, the right to exercise the Rights will terminate
and represent only the right to receive the Redemption Price upon the later
of ten Business Days following the giving of notice or the expiration of any
period during which the rights under Section 11(a)(ii) may be exercised. The
Corporation shall promptly give public notice of any such redemption;
PROVIDED, HOWEVER, that the failure to give, or any defect in, any such
notice shall not affect the validity of such redemption. Within ten (10) days
after such date for redemption set forth in a resolution of the Board of
Directors ordering the redemption of the Rights, the Corporation shall mail a
notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the
Corporation 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 and other than in connection with
the purchase of Common Shares prior to the Distribution Date.
(c) In the case of a redemption permitted under Section 23(a)(i),
the Corporation may, at its option, discharge all of its obligations with
respect to the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the 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 of the Common Shares, and upon such action, all outstanding Rights and
Right Certificates shall be null and void without any further action by the
Corporation.
Section 24. EXCHANGE.
(a) The Board of Directors of the Corporation, at its option, may
at any time after the time that any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 7(e) and Section 11(a)(ii) hereof) for Common Shares of the
Corporation at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
involving either the Common Shares or the Preferred Shares occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"EXCHANGE RATIO"). Notwithstanding the foregoing, the Board of Directors
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shall not be empowered to effect such exchange at any time after any Person
(other than the Corporation, any Subsidiary of the Corporation, any employee
benefit plan of the Corporation or any such Subsidiary, any entity holding
Common Shares for or pursuant to the terms of any such plan or any trustee,
administrator or fiduciary of such a plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to subsection (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 by the
Exchange Ratio. The Corporation 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 Corporation
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 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 void pursuant to the provisions of Section 7(e) and Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation,
at its option, may substitute Preferred Shares (or equivalent preferred
shares, as such term is defined in Section 11(b) hereof) for some or all of
the Common Shares exchangeable for Rights, at the initial rate of
one-thousandth 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) The Board of Directors of the Corporation shall not authorize
any exchange transaction referred to in Section 24(a) hereof unless at the
time such exchange is authorized there shall be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to
permit the exchange of Rights as contemplated in accordance with this Section
24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Corporation shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regularly quarterly cash dividend), (ii) to offer to the holders of its
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or
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with any other Person (other than a Subsidiary of the Corporation in a
transaction which does not violate Section 11(o) hereof), 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% or
more of the assets or earning power of the Corporation and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Corporation
and/or any of its Subsidiaries in one or more transactions each of which does
not violate Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Corporation, then, in each such case, the
Corporation shall give to each holder of a Right Certificate, in accordance
with Section 26 hereof, a notice of such proposed action to the extent
feasible and file a certificate with the Rights Agent to that effect, 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 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 twenty (20) days rior 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 twenty (20) days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Preferred Shares, whichever shall be the
earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, 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 and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also, if appropriate, to Common Shares and/or, if
appropriate, other securities of the Corporation.
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 Corporation 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:
Puroflow Incorporated
16559 Saticoy Street
Van Nuys, California 91406
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Corporation or by the
holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by firstclass mail, postage prepaid,
addressed (until another address is filed in writing with the Corporation) as
follows:
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Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Client Administration
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares 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 Corporation.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date, the Corporation and the Rights Agent shall, if the Corporation so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing Common Shares. From and
after the Distribution Date, the Corporation and the Rights Agent shall, if
the Corporation so directs, supplement or amend this Agreement without the
approval of any holders of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Corporation may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, however, that this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Corporation 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 that such supplement or amendment does
not adversely affect the rights or obligations of the Rights Agent under
Section 18 or Section 20 of 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 Common Shares. Notwithstanding anything contained
in this Rights Agreement to the contrary, in the event that a majority of the
Board of Directors of the Corporation consists of (i) persons elected at a
meeting or by written consent of stockholders who were not nominated by the
Board of Directors in office immediately prior to such meeting or written
consent, and/or (ii) successors of such persons elected to the Board of
Directors for the purpose of either facilitating a Transaction with a
Transaction Person or circumventing directly or indirectly the provisions of
this Section 27, then (I) for a period of 365 days following the
effectiveness of such action, this Rights Agreement shall not be amended or
supplemented in any manner reasonably likely to have the purpose or effect of
facilitating a Transaction with a Transaction Person and (II) no amendments
or supplements may be made following such 365-day period if (x) such
amendment or supplement is reasonably likely to have the purpose of
facilitating a Transaction with a Transaction Person and (y) during such
365-day period, the Crporation enters into any agreement, arrangement or
understanding with any Transaction Person which is reasonably likely to have
the purpose or effect of facilitating a Transaction with any Transaction
Person.
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Section 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. The Board of Directors of the Corporation shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board, or the Corporation, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of
this Agreement, and (ii) make all determinations deemed necessary or
advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend
the Agreement and whether any proposed amendment adversely affects the
interests of the holders of Right Certificates). For all purposes of this
Agreement, any calculation of the number of Common Shares or other securities
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares or any other
securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to
the foregoing) which are done or made by the Board in good faith, shall (x)
be final, conclusive and binding on the Corporation, the Rights Agent, the
holders of the Right Certificates and all other parties, and (y) not subject
the Board to any liability to the holders of the Right Certificates.
Section 29. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Corporation, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Corporation, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 31. 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 32. GOVERNING LAW. This Agreement, each Right and each
Right Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all 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 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
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Section 34. 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 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement
to be duly executed, all as of the date and year first above written.
PUROFLOW INCORPORATED
By: /s/ Michael Figoff
-----------------------------------------
Name: Michael Figoff
Title: President & CEO
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: /s/ Roger Bernhammer
-----------------------------------------
Name: Roger Bernhammer
Title: Vice President
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EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK OF PUROFLOW INCORPORATED
(Pursuant to Section 151
of the General Corporation Law of the State of Delaware)
We, Michael H. Figoff, President, and Sandy Yoshisato, Secretary of
Puroflow Incorporated (the "CORPORATION"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY as
follows:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors
on May 28, 1999, voted to create a series of 25,000 shares of Preferred Stock
designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation in accordance with the provisions of
the Corporation's Certificate of Incorporation and Section 15 l(g) of the
General Corporation Law of the State of Delaware, the Board of Directors
hereby creates a series of Preferred Stock of the Company and hereby states
the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof (in addition to the provisions set forth
in the Corporation's Certificate of Incorporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Section 1. DESIGNATION AND AMOUNT. There shall be a series of
Preferred Stock, par value $.10 per share, of the Corporation which shall be
designated as "Series A Junior Participating Preferred Stock," par value $.10
per share, and the number of shares constituting such series shall be 25,000.
Such number of shares may be increased or decreased by resolution of the
Board of Directors or by resolution of the Executive Committee of the Board
of Directors, provided, that no decrease shall reduce the number of shares of
Series A Junior Participating Preferred Stock to a number less than that of
the shares then outstanding plus the number of shares issuable upon exercise
of outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the Series
A Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Participating Preferred Stock in preference to the
holders of shares of Common Stock, par value $.01 per share (the "COMMON
STOCK"), of the Corporation and any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of each fiscal quarter of the Corporation 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
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first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$1.00 or (b) subject to the provision for adjustment hereinafter set forth,
1000 times the aggregate per share amount of all cash dividends, and 1000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock 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 Junior Participating Preferred
Stock. In the event the Corporation shall at any time after June 7, 1999 (the
"RIGHTS DECLARATION DATE") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the
outstanding Common Stock, or (iii) combine (by a reverse stock split or
otherwise) the outstanding Common Stock into a smaller number of shares, then
in each such case the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Junior Participating Preferred Stock as provided in paragraph
(A) above at the time it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) So long as any shares of the Series A Junior Participating
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 Junior Participating Preferred Stock shall
have been declared.
(D) The holders of the shares of the Series A Junior Participating
Preferred Stock shall not be entitled to receive any dividends or other
distributions except as provided herein.
(E) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend
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Payment Date in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Series A Junior Participating Preferred Stock in an amount less than the
total of such dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 1000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise) the outstanding Common Stock, or (iii) combine (by a reverse stock
split or otherwise) the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders
of shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to at
least six (6) full quarterly dividends (whether or not declared and whether
or not consecutive) thereon, the occurrence of such contingency shall mark
the beginning of a period (herein called a "DEFAULT PERIOD") which shall
extend until such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend period on
all shares of Series A Junior Participating Preferred Stock then outstanding
shall have been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock (including holders of the
Series A Junior Participating Preferred Stock) with dividends in arrears in
an amount equal to at least six (6) full quarterly dividends (whether or not
declared and whether or not consecutive) thereon, voting as a class,
irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders, provided that neither such voting right nor
the right of the holders of any other series of Preferred Stock, if any, to
increase, in
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<PAGE>
certain cases, the authorized number of Directors shall be exercised unless
the holders of one-third (1/3) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum
of the holders of Common Stock shall not affect the exercise by the holders
of Preferred Stock of such voting right. At any meeting at which the holders
of Preferred Stock shall exercise such voting night initially during an
existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors as
may then exist up to two (2) Directors or, if such right is exercised at an
annual meeting, to elect two (2) Directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election by them
of the required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during the
continuance of such period, the number of directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as herein provided
or pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman of
the Board or the President of the Corporation. Notice of such meeting and of
any annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C)(iii) shall be given to each holder of record
of Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting
shall be called for a time not earlier than 10 days and not later than 60
days after such order or request or in default of the calling of such meeting
within 60 days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3) be
filled by a vote of a majority of the remaining Directors theretofore elected
by the holders of the class of stock which elected the Director whose office
shall become vacant. References in this paragraph (C) to Directors elected by
the holders of a particular class of stock shall include Directors elected by
such Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any
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Directors elected by the holders of Preferred Stock as a class shall
terminate, and (z) the number of Directors shall be such number as may be
provided for in the Certificate of Incorporation or By-laws irrespective of
any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or By-laws).
Any vacancies in the Board of Directors effected by the provisions of clauses
(y) and (z) in the preceding sentence may be filled by a majority of the
remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating 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 Junior Participating 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 Junior
Participating Preferred Stock;
(ii) Declare or pay dividends on 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
Junior Participating Preferred Stock except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such panty 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 Junior
Participating 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
Junior Participating Preferred Stock; or
(iv) Purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock or any shares of
stock ranking on a parity with the Series A Junior Participating Junior
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
5
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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 Junior
Participating 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 authorized but unissued shares of Preferred Stock and may be reissued
as part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series A
Junior Participating Preferred Stock shall have received per share, the
amount of $1.00, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment
(the "SERIES A LIQUIDATION PREFERENCE"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "COMMON ADJUSTMENT") equal to
the quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) 1000 (as appropriately adjusted as set forth in paragraph (C) below to
reflect such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock) (such number in clause (ii), the
"ADJUSTMENT NUMBER"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and
Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in
the ratio of the Adjustment Number to 1 with respect to such Preferred Stock
and Common Stock, on a per share basis, respectively.
(B) In the event there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event there are not sufficient assets available to permit payment in full
of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
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(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. If 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 and/or any other property, then in any such event
the shares of Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
Section 8. NO REDEMPTION. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating Preferred
Stock shall rank junior to all other series of the Corporation's Preferred
Stock as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
Section 10. FRACTIONAL SHARES. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Junior Participating
Preferred Stock.
Section 11. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Junior Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority or more of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as
a class.
Section 12. EFFECTIVE DATE. This Amended Certificate of
Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock of Puroflow Incorporated shall be effective at 5:00 P.M.,
Eastern Standard Time, on June 7, 1999.
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IN WITNESS WHEREOF, I have executed and subscribed this Certificate and
do affirm the foregoing as true under penalties of perjury this 28th day of
May, 1999.
By:
------------------------------------
President
Attest:
- ----------------------------------------
Secretary
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EXHIBIT B
Form of Right Certificate
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER May 28, 2001, OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR
ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME
NULL AND VOID.
Right Certificate
Puroflow Incorporated
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 May 28, 1999 (the "RIGHTS
AGREEMENT"), between Puroflow Incorporated, a Delaware corporation (the
"CORPORATION"), and Continental Stock Transfer & Trust Company (the "RIGHTS
AGENT"), to purchase from the Corporation at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00
P.M., New York City time, on May 28, 2001 unless the Rights evidenced hereby
shall have been previously redeemed by the Corporation, at the principal
office or offices of the Rights Agent designated for such purpose, or at the
office of its successor as Rights Agent, one one-thousandth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, with a
par value of $.10 per share (the "PREFERRED SHARES"), of the Corporation, at
a purchase price of $5.00 per one one-thousandth of a Preferred Share (the
"PURCHASE PRICE"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of
a Preferred Share which may be purchased upon exercise hereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase
Price as of May 28, 1999 based on the Preferred Shares as constituted at such
date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate
or Associate of any such Acquiring Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate
or Affiliate who becomes a transferee after the Acquiring Person becomes
such, (iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with the
<PAGE>
Acquiring Person becoming such, or (iv) a Director of the Corporation in
office on the date of the rights agreement, such Rights shall become null and
void and no holder hereof shall have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number of one one-thousandths of a Preferred Share or other securities which
may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events (as such term is defined in the
Rights Agreement).
This Right Certificate is subject to all of 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 Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Corporation and the holders of the Right
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth
in the Rights Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Corporation and the principal office or
offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates,
upon surrender at the principal 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 of
Preferred Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate
or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at a
redemption price of $.001 per Right (subject to adjustment as provided in the
Rights Agreement) payable in Common Shares or cash.
The Corporation shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right as defined in the Rights Agreement.
The Corporation will not be required to issue fractions of
Preferred Shares (other than fractions which are one one-thousandths or
integral multiples of one one-thousandth of a Preferred Share) upon exercise
of the Rights or to distribute certificates which evidence fractional
Preferred Shares (other than fractions which are one one-thousandths or
integral multiples of one one-thousandth of a Preferred Share). In lieu of
fractional Preferred Shares other than fractions that are multiples of one
one-thousandth of a Share, the Corporation will pay to the registered holders
of Right Certificates at the time such Rights are exercised an amount in cash
2
<PAGE>
equal to the same fraction of the current market value of one Preferred Share
as defined in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Corporation 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 Corporation or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights Agreement), or to receive dividends or
other distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate
shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal. Dated as of ___________, _____.
[SEAL]
ATTEST: PUROFLOW INCORPORATED
Attest: By
-----------------------------------
By Name:
--------------------------------- Title:
Name:
Title:
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By
---------------------------------------
Authorized Signatory
Name:
Title:
4
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________________________________________
hereby sells, assigns and transfers unto ______________________________________
_______________________________________________________________________________
(Please print name 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 Corporation, with full power of substitution.
Dated: ___________, _____
---------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank, savings association, credit union or
trust company having an office or correspondent in the United States or other
eligible guarantor institution which is a participant in a signature
guarantee medallion program.
- ------------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are 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, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any Person who is
or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).
---------------------------------
Signature
5
<PAGE>
- ------------------------------------------------------------------------------
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise Rights represented
by this Right Certificate to purchase the Preferred Shares, Common Shares or
such other securities issuable upon the exercise of such Rights at this time
as follows:
Please Insert
Number of Rights To Be Exercised
--------------------------------
(i) Preferred Shares Exercise ___________________
(ii) Section 11(a)(ii) Exercise ___________________
(iii) Section 13 Exercise ___________________
The undersigned requests that certificates for such Preferred Shares,
Common Shares or other securities be issued in the name of:
Please insert social security
or other identifying number __________________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
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 of transferee)
6
<PAGE>
Dated:____________, 19__
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank, savings association, credit union or
trust company having an office or correspondent in the United States or other
eligible guarantor institution which is a participant in a signature
guarantee medallion program.
7
<PAGE>
Form of Reverse Side of Right Certificate -- continued.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are 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, the undersigned did not acquire the
Rights evidenced by this Rights Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed,
the Corporation 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.
8
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH
PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
On May 28, 1999, the Board of Directors of Puroflow Incorporated, a
Delaware corporation (the "CORPORATION"), declared a dividend distribution of
one preferred share purchase right (a "RIGHT") for each outstanding share of
Common Stock, par value $.01 per share (the "COMMON SHARES") of the
Corporation. The dividend is payable to the stockholders of record as of 5:00
P.M., Eastern Standard Time, on June 7, 1999 (the "RECORD DATE"), and with
respect to Common Shares issued thereafter until the Distribution Date (as
defined below) and, in certain circumstances, with respect to Common Shares
issued after the Distribution Date. Except as set forth below, each Right,
when it becomes exercisable, entitles the registered holder to purchase from
the Corporation one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $.10 per share (the "PREFERRED
SHARES") at a price of $5.00 per one one-thousandth of a Preferred Share (the
"PURCHASE PRICE"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, dated as of May 28, 1999 (the
"RIGHTS AGREEMENT"), between the Corporation and Continental Stock Transfer &
Trust Company (the "RIGHTS AGENT").
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates (as
hereinafter defined) will be distributed. The Rights will separate from the
Common Shares on the earliest to occur of (i) the first date of public
announcement that a person or "group" has acquired after May 28, 1999
beneficial ownership of 17.5% or more of the outstanding Common Shares
(except pursuant to a Permitted Offer, as hereinafter defined); or (ii) 10
business days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to commence, a tender offer
or exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (as hereinafter defined) (the earliest of such
dates being called the "DISTRIBUTION DATE"). A person or group whose
acquisition of Common Shares causes a Distribution Date pursuant to clause
(i) above is an "ACQUIRING PERSON." The first date of public announcement
that a person or group has become an Acquiring Person is the "SHARES
ACQUISITION DATE." "DISINTERESTED DIRECTORS" are directors who are not
officers of the Corporation and who are not Acquiring Persons or their
affiliates, associates or representatives of any of them, or any Person who
directly or indirectly proposed or nominated as a director of the Corporation
by a Transaction Person (as defined below).
The Rights Agreement provides that, until the Distribution Date, 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
<PAGE>
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 as of the Record Date, even
without such notation or a copy of this 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 to each
initial record holder of certain Common Shares issued after the Distribution
Date), and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
expire at 5:00 P.M., New York City time, on May 28, 2001, unless earlier
redeemed by the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a Permitted Offer as defined below), each holder of a Right will
have (subject to the terms of the Rights Agreement) the right (the "FLIP-IN
RIGHT") to receive upon exercise the number of Common Shares, or, in the
discretion of the Board of Directors, of one one-thousandths of a Preferred
Share (or, in certain circumstances, other securities of the Corporation)
having a value (immediately prior to such triggering event) equal to two
times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are,
or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or any affiliate or associate
thereof or by any Director of the Corporation in office on the date of the
Rights Agreement will be null and void. A "PERMITTED OFFER" is a tender or
exchange offer for all outstanding Common Shares which is at a price and on
terms determined, prior to the purchase of shares under such tender or
exchange offer, by a majority of Disinterested Directors to be adequate
(taking into account all factors that such Disinterested Directors deem
relevant) and otherwise in the best interests of the Corporation, its
stockholders and its other relevant constituencies (other than the person or
any affiliate or associate thereof on whose basis the offer is being made)
taking into account all factors that such directors may deem relevant.
In the event that, at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders
of all of the surviving corporation's voting power, or (ii) more than 50% of
the Corporation's assets or earning power is sold or transferred, in either
case with or to an Acquiring Person or any affiliate or associate or any
other person in which such Acquiring Person, affiliate or associate has an
interest or any person acting on behalf of or in concert with such Acquiring
Person, affiliate or associate, or, if in such transaction all holders of
Common Shares are not treated alike, then each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right (the "FLIP-OVER RIGHT") to receive, upon exercise, common
shares of the acquiring company having a value equal to two times the
exercise price of the Right.
The Purchase Price payable, and the number of one-thousandths of a
Preferred Share or other securities 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
2
<PAGE>
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 quarterly cash dividends) or of subscription rights or warrants
(other than those referred to above).
The Purchase Price is 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.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional one-thousandths of a Preferred Share will
be issued and in lieu thereof, an adjustment in cash will be made based on
the market price of the Preferred Shares on the last trading day price to the
date of exercise.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $ 1.00 per share but, if greater, will be
entitled to an aggregate dividend per share of 1000 times the dividend
declared per Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation
payment of $ 1.00 per share; thereafter, and after the holders of the Common
Shares receive a liquidation payment of $0.001 per share, the holders of the
Preferred Shares and the holders of the Common Shares will share the
remaining assets in the ratio of one thousand to 1 (as adjusted) for each
Preferred Share and Common Share so held, respectively. 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 one thousand
times the amount received per Common Share. These rights are protected by
customary antidilution provisions. In the event that the amount of accrued
and unpaid dividends on the Preferred Shares is equivalent to at least six
full quarterly dividends, the holders of the Preferred Shares shall have the
right, voting as a class, to elect two directors in addition to the directors
elected by the holders of the Common Shares until all cumulative dividends on
the Preferred Shares have been paid through the last quarterly dividend
payment date or until non-cumulative dividends have been paid regularly for
at least one year.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Corporation may
redeem the rights in whole, but not in part, at a price of $.001 per Right
(the "REDEMPTION PRICE"), which redemption shall be effective upon the action
of the Board of Directors. Additionally, the Corporation may redeem the then
outstanding Rights in whole but not in part, at the Redemption Price after
the triggering of the Flip-in Right and before the expiration of any period
during which the Flip-in Right may be exercised in connection with a merger
or other business combination transaction or series of transactions involving
the Corporation in which all holders of Common Shares are treated alike but
not involving a Transaction Person (as defined below). Upon the effective
date of the redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
3
<PAGE>
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation,
the right to vote or to receive dividends. While the distribution of the
Rights will not be taxable to stockholders of the Corporation, stockholders
may, depending upon the circumstances, recognize taxable income should the
Rights become exercisable or upon the occurrence of certain events thereafter.
4
