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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
DYNAMICS RESEARCH CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-2211809
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(STATE OR OTHER JURISDICTION OF INCORPORATION) (IRS EMPLOYER
IDENTIFICATION NO.)
60 Frontage Road, Andover, MA 01810-5498
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
If this Form relates to the If this Form relates to the
registration of a class of registration of a class of securities
securities pursuant to Section pursuant to Section 12(g) of the
12(b) of the Exchange Act and Exchange Act and is effective
is effective pursuant to pursuant to General Instruction
General Instruction A.(c), A.(d), please check the following
please check the following box. [] box. []
SECURITIES ACT REGISTRATION STATEMENT FILE NUMBER TO WHICH THIS FORM
RELATES:
---------------
(IF APPLICABLE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH NAME OF EACH EXCHANGE ON WHICH EACH
CLASS TO BE SO REGISTERED CLASS IS TO BE REGISTERED
- -------------------------------- -----------------------------------
None None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Series B Preferred Stock Purchase Rights
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(TITLE OF CLASS)
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
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On February 17, 1998, Dynamics Research Corporation declared a dividend
distribution of one preferred stock purchase right for each share of Common
Stock. These New Rights will eventually replace and have virtually the same
practical effect as the Rights that are presently in existence, but which are
due to terminate on July 27, 1998. Each New Right entitles the registered holder
to purchase from the Company after the Distribution Date described below one-
twelfth of a share of its Series B Preferred Stock. The exercise price is $54.17
for each one-twelfth share of Preferred Stock. The terms of the New Rights were
adjusted to reflect the Common Stock dividend distributed in May, 1998. The
distribution of New Rights is payable on July 27, 1998 to the record holders of
Common Stock at the close of business on that date. One New Right will also be
issued for each share of Common Stock issued between July 27, 1998 and the
Distribution Date.
Exercisability of the New Rights; Distribution Date. The New Rights are
not exercisable until the Distribution Date. The Distribution Date would occur,
if ever, ten business days after either of the following events:
. A public announcement that a person or group (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the Company's outstanding Common Stock (the "Stock Acquisition Date") or
. The commencement or announcement of an intention to make a tender offer
or exchange offer that would result in a person or group owning 15% or more of
the Company's outstanding Common Stock.
However, if a distribution of Rights were to occur under the Rights Plan
presently in effect, then July 27, 1998 would be the Distribution Date for New
Rights.
Mergers, Asset Sales and Self-Dealing Transactions. If after the Stock
Acquisition Date the Company is acquired in a merger or other business
combination, or 25% or more of its assets or earning power is sold, proper
provision is to be made so that each holder of a New Right would have the right
to receive, upon exercise of the New Right, that number of shares of common
stock of the acquiring company which at the time has a market value of two times
the exercise price of the New Right.
In the event that:
(1) the Company is the surviving corporation in a merger with an Acquiring
Person and its Common Stock is not changed or exchanged, or
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(2) an Acquiring Person engages in one of a number of self-dealing
transactions specified in the Rights Agreement described below, or
(3) during such time as there is an Acquiring Person any recapitalization,
reorganization or other transaction involving the Company occurs which result in
such Acquiring Person's ownership interest being increased by more than 1%,
then each holder of a New Right would have the right to receive, upon exercise
of the New Right, that number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
market value of two times the exercise price of the New Right.
Following the occurrence of any of the events described in this section,
any New Rights beneficially owned by any Acquiring Person would immediately
become null and void.
Exchange Option. The Board may, at its option, at any time after any person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable New Rights for shares of Common Stock at an exchange ratio of five-
sixths of one share of Common Stock per New Right. The Board, however, may not
effect an exchange at any time after any person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) any employee benefit plan of the
Company or any such subsidiary or any entity holding Common Stock for or
pursuant to the terms of any such plan), together with all affiliates of such
person, becomes the beneficial owner of 50% or more of the Common Stock then
outstanding. Immediately upon the action of the Board ordering the exchange of
any New Rights and without any further action and without any notice, the right
to exercise such New Rights will terminate and the only right thereafter of a
holder of such New Rights will be to receive that number of five-sixths of a
share of Common Stock equal to the number of such New Rights held by the holder.
Transferability of New Rights. Until the Distribution Date, the Common
Stock Certificates will evidence the New Rights, and the transfer of the Common
Stock certificates will constitute a transfer of the New Rights. After the
Distribution Date, separate certificates evidencing the New Rights would be
mailed to holders of record of the Company's Common Stock as of the close of
business on the Distribution Date, and such separate New Rights Certificates
alone would evidence the New Rights.
Redemption. The Board of Directors, by a majority vote, may redeem the New
Rights at any time at a redemption price of $.0083 per New Right. Immediately
upon such redemption, the right to exercise the New Rights will terminate, and
the New Rights Holders will become entitled only to receive the Redemption
Price.
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Expiration of New Rights. If not previously exercised or redeemed, the New
Rights will expire on July 27, 2008.
Anti-Dilution Adjustment. The exercise price, the redemption price, the
exchange ratio and the number of shares of the Preferred Stock or other
securities or property issuable upon exercise of the New Rights are subject to
adjustment from time to time to prevent dilution under the following
circumstances:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, or
. upon the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for shares of the Preferred Stock or convertible
securities at less than the current market price, or
. upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends out of the
earnings or retained earnings of the Company and dividends payable in shares of
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
With certain exceptions, no adjustment in the exercise price will be
required until cumulative adjustments require an adjustment of at least 1% in
such price. At the Company's option, cash (based on the market price on the
last trading date prior to the date of the exercise) will be paid instead of
issuing fractional shares of any securities (other than fractional shares of
Preferred Stock in integral multiples of one-twelfth of a share).
No Shareholder Rights. A New Right holder, as such, has no rights as a
shareholder of the Company, including, without limitation, the right to vote or
receive dividends.
Amendments. Any of the provisions of the Rights Agreement may be amended
by the Board of Directors prior to the Distribution Date without the approval of
any holders of the New Rights. After the Distribution Date, the Board of
Directors may amend the Rights Agreement to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of New Rights (excluding
the interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement. A majority vote of the Board of Directors is
required.
Tax Consequences. Although the Company believes that neither the
distribution of the New Rights nor the subsequent separation of the New Rights
on the Distribution Date should be taxable to the stockholders or the Company,
stockholders may, depending upon the circumstances, realize taxable income upon
the occurrence of an event described under "Mergers, Asset Sales and Self-
Dealing Transactions."
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Rights Agreement. The terms of the New Rights are set forth in a Rights
Agreement between the Company and American Stock Transfer & Trust Company, as
Rights Agent. A copy of the Rights Agreement is available free of charge from
the Rights Agent at the following address:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Shareholder Services Division
(Dynamics Research Corporation Rights Agreement)
The form of Rights Agreement dated as of February 17, 1998 between the
Company and American Stock Transfer & Trust Company, as Rights Agent, specifying
the terms of the Rights (including as exhibits the form of Rights Certificate
and the Summary of Rights) is attached hereto as an exhibit. The foregoing
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
ITEM 2. EXHIBITS.
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1. Rights Agreement dated as of February 17, 1998 ("Rights Agreement")
between the Company and American Stock Transfer & Trust Company, as
Rights Agent.
2. Form of Certificate of Designation with respect to the Series B
Preferred Stock, par value $.10 per share, of the Company (attached as
Exhibit A to the Rights Agreement).
3. Form of Rights Certificate (attached as Exhibit B to the Rights
Agreement). Pursuant to the Rights Agreement, printed Rights
Certificates will not be mailed until the Distribution Date (as
defined in the Rights Agreement).
4. Summary of Rights (attached as Exhibit C to the Rights Agreement).
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SIGNATURE
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.
DYNAMICS RESEARCH CORPORATION
Date: June 25, 1998 By: /s/ Douglas R. Potter
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Name: Douglas R. Potter
Title: Vice President of Finance
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EXHIBIT INDEX
The following designated exhibits are filed herewith:
Sequentially
Numbered Page
-------------
1. Rights Agreement dated as of February 8
17, 1998 ("Rights Agreement") between
the Company and American Stock
Transfer & Trust Company, as Rights
Agent.
2. Form of Certificate of Designation with 52
respect to the Series B Preferred Stock,
par value $.10 per share, of the
Company (attached as Exhibit A to the
Rights Agreement).
3. Form of Rights Certificate (attached as 59
Exhibit B to the Rights Agreement).
Pursuant to the Rights Agreement,
printed Rights Certificates will not be
mailed until the Distribution Date (as
defined in the Rights Agreement).
4. Summary of Rights (attached as Exhibit 67
C to the Rights Agreement).
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EXHIBIT 1
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DYNAMICS RESEARCH CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
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Rights Agreement
Dated as of February 17, 1998
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Page 8 of 70
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Table of Contents
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<TABLE>
<CAPTION>
Section Page
<S> <C>
Section 1. Certain Definitions ............................................................. 2
Section 2. Appointment of Rights Agent ..................................................... 7
Section 3. Issue of Rights Certificates .................................................... 7
Section 4. Form of Rights Certificates ..................................................... 8
Section 5. Countersignature and Registration ............................................... 9
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates .......... 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights ................... 11
Section 8. Cancellation and Destruction of Rights Certificates ............................. 13
Section 9. Reservation and Availability of Shares of Preferred Stock; Other Covenants. ..... 13
Section 10. Preferred Stock Record Date; Etc. .............................................. 14
Section 11. Antidilution Adjustments ....................................................... 15
Section 12. Certificate of Adjustments ..................................................... 25
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power ........... 25
Section 14. Fractional Rights and Fractional Shares ........................................ 27
Section 15. Rights of Action ............................................................... 28
Section 16. Agreement of Rights Holders .................................................... 28
Section 17. Rights Certificate Holder Not Deemed a Stockholder ............................. 29
Section 18. Concerning the Rights Agent .................................................... 29
Section 19. Merger or Consolidation or Change of Name of Rights Agent ...................... 30
</TABLE>
Page 9 of 70
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<TABLE>
<S> <C> <C>
Section 20. Duties of Rights Agent ......................................................... 30
Section 21. Change of Rights Agent ......................................................... 33
Section 22. Issuance of New Rights Certificates ............................................ 34
Section 23. Redemption and Termination ..................................................... 34
Section 24. Exchange ....................................................................... 35
Section 25. Notice of Proposed Actions ..................................................... 36
Section 26. Notices ........................................................................ 37
Section 27. Supplements and Amendments ..................................................... 38
Section 28. Successors ..................................................................... 38
Section 29. Determinations and Actions by the Board; etc. .................................. 38
Section 30. Benefits of this Agreement ..................................................... 39
Section 31. Severability ................................................................... 39
Section 32. Governing Law .................................................................. 39
Section 33. Counterparts ................................................................... 40
Section 34. Descriptive Headings ........................................................... 40
</TABLE>
Page 10 of 70
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RIGHTS AGREEMENT
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This Agreement dated as of February 17, 1998 is between Dynamics Research
Corporation, a Massachusetts corporation (the "Company") and American Stock
Transfer & Trust Company, a New York corporation (the "Rights Agent").
W I T N E S S E T H:
-------------------
WHEREAS, on July 14, 1988, the Board of Directors of the Company (the
"Board") authorized the issuance of rights to purchase, on the terms and subject
to the provisions of the Rights Agreement dated July 14, 1988 (the "1988
Agreement"), one one-tenth of a share of the Company's Series A Participating
Preferred Stock; and
WHEREAS, on July 14, 1988, the Board authorized and declared a dividend
distribution of one right for every share of Common Stock of the Company
outstanding on July 27, 1988, and authorized the issuance of one right (subject
to certain adjustments) for each share of Common Stock of the Company issued
between July 27, 1988 and the "Distribution Date" under the 1988 Agreement; and
WHEREAS, on September 6, 1989, the Board determined it desirable and in the
best interests of the Company and its stockholders to supplement and amend
certain provisions of the 1988 Agreement; and
WHEREAS, on February 17, 1998, the Board determined it desirable and in the
best interests of the Company and its stockholders for the Company to renew the
1988 Agreement, as amended, and to implement such renewal by executing this
Agreement (as hereinafter defined); and
WHEREAS, on February 17, 1998 (the "Declaration Date"), the Board
authorized and declared a dividend distribution of one Right (each Right being a
right to purchase, on the terms and subject to the provisions of this Agreement,
one one-tenth of a share of the Company's Series B Preferred Stock, each a
"Right", collectively the "Rights") for each share of Common Stock of the
Company outstanding on July 27, 1998, the "Expiration Date" under the 1988
Agreement, as amended (the "Dividend Record Date") and authorized the issuance
of one Right (as such number may hereafter be adjusted pursuant to the
provisions of Section 11(i) or Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Dividend Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
defined herein), and under certain circumstances thereafter, each Right
initially representing the right to purchase one tenth of a share of Preferred
Stock (as hereinafter defined), upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
Page 11 of 70
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NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto hereby agree as follows:
Section 1. Certain Definitions.
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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 of such Person, shall be the Beneficial Owner of 15% or more of
the shares of Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of
the Company or of any Subsidiary of the Company, (iv) any Person organized,
appointed, or established by the Company or a Subsidiary of the Company pursuant
to the terms of any plan described in clause (iii) above or (v) any such Person
who has reported or is required to report such ownership (but less than 15%) on
Schedule 13G under the Exchange Act (or any comparable or successor report) or
on Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in any
of the actions specified in Item 4 of such Schedule (other than the disposition
of the Common Stock) and, within 10 Business Days of being requested by the
Company to advise it regarding the same, certifies to the Company that such
Person acquired shares of Common Stock in excess of 14.9% inadvertently or
without knowledge of the terms of the Rights and who, together with all of such
Person's Affiliates, thereafter does not acquire additional shares of Common
Stock while the Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding, provided, however, that if the Person requested to so certify
-------- -------
fails to do so within 10 Business Days, then such Person shall become an
Acquiring Person immediately after such 10 Business Day Period.
(b) "Act" shall mean the Securities Act of 1933 (or any successor act), as
amended and as may from time to time be in effect.
(c) "Affiliate," with respect to any Person, shall mean any other Person
who is, or who would be deemed to be, an "affiliate" or an "associate" of such
Person within the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as such Rule is in
effect on the Declaration Date.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own" or have "Beneficial Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates has
"beneficial ownership" of within the meaning of Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, as such Rule is in effect on
the Declaration Date;
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(ii) which such Person or any of such Person's Affiliates has,
directly or indirectly, the right to acquire (whether such right is
exercisable immediately or after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon
the exercise of conversion, exchange or other rights, warrants or options,
or otherwise;
(iii) which such Person or any of such Person's Affiliates has,
directly or indirectly, the right to vote or dispose of, including pursuant
to any agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the "Beneficial Owner"
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of, or to "beneficially own," or to have "Beneficial Ownership" of any
security for purposes of this Section 1(d)(iii) as a result of an
agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable proxy solicitation
rules and regulations promulgated under the Exchange Act or (B) is made in
connection with, or is to otherwise participate in, a proxy or consent
solicitation made, or to be made, pursuant to, and in accordance with, the
applicable proxy solicitation rules and regulations promulgated under the
Exchange Act, in either case described in clause (A) or (B) above, whether
or not such agreement, arrangement or understanding is also then reportable
by such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iv) which are beneficially owned, directly or indirectly, by any
other Person or any Affiliate thereof with which such Person or any of such
Person's Affiliates has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy or in connection with a proxy or
consent solicitation described in clause (A) or (B) of the proviso to
Section 1(d)(iii) hereof) or disposing of any securities of the Company;
provided, however, that for purposes of this Section 1(d) a Person shall not be
- -------- -------
deemed the "Beneficial Owner" of, or to "beneficially own," or to have
"Beneficial Ownership" of (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates until such
tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a Common
Stock Event, or (C) securities issuable upon exercise of Rights which were held
by a Person or its Affiliates prior to the Distribution Date as long as such
Person is not responsible for the occurrence of the Common Stock Event giving
rise to the Distribution Date; and provided, further, however, that nothing in
-------- ------- -------
this Section 1(d) shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own," or to have
"Beneficial Ownership" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
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(e) "Board" shall have the meaning set forth in the preamble to this
Agreement.
(f) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in The Commonwealth of Massachusetts or the
city in which the principal office of the Rights Agent is located are authorized
or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M., Boston,
Massachusetts time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on the next
succeeding Business Day.
(h) "Closing Price" shall have the meaning set forth in Section 11(d)
hereof.
(i) "Common Stock" shall mean the Common Stock, with a par value of $.10
per share, of the Company, except that "Common Stock" when used with respect to
any Person other than the Company shall mean either (i) the common stock (or
other capital stock or shares of beneficial interest) of such Person with the
greatest voting power, or (ii) the equity securities or other equity interests
having power to control or direct the management and affairs of such Person, or
(iii) if such Person is a Subsidiary of another Person, the Person (A) who
ultimately controls such Person that is the Subsidiary and (B) which has
outstanding such common stock (or such other capital stock, equity securities or
interests).
(j) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
(k) "Common Stock Event" shall mean the occurrence of any event described
in (i) Section 11(a)(ii) hereof or (ii) clause (a), (b) or (c) of the first
sentence of Section 13 hereof.
(l) "Company" shall have the meaning set forth in the preamble to this
Agreement.
(m) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(n) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(o) "Declaration Date" shall have the meaning set forth in the preamble to
this Agreement.
(p) "Directors" shall mean the members of the Board.
(q) "Disqualified Transferee" shall mean any Person who is a direct or
indirect transferee of any Right from an Acquiring Person or an Affiliate of an
Acquiring Person and became such a transferee (x) after the occurrence of a
Common Stock Event or (y) prior to or
Page 14 of 70
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concurrently with the Acquiring Person becoming such and received such Right
pursuant to a transfer (whether or not for value) (A) from the Acquiring Person
to holders of its Common Stock or other equity securities or to any Person with
whom the Acquiring Person has any continuing agreement, arrangement, or
understanding (whether or not in writing) regarding the transferred Right, or
(B) which a majority of the Board reasonably determines is part of a plan,
arrangement, or understanding (whether or not in writing) which has as a primary
purpose or effect, the avoidance of Section 7(e) hereof.
(r) "Distribution Date" shall mean the date which is the later of (A) the
earlier of (x) the 10th Business Day following the Stock Acquisition Date (or,
if the 10th Business Day following the Stock Acquisition Date occurs before the
Dividend Record Date, at the close of business on the Dividend Record Date) or
(y) the 10th Business Day following the Offer Commencement Date (or, if the 10th
Business Day following the Offer Commencement Date occurs before the Dividend
Record Date, at the close of business on the Dividend Record Date) or (B) such
specified or unspecified date thereafter which is on or after the Dividend
Record Date, as may be determined by a majority of the Board.
(s) "Dividend Record Date" shall have the meaning set forth in the preamble
to this Agreement.
(t) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
(u) "Excess Amount" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(v) "Exchange Act" shall mean the Securities Exchange Act of 1934 (or any
successor act), as in effect on the Declaration Date.
(w) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(x) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(y) "Offer Commencement Date" shall mean the date of the commencement by
any Person, other than (i) the Company, (ii) a Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company or
(iv) any Person organized, appointed, or established by the Company or such
Subsidiary pursuant to the terms of any such plan, of a tender or exchange offer
(including when such offer is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act) if upon consummation thereof the Person and Affiliates thereof would be the
Beneficial Owner of 15% or more of the then outstanding shares of Common Stock
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights on the Dividend Record Date or thereafter).
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(z) "Officers' Certificate" has the meaning set forth in Section 20(b)
hereof.
(aa) "Other Consideration" has the meaning set forth in Section 6(a)
hereof.
(bb) "Person" shall mean a company, corporation, association, partnership,
joint venture, trust, estate, organization, business, entity or individual.
(cc) "Preferred Stock" shall mean the Series B Preferred Stock, $.10 par
value, of the Company, having the rights and preferences set forth in the form
of Certificate of Designation attached hereto as Exhibit A.
(dd) "Purchase Price" shall have the meaning set forth in Section 7(b)
hereof.
(ee) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(ff) "Rights" shall have the meaning set forth in the preamble to this
Agreement.
(gg) "Rights Agent" shall have the meaning set forth in the preamble of
this Agreement subject to the appointment of a successor Rights Agent pursuant
to Section 21 hereof.
(hh) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(ii) "Stock Acquisition Date" shall mean the later of (i) the date of the
first public announcement by an Acquiring Person or the Company that an
Acquiring Person has become such (including the first date on which any filing
with any governmental authority disclosing that an Acquiring Person has become
such becomes available to the public), or (ii) the date on which an executive
officer of the Company has actual knowledge that an Acquiring Person has become
such.
(jj) "Subsidiary" shall mean, as of any date, any Person of which the
Company (or other specified Person) owns directly, or indirectly through a
Subsidiary or Subsidiaries, at least a majority of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally, or holds
directly, or indirectly through a Subsidiary or Subsidiaries, at least a
majority of partnership or similar interests, or is a general partner, or of
which the Company (or other specified Person) owns voting securities sufficient
to elect at least a majority of the directors of such Person.
(kk) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ll) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
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(mm) "Trading Day" shall mean a day on which the principal national
securities exchange on which such security is listed or admitted to trading is
open for the transaction of business or, if such security is not listed or
admitted to trading on any national securities exchange, a day which is a
Business Day.
Section 2. Appointment of Rights Agent.
---------------------------
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time, upon prior written
notice to the Rights Agent, appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the Distribution Date, (i) the Rights will be evidenced (subject
to the provisions of Section 3(b) hereof) by the certificates representing
shares of Common Stock registered in the names of the holders of the Common
Stock (which certificates shall be deemed also to be certificates for the
associated Rights) and not by separate rights certificates, and (ii) the Rights
will be transferable only in connection with the transfer of the associated
shares of Common Stock. As soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the stock transfer
records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the "Rights Certificates"), evidencing in the
aggregate that number of Rights to which such holder is entitled in accordance
with the provisions of this Agreement. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates. The Rights are
exercisable only in accordance with the provisions of Section 7 hereof and are
redeemable only in accordance with Section 23 hereof.
(b) As soon as practicable after the Dividend Record Date, the Company will
cause a copy of a Summary of Rights, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), to be sent by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Dividend Record Date, at the address of such holder shown on the
stock transfer records of the Company. With respect to certificates for the
Common Stock outstanding as of the Dividend Record Date, until the Distribution
Date, the Rights associated with the shares of Common Stock represented by such
certificates will be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the surrender for transfer of any of
the certificates representing shares of the Common Stock outstanding on the
Dividend Record Date, with or without a copy of the Summary of Rights,
Page 17 of 70
<PAGE>
shall also constitute the transfer of the Rights associated with the Common
Stock represented by such certificate.
(c) Rights shall be issued in respect of all shares of Common Stock issued
(whether originally issued or delivered from the Company's treasury) after the
Dividend Record Date but prior to the earliest of (i) the Distribution Date,
(ii) the Expiration Date, or (iii) the redemption of the Rights. Certificates
representing such shares of Common Stock and certificates issued on transfer of
such shares of Common Stock, with or without a copy of the Summary of Rights,
prior to the Distribution Date (or earlier expiration or redemption of the
Rights) shall be deemed also to be certificates for the associated Rights, and
commencing as soon as reasonably practicable following the Dividend Record Date
shall bear the following legend (or a legend substantially in the form thereof):
This certificate also evidences and entitles the holder to Rights set forth
in a Rights Agreement between the issuer and American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agent"), dated as of February
17, 1998 (the "Rights Agreement"), the terms of which are incorporated
herein by reference and a copy of which is on file at the principal offices
of both the issuer and the Rights Agent. The Rights Agent will mail to the
registered holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge upon written request. Under
certain circumstances set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced by
this certificate. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by any Person who is, was or becomes,
or acquires shares from, an Acquiring Person or any Affiliate of an
Acquiring Person (as each such term is defined in the Rights Agreement and
generally relating to the ownership or purchase of large shareholdings),
whether currently held by or on behalf of such Person or Affiliate or by
certain subsequent holders, may become null and void.
Until the Distribution Date or the earlier redemption, expiration or termination
of the Rights, the Rights associated with the Common Stock shall be evidenced by
the Common Stock certificates alone and the registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the form of assignment and the form of
exercise notice and certificate to be printed on the reverse thereof) shall each
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 Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
Page 18 of 70
<PAGE>
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 traded, or to conform to usage.
Subject to the provisions of Sections 11 and 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Dividend Record Date (or, if the
shares pursuant to which the Rights are attached are issued thereafter, such
date of issuance), shall include the date of countersignature and on their face
shall entitle the holders thereof to purchase such number of one one-tenths of a
share of Preferred Stock as shall be set forth therein at the Purchase Price (as
hereinafter defined), but the amount and type of securities issuable upon the
exercise of each Right and the Purchase Price shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or 22 hereof
that represents Rights beneficially owned by (i) any Acquiring Person or any
Affiliate of an Acquiring Person, or (ii) any Disqualified Transferee, and any
other Rights Certificate issued pursuant to Section 6 or 11 hereof upon the
transfer, exchange, replacement, or adjustment of any such Rights Certificate,
shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate
(which includes both affiliates and associates) of an Acquiring Person (as
each such term is defined in the Rights Agreement between the issuer and
American Stock Transfer & Trust Company, as Rights Agent, dated as of
February 17, 1998 (the "Rights Agreement")). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void in
the circumstances specified in Section 7(e) of the Rights Agreement. The
Rights Agent will mail to the registered holder of this certificate a copy
of the Rights Agreement, as in effect on the date of such mailing, without
charge upon written request.
Section 5. Countersignature and Registration.
---------------------------------
The Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, the President or the Vice President of Finance, and by
the Treasurer or an Assistant Treasurer of the Company, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or
facsimile thereof. The Rights Certificates shall be countersigned, either
manually or by facsimile signature, by the Rights Agent and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, issued, and delivered with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company. Any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights
Page 19 of 70
<PAGE>
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
Following the Distribution Date, the Rights Agent shall keep or cause to be
kept, at the office of the Rights Agent designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates, and the date of countersignature thereof by the Rights Agent.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
----------------------------------------------------------
Certificates.
------------
(a) Subject to the provisions of Sections 4(b), 7(e), and 14 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the earlier of the Close of Business on the Expiration Date or the redemption of
the Rights, any Rights Certificate may be transferred, split up, combined or
exchanged for another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of one one-tenths of a share of
Preferred Stock (or, following a Common Stock Event, Common Stock and/or such
other securities, cash, or other assets as shall be issuable in respect of the
Rights in accordance with the terms of this Agreement (such other securities,
cash or other assets being referred to herein as "Other Consideration")) as the
Rights Certificate 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 Rights Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate to be transferred, split up, combined, or exchanged at the office of
the Rights Agent designated for such purpose, accompanied by a signature
guarantee and such other documentation as the Rights Agent may reasonably
request. Neither the Rights Agent nor the Company shall be obligated to take
any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner from whom the Rights evidenced by such Rights
Certificate are to be transferred (or the Beneficial Owner to whom such Rights
are to be transferred) or Affiliates thereof as the Company shall reasonably
request. Thereupon, subject to Sections 4(b), 7(e) and 14 hereof, the Company
shall execute and the Rights Agent shall countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment by the holders of Rights
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 Rights
Certificates which the Company is not required to pay in accordance with Section
9(d) hereof.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in
Page 20 of 70
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case of loss, theft or destruction, the receipt of indemnity or security
satisfactory to them, and upon reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Rights Certificate, if mutilated, accompanied by a
signature guarantee and such other documentation as the Rights Agent may
reasonably request, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed, or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Except as otherwise provided herein, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby in whole or in part
at any time from and after the Distribution Date and at or prior to the Close of
Business on July 27, 2008 (the "Expiration Date") or the earlier redemption of
the Rights. At the Expiration Date (or the earlier redemption of the Rights),
all Rights shall be extinguished and all Rights Certificates shall become null
and void. To exercise Rights, the registered holder of the Rights Certificate
evidencing such Rights shall surrender such Rights Certificate, with the form of
election to purchase on the reverse side thereof and the certificate contained
therein duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, accompanied by a signature guarantee and such other
documentation as the Rights Agent may reasonably request, together with payment
in cash, only if by electronic or wire transfer, or by certified check or bank
check, of the Purchase Price with respect to the total number of one one-tenths
of a share of Preferred Stock (or, after a Common Stock Event, shares and/or
similar units of Common Stock or Other Consideration) as to which the Rights are
exercised (which payment shall include any additional amount payable by such
Person in accordance with Section 9(d) hereof). The Rights Agent shall promptly
deliver to the Company all payments of the Purchase Price received in respect of
Rights Certificates accepted for exercise.
(b) The purchase price for each one one-tenth of a share of Preferred Stock
issuable pursuant to the exercise of a Right (the "Purchase Price") shall
initially be $65.00, shall be subject to adjustment as provided in Section 11
hereof, and shall be payable in lawful money of the United States of America.
(c) Upon receipt of a Rights Certificate representing the Rights, with the
form of election to purchase set forth on the reverse side thereof and the
certificate contained therein duly executed, accompanied by payment of the
Purchase Price, with respect to each Right so exercised, the Rights Agent,
subject to Sections 7(e), 11(a)(iii) and 20(k) hereof, shall thereupon promptly
(i) requisition from any transfer agent of the Preferred Stock (or Common Stock,
as the case may be) (or from the Company if there shall be no such transfer
agent, or make available if the Rights Agent is such transfer agent)
certificates for the total number of one one-tenths of a share of Preferred
Stock (or Common Stock, as the case may be) to be purchased and the Company
hereby irrevocably authorizes such transfer agent to comply with any such
request, (ii) after receipt of such certificates, cause the same to be delivered
to or
Page 21 of 70
<PAGE>
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated in writing by such holder, and (iii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of a fractional share in accordance with Section 14 hereof and
after receipt promptly deliver such cash to or upon the order of the registered
holder of such Rights Certificate. After the occurrence of the later of a Common
Stock Event or the Dividend Record Date the Company shall make all necessary
arrangements so that any Other Consideration then deliverable or which may be
deliverable in respect of the Rights is available for distribution by the Rights
Agent. For purposes of this Section 7, the Rights Agent shall be entitled to
rely, and shall be protected in relying, on an Officers' Certificate from the
Company to the effect that the Distribution Date has occurred.
(d) Subject to Sections 4(b), 7(e) and 14 hereof, in case the registered
holder of any Rights Certificate shall exercise less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be executed and delivered by the Company to
the Rights Agent and countersigned and delivered by the Rights Agent to the
registered holder of such Rights Certificate or to such holder's duly authorized
assigns.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of the later of a Common Stock Event or the Dividend
Record Date any Rights beneficially owned by (i) an Acquiring Person or an
Affiliate of an Acquiring Person, or (ii) a Disqualified Transferee 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 Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but the Company shall have no liability to any holder
of Rights Certificates or other Person and none of the terms of this Agreement
or the Rights shall be deemed to be waived with respect to such holder or other
Person as a result of any failure by the Company to make any determinations with
respect to an Acquiring Person or any Affiliate of an Acquiring Person or
Disqualified Transferees hereunder or any failure to have a legend placed on any
Rights Certificate in accordance with Section 4(b) hereof or on any Common Stock
certificate in accordance with Section 3(c) hereof.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a holder of any Rights Certificate upon the occurrence of any
purported exercise thereof unless such 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 Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
from whom the Rights evidenced by such Rights Certificate are to be transferred
(or the Beneficial Owner to whom such Rights are to be transferred) or
Affiliates thereof as the Company shall reasonably request.
Page 22 of 70
<PAGE>
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of and accepted for
exercise, or surrendered for the purpose of redemption, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents (other than the Rights Agent), 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 Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Rights Certificates
purchased or retired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights Certificates to the Company,
or may, at the written request of the Company, but shall not be required to,
destroy such canceled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares of Preferred Stock; Other
----------------------------------------------------------------
Covenants.
- ---------
(a) The Company covenants and agrees that on and after the Distribution
Date, it shall use reasonable efforts to cause to be reserved and kept available
out of its authorized and unissued shares of Preferred Stock (or, following the
occurrence of a Common Stock Event, out of its authorized and unissued shares of
Common Stock and/or Other Consideration, or out of its authorized and issued
shares held in its treasury), the number of shares of Preferred Stock (or,
following a Common Stock Event, shares of Common Stock and/or Other
Consideration) that, except as provided in Section 11(a)(iii) hereof, would then
be sufficient to permit the exercise in full of all outstanding Rights;
provided, however, that the reservation of such shares shall be subject and
- -------- -------
subordinate to any other reservation of such shares made by the Company at any
time for any lawful purpose; provided, further, however, that in no event shall
-------- ------- -------
such failure to so reserve shares affect the rights of any holder of Rights
hereunder.
(b) The Company covenants and agrees that on and after the Distribution
Date so long as the Preferred Stock (or, following a Common Stock Event, shares
and/or similar units of Common Stock and/or Other Consideration) issuable upon
the exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause all shares (or similar units)
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company covenants and agrees that it shall take all such action as
may be necessary to ensure that each one one-tenth of a share of Preferred Stock
(or, following a Common Stock Event, each share and/or similar unit of Common
Stock or Other Consideration) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (or units), subject to
payment in full of the Purchase Price, be duly and validly authorized and issued
and fully paid and nonassessable.
Page 23 of 70
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(d) The Company covenants and agrees that it shall pay when due and payable
any and all federal and state transfer taxes and similar charges which may be
payable in respect of the issuance or delivery of the Rights Certificates or of
any shares of Preferred Stock (or, following the occurrence of a Common Stock
Event, each share and/or similar unit of Common Stock or Other Consideration)
upon the exercise of Rights; provided, however, that the Company shall not be
-------- -------
required to pay any transfer tax which may be payable in respect of any transfer
involved in the transfer or delivery of Rights Certificates or in the issuance
or delivery of certificates for any shares of Preferred Stock (or, following the
occurrence of a Common Stock Event, each share and/or similar unit of Common
Stock or Other Consideration) in a name other than that of the registered holder
of the Rights Certificate evidencing Rights surrendered for exercise or to issue
or deliver any certificates for any shares of Preferred Stock (and, following
the occurrence of a Common Stock Event, any shares and/or similar units of
Common Stock or Other Consideration) upon the exercise of any Rights until any
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender thereof) or until it has been
established to the Company's satisfaction that no such tax is due.
(e) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the first occurrence of a Common
Stock Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, or
as soon as is required by law following the Distribution Date, as the case may
be, a registration statement under the Act, with respect to the securities
issuable upon exercise of the Rights on an appropriate form, (ii) to cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) to cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, or (B) the Expiration Date or earlier redemption of the Rights. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states of the
United States in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this Section
9(e), the exercisability of the Rights in order to prepare and file such
registration statement or to permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended. The Company shall
thereafter issue a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
Section 10. Preferred Stock Record Date; Etc.
--------------------------------
Each Person in whose name any certificate for any shares of Preferred Stock
(or, following the occurrence of a Common Stock Event, shares and/or similar
units of Common
Page 24 of 70
<PAGE>
Stock or Other Consideration) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such shares of
Preferred Stock (or such shares and similar units of Common Stock and/or Other
Consideration, as the case may be) represented thereby, and such certificate
shall be dated the date which is the later of (i) the date upon which the Rights
Certificate evidencing such Rights was duly surrendered, or (ii) the date upon
which payment of the Purchase Price (and any applicable transfer taxes) in
respect thereof was made; provided, however, that if such date is a date upon
-------- -------
which the relevant transfer books of the Company are closed, such Person shall
be deemed to have become the record holder of such shares (or Other
Consideration) on, and such certificate shall be dated, the next succeeding
Business Day on which such transfer books of the Company are open; provided,
--------
further, that the Company covenants and agrees that it shall not close such
- -------
transfer books for a period exceeding ten consecutive days. Prior to the
exercise of the Rights evidenced thereby (which shall be deemed to have occurred
on the date such certificate for shares and/or similar units of Preferred Stock,
Common Stock or Other Consideration shall be dated in accordance with this
Section 10), the holder of a Rights Certificate, as such, shall not be entitled
to any rights of a security holder of the Company with respect to the shares of
Preferred Stock or Common Stock (and/or such shares or similar units of Common
Stock or Other Consideration) for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions, or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as expressly
provided herein.
Section 11. Antidilution Adjustments.
------------------------
The Purchase Price and the number and kind of securities 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 that the Company shall at any time after the
Declaration Date (A) declare and pay a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares, or (D) issue, change, or alter any of its shares of
capital stock in a reclassification or recapitalization (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving Person), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, then, and in each
such case, the Purchase Price in effect at the time of the record date for
such dividend or the effective time of such subdivision, combination,
reclassification or recapitalization, and the number and kind of shares of
capital stock issuable at such time, 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 Preferred Stock or other
capital stock which, if such Right had been exercisable and was exercised
immediately prior to such time at the Purchase Price then in effect and at
a time when the transfer books for the Preferred Stock (or other capital
Page 25 of 70
<PAGE>
stock) of the Company were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, reclassification or recapitalization. If an
event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event
(A) any Person shall at any time after the Declaration Date
become an Acquiring Person; or
(B) any Acquiring Person or any Affiliate of any Acquiring
Person, at any time after the Declaration Date, directly or
indirectly, shall (1) merge into the Company or otherwise combine with
the Company, and the Company shall be the continuing or surviving
corporation of such merger or combination and the Common Stock of the
Company shall remain outstanding and no shares thereof shall be
changed or otherwise transformed into stock or other securities of any
other Person or the Company or cash or any other property, (2) in one
or more transactions, transfer any assets to the Company in exchange
(in whole or in part) for shares of any class of its equity securities
or for securities exercisable for or convertible into shares of any
such class or otherwise obtain from the Company, with or without
consideration, any additional shares of any such class or securities
exercisable for or convertible into shares of any such class (other
than as part of a pro rata distribution to all holders of such class),
(3) sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise dispose (in one transaction or a series of transactions) to,
from or with the Company or any of the Company's Subsidiaries, assets
with an aggregate fair market value in excess of 25% of the assets of
the Company and its Subsidiaries determined on a consolidated basis on
terms and conditions less favorable to the Company than the Company
would be able to obtain through arm's-length negotiation with an
unaffiliated third party, (4) receive any compensation from the
Company or any of the Company's Subsidiaries other than compensation
as a director of the Company or for full-time employment as a regular
employee at rates in accordance with the Company's (or such
Subsidiary's) past practices, (5) receive the benefit (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance provided by the Company or any
of its Subsidiaries on terms and conditions less favorable to the
Company (or such Subsidiary) than the Company would be able to obtain
through arm's-length negotiation with an unaffiliated third party or
(6) commence a tender or exchange offer for securities of the Company;
or
Page 26 of 70
<PAGE>
(C) during such time as there is an Acquiring Person at any time
after the Declaration Date, there shall be any reclassification of
securities (including any combination thereof), or recapitalization of
the Company, or any merger or consolidation of the Company with any of
its Subsidiaries (whether or not with or into or otherwise involving
an Acquiring Person or any Affiliate of an Acquiring Person), or any
repurchase by the Company or any of its Subsidiaries of shares of the
Common Stock of the Company, or any other class or series of
securities issued by the Company, which reclassification,
recapitalization, merger, consolidation or repurchase is effected at a
time when a majority of the Board consists of persons who are the
Acquiring Person or its Affiliates, or nominees or designees of any
thereof, which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of
any class of equity securities or securities exercisable for or
convertible into any class of equity securities of the Company or any
of its Subsidiaries which is directly or indirectly owned by an
Acquiring Person or any Affiliate of an Acquiring Person
then, in each such case, upon the Close of Business on the tenth Business
Day after the occurrence of such event or if such tenth Business Day
following the occurrence of such event occurs before the Dividend Record
Date, upon the Dividend Record Date, proper provision shall be made so that
each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon exercise thereof at the Purchase
Price in effect at the time of exercise in accordance with the terms of
this Agreement, in lieu of a number of one one-tenths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying an amount equal to the
then current Purchase Price by an amount equal to the number of one one-
tenths of a share of Preferred Stock for which a Right was or would have
been exercisable immediately prior to the first occurrence of any such
event whether or not such Right was then exercisable, and (y) dividing that
product by 50% of the Current Market Price per share of the Common Stock of
the Company (as defined in Section 11(d) hereof) determined as of the date
of such first occurrence.
(iii) In lieu of issuing whole or fractional shares of Common Stock
in accordance with Section 7(c) hereof, the Company shall (i) in the event
that the number of shares of Common Stock which are authorized by the
Company's charter but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with Section 7(c) hereof, or
(ii) if a majority of the Board determines that it would be appropriate and
not contrary to the interests of the holders of Rights (other than any
Acquiring Person or Disqualified Transferee or any Affiliate of the
Acquiring Person or Disqualified Transferee), (A) determine an amount, if
any, (the "Excess Amount") equal to the excess of (1) the value (the
"Current Value") of the whole or fractional
Page 27 of 70
<PAGE>
shares of Preferred Stock (or Common Stock) issuable upon the exercise of a
Right in accordance with Section 7(c) hereof, over (2) the Purchase Price,
and (B) with respect to each Right, (subject to Section 7(e) hereof) make
adequate provision to substitute for such whole or fractional shares of
Preferred Stock (or Common Stock), upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation,
shares or units of Preferred Stock or preferred stock which the Board has
deemed in good faith to have the same value as a share of Common Stock
(such shares of preferred stock being referred to herein as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing (which would include the additional
consideration provided to any holder by reducing the Purchase Price) having
an aggregate value equal to the Current Value, where such aggregate value
has been determined by the Board; provided, however, subject to the
-------- -------
provisions of Section 9(e) hereof, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within 30
days following the Close of Business on the tenth Business Day after the
first occurrence of a Common Stock Event described in Section 11(a)(ii)
hereof or, if such tenth Business Day occurs before the Dividend Record
Date, upon the Dividend Record Date, then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, whole or fractional shares of Preferred
Stock (or Common Stock) (to the extent available) and then, if necessary,
cash, securities, and/or assets which in the aggregate are equal to the
Excess Amount. If the Board shall determine in good faith that it is likely
that sufficient additional shares of Common Stock or Common Stock
Equivalents could be authorized for issuance upon exercise in full of the
Rights, the 30-day period set forth above may be extended to the extent
necessary, but not more than 90 days following the Close of Business on the
tenth Business Day after the first occurrence of such a Common Stock Event
or, if such tenth Business Day occurs before the Dividend Record Date, upon
the Dividend Record Date (such 30 day period, as it may be extended to 90
days, is referred to herein as the "Substitution Period"). To the extent
that the Company determines that some action is to be taken pursuant to the
preceding provisions of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that (except as to the form of
consideration which shall be determined as appropriate by a majority of the
Board) such action shall apply uniformly to all outstanding Rights which
shall not have become null and void, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such provisions and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended. The Company shall thereafter
issue a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the Common
Stock issuable upon exercise of a Right in accordance with Section 7(c)
hereof shall be the Current Market Price per share of the
Page 28 of 70
<PAGE>
Common Stock (as determined pursuant to Section 11(d) hereof) on the Close
of Business on the tenth Business Day after the date of the first
occurrence of such a Common Stock Event or, if such tenth Business Day
occurs before the Dividend Record Date, upon the Dividend Record Date, and
the value of any Common Stock Equivalent shall be deemed to be equal to the
Current Market Price per share of the Common Stock on such date.
(b) In the event the Company shall, after the Dividend Record Date, fix a
record date for the issuance of any options, warrants, or other rights to all
holders of Preferred Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or purchase (i) Preferred
Stock or (ii) shares having the same rights, privileges and preferences as the
shares of any number of one one-tenths of a share of Preferred Stock
("Equivalent Preferred Stock") or (iii) securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
Equivalent Preferred Stock (or having a conversion price per share of Common
Stock, if a security is convertible into Preferred Stock or Equivalent Preferred
Stock) less than the Current Market Price per share of Preferred Stock
(determined in accordance with Section 11(d) hereof) determined as of 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 shares
of Preferred Stock outstanding on such record date plus the number of shares of
Preferred Stock and/or Equivalent Preferred Stock which the aggregate minimum
offering price of the total number of shares of one one-tenths of a share of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate minimum conversion price of such convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the maximum number of additional shares of Preferred Stock
and/or Equivalent Preferred Stock to be offered for subscription or purchase (or
the maximum number of shares into which such convertible securities so to be
offered are convertible). In case such subscription price may be paid by
delivery of consideration part or all of which shall be in a form other than
cash, for purposes of this Section 11(b) the value of such consideration shall
be the fair market value thereof as determined in good faith by the Board (which
determination shall be described in an Officers' Certificate filed with the
Rights Agent). Shares of Preferred Stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such options, warrants or other rights 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 (subject,
however, to such other adjustments as are provided herein).
(c) In the event that the Company shall, after the Dividend Record Date,
fix a record date for the making of a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is
Page 29 of 70
<PAGE>
the surviving or continuing Person) of evidences of indebtedness, cash (other
than cash dividends paid out of the earnings or retained earnings of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied), other property
(other than a dividend payable in a number of one one-tenths of a share of
Preferred Stock, but including any dividend payable in capital stock other than
Preferred Stock), 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, of which the numerator
shall be (i) the Current Market Price per share of Preferred Stock (as defined
in Section 11(d) hereof) determined as of such record date, less (ii) the sum of
(A) that portion of cash plus (B) the fair----market value, as determined in
good faith by the Board (which determination shall be described in an Officers'
Certificate filed with the Rights Agent) of that portion of such evidences of
indebtedness, such other property, and/or such subscription rights or warrants
applicable to one share of Common Stock and of which the denominator shall be
such Current Market Price per share of the Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event 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 (subject, however, to such other adjustments as are
provided herein).
(d) For purposes of any computation pursuant to Section 11(a)(iii) hereof,
the "Current Market Price" per share (or unit) of any security on any date shall
be deemed to be the average of the daily Closing Price of such security for the
10 consecutive Trading Days immediately after such date, and for the purpose of
any other computation hereunder, the "Current Market Price" per share (or unit)
of any security on any date shall be deemed to be the average of the daily
Closing Price of such security for the 20 consecutive Trading Days immediately
prior to such date; provided, however, that in the event that the Current Market
-------- -------
Price per share of such security is determined during a period following the
announcement by the issuer of such security of (i) a dividend or distribution on
such security payable in shares (or units) of such security or securities
convertible into shares (or units) of such security, or (ii) any subdivision,
combination or reclassification of such security, and prior to the expiration of
such 10 Trading Days or 20 Trading Days after (A) the ex-dividend date for such
dividend or distribution, or (B) the record date for such subdivision,
combination or reclassification, as the case may be, then, and in each such
case, the "Current Market Price" shall be the Closing Price of such security on
the last day of such respective 10 Trading Day or 20 Trading Day period. For
purposes of this Agreement, the "Closing Price" of any security on any day shall
be the last sale price, regular way, with respect to shares (or units) of such
security, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, with respect to such security, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which such security is listed or admitted to trading; or, if such
security is not so listed or admitted to trading, the last quoted sale price
with respect to shares (or units) of such security, or, if not so quoted, the
average of the high bid and low
Page 30 of 70
<PAGE>
asked prices in the over-the-counter market with respect to shares (or units) of
such security, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or such other similar system then in use; or, if
on any such date such security is not quoted by any such organization, the
average of the closing bid and asked prices with respect to shares (or units) of
such security, as furnished by a professional market maker making a market in
such security selected by the Board; or, if no such market maker is available,
the fair market value of shares (or units) of such security as of such day as
determined in good faith by the Board (which determination shall be described in
an Officers' Certificate filed with the Rights Agent); provided, however, that
-------- -------
the "Closing Price" of one one-tenth of a share of Preferred Stock as of any
Trading Day shall be equal to the Closing Price of a whole share of Preferred
Stock on such Trading Day divided by 10; provided, further, that if the Closing
-------- -------
Price of such a share of Preferred Stock as of any Trading Day cannot be
reasonably determined by the foregoing provisions, the "Closing Price" of one
one-tenth of a share of Preferred Stock on such Trading Date shall be the
Closing Price of a share of Common Stock on such Trading Day.
(e) No adjustment in the Purchase Price shall be required unless adjustment
would require an increase or decrease of at least 1% in such 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 (x) ten-thousandth of a share (or similar
unit) of Common Stock or securities other than Preferred Stock or Equivalent
Preferred Stock or (y) one-millionth of a share of Preferred Stock or Equivalent
Preferred Stock. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which mandates the
adjustment or (ii) the Expiration Date. Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those required by this Section 11, as it
in its discretion shall determine to be advisable in order that any dividends,
subdivision of shares, distribution of rights to purchase shares of beneficial
interest or other stock or securities, or distribution of securities convertible
into or exchangeable for stock hereafter made by the Company to its stockholders
shall not be taxable.
(f) In the event that at any time, as a result of an adjustment made in
respect of a Common Stock Event, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than shares of Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof 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 such other shares
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m) and (p)
hereof, and the provisions of Sections 7, 9, 10, 11(d), 13 and 14 hereof with
respect to the shares of Preferred Stock shall apply on like terms to any such
other shares.
Page 31 of 70
<PAGE>
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-tenths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights represented thereby, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made pursuant to Sections 11(b) and 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-tenths of a share of Preferred Stock (calculated to the nearest one-
millionth of a share) obtained by (i) multiplying (x) the number of one one-
tenths of a share of Preferred Stock covered by a Right immediately prior to
this adjustment, 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.
(i) Assuming that no other adjustment pursuant to this Section 11 has been
made, the Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights in substitution for any adjustment
in the number of one one-tenths of a share of Preferred Stock 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-tenths of
a share of Preferred Stock 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
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price by the Purchase Price in effect
immediately after such adjustment of the Purchase Price. The Company shall make
a public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i) the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed,
and countersigned in the manner provided for herein (and may bear, at the option
of the Company,
Page 32 of 70
<PAGE>
the adjusted Purchase Price) and shall be registered in the names of the holders
of record of Rights 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 whole or fractional shares of Preferred Stock issuable upon exercise
of such Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the number of one one-
tenths of a share of Preferred Stock which were expressed in the initial Rights
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-tenths
of a share of Preferred Stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue such number of
fully paid and nonassessable one one-tenths of a share of Preferred Stock at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
number of one one-tenths of a share of Preferred Stock or other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-tenths of a share of Preferred Stock or other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, by means of a vote of the Board acting in good faith, shall
determine to be advisable in order that any consolidation or subdivision of the
Common Stock, issuance wholly for cash of any Common Stock at less than the
Current Market Price thereof, issuance wholly for cash of Common Stock (or other
securities which by their terms are convertible into or exchangeable for Common
Stock), dividends payable in shares of Common Stock or other capital stock or
shares of beneficial interest, or issuance of rights, options, or warrants
referred to hereinabove in this Section 11, hereafter made or declared by the
Company to the holders of its Common Stock, shall not be taxable to such
holders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with
Page 33 of 70
<PAGE>
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, more
than 25% of (A) the assets (taken at net asset value as stated on the books of
the Company and determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied) or (B) the earning power of
the Company and its Subsidiaries (determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied)
to any other Person or Persons (other than the Company or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale, there are any rights, warrants or other instruments or
securities outstanding or agreements (whether or not in writing) in effect that
would substantially 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 such other Person shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Declaration Date and prior to
the Distribution Date (i) declare or pay a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, or (ii) effect a subdivision,
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or smaller number of shares, then in any such case, (i)
the number of one one-tenths of a share of Preferred Stock purchasable after
such event upon exercise of each Right shall be determined by multiplying the
number of one one-tenths of a share of Preferred Stock so purchasable
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event; and (ii) each share of Common Stock outstanding immediately after
such event shall have issued with respect to it that number of Rights which each
share of Common Stock outstanding immediately prior to such event had issued
with respect to it. The adjustments provided for in this Section 11(p) shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.
Page 34 of 70
<PAGE>
Section 12. Certificate of Adjustments.
--------------------------
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall (a) promptly prepare an Officers' Certificate setting forth such
adjustment, including any adjustment in Purchase Price, the number of shares or
Other Consideration payable, and a brief statement of the facts accounting for
such adjustment, (b) promptly file with the Rights Agent and with each transfer
agent for the Preferred Stock and Common Stock a copy of such Officers'
Certificate, and (c) mail a brief summary thereof to each registered holder of a
Rights Certificate in accordance with Section 26 hereof. The Rights Agent shall
be fully protected in relying on any such Officers' Certificate and on any
adjustment therein contained, and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such an Officers'
Certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
In the event that, following the Stock Acquisition Date, directly or
indirectly, (a) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) and the Company shall not be the continuing
or surviving Person of such consolidation or merger, (b) any Person (other than
a Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof) shall consolidate with, or merge with and into, the Company, the Company
shall be the continuing or surviving Person of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the Common Stock
of the Company shall be changed or otherwise transformed into other stock or
other securities of any other Person or the Company or cash or any other
property, or (c) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, more than 25% of (A) the assets (taken at net
asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied) or (B) the earning power of the Company and its
Subsidiaries (determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied) to any Person (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof) then, from and after such event, or if
such event occurs before the Dividend Record Date, from and after the Dividend
Record Date, 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 the Purchase Price in effect at the time
of such exercise in accordance with the terms of this Agreement, such number of
whole or fractional shares of validly authorized and issued, fully paid, non-
assessable, and freely tradeable Common Stock of such other Person (or in the
--
case of a transaction or series of transactions described in clause (c) above,
the Person receiving the greatest amount of the assets or earning power of the
Company, or if the Common Stock of such other Person is not and has not been
--
continuously registered under Section 12 of the Exchange Act for the preceding
12-month period and such Person is a direct or indirect
Page 35 of 70
<PAGE>
Subsidiary of another Person, that other Person, or if such other Person is a
--
direct or indirect Subsidiary of more than one other Person, the Common Stock of
two or more of which are and have been so registered, such other Person whose
outstanding Common Stock has the greatest aggregate value), free and clear of
any liens, encumbrances, rights of first refusal, or other adverse claims, as
shall be equal to the result obtained by (x) multiplying the Purchase Price in
effect immediately prior to the first occurrence of any Common Stock Event
described in this Section 13, or if such Common Stock Event occurs before the
Dividend Record Date, upon the Dividend Record Date, by the number of one one-
tenths of a share of Preferred Stock for which a Right is exercisable
immediately prior to such first occurrence (and without taking into account any
prior adjustment made pursuant to 11(a)(ii)) and (y) dividing that product by
50% of the Current Market Price per share (as defined in Section 11(d) hereof)
of the Common Stock of such other Person determined as of the date of
consummation of such consolidation, merger, sale, or transfer; (ii) the issuer
of such Common Stock shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale, or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed, for all purposes of this Agreement, to refer to such
issuer, it being specifically intended that the provisions of Section 11 hereof
(other than Section 11(a)(ii) hereof) shall apply only to such issuer following
the first occurrence of a Common Stock Event described in this Section 13; (iv)
such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the whole or fractional shares of its Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Common Stock Event
described in clauses (a), (b) or (c) of this Section 13. The Company shall not
consummate any such consolidation, merger, sale or transfer unless (i) such
issuer shall have a sufficient number of authorized shares of its Common Stock
which have not been issued or reserved for issuance as will permit the exercise
in full of the Rights in accordance with this Section 13, and (ii) prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement so providing and further providing that as soon
as practicable after the date of any Common Stock Event described above in this
Section 13, or if such Common Stock Event occurs before the Dividend Record
Date, upon the Dividend Record Date, such issuer shall (A) 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
will use its best efforts to cause such registration statement to (I) become
effective as soon as practicable after such filing and (II) remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
Expiration Date, and (B) will deliver to holders of the Rights historical
financial statements of such issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act. Furthermore, in case the Person which is to be party to a
transaction referred to in this Section 13 has any provision in any of its
authorized securities or in its charter or by-laws or other agreement or
instrument governing its affairs, which provision would have the effect of
causing such Person to issue, in connection with, or as a consequence of, the
Page 36 of 70
<PAGE>
consummation of a Common Stock Event described in clauses (a), (b), or (c) of
this Section 13, whole or fractional shares of Common Stock of such Person at
less than the then Current Market Price per share thereof (as defined in Section
11(d) hereof), or to issue securities exercisable for, or convertible into,
Common Stock of such Person at less than such then Current Market Price, then,
in such event, the Company hereby agrees with each holder of the Rights that it
shall not consummate any such transaction unless prior thereto the Company and
such Person shall have executed and delivered to the Rights Agent a supplemental
agreement providing that such provision in question shall have been canceled,
waived, or amended so that it will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers. In the event that the later of a Common Stock Event
or a Dividend Record Date as described in this Section 13 shall occur at any
time after the occurrence of the later of a Common Stock Event or a Dividend
Record Date as described in Section 11(a)(ii) hereof, the Rights which have not
theretofore been exercised shall thereafter become exercisable, except as
provided in Section 7(e) hereof, in the manner described in this Section 13.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or to
distribute fractions of Rights, except prior to the Distribution Date as
provided in Section 11(i) hereof, or to distribute Rights Certificates which
evidence fractional Rights. In lieu of issuing such fractional Rights, at the
election of the Company, there shall be paid to the registered holders of the
Rights 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.
(b) The Company shall not be required to issue fractions of shares of its
capital stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares (other than, in each case with respect to Preferred
Stock or Equivalent Preferred Stock, fractions which are integral multiples of
one one-tenth of a share of Preferred Stock or Equivalent Preferred Stock, as
the case may be). Fractions of shares of Preferred Stock or Equivalent
Preferred Stock, as the case may be, in integral multiples of one one-tenth of a
share of Preferred Stock or Equivalent Preferred Stock may, at the election of
the Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depository selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Stock or the Equivalent Preferred Stock
represented by such depositary receipts. In lieu of fractional shares, at the
election of the Company, there shall be paid to the registered holders of Rights
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market
Page 37 of 70
<PAGE>
value of a share of such capital stock. For purposes of this Section 14(b), the
current market value of a share of such capital stock shall be the Closing Price
of such capital stock for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly waives
such holder's right to receive any fractional Rights or (except as provided in
Section 14(b) hereof) any fractional share upon exercise of a Right.
Section 15. Rights of Action.
----------------
Excepting the rights of action given the Rights Agent under Section 18
hereof and except as set forth in Section 20(1) hereof, all rights of action in
respect of this Agreement are vested in the registered holder of each Right; and
any registered holder of any Right, without the consent of the Rights Agent or
of the holder of any other Right, may, in its own behalf and for its own
benefit, enforce, and may institute and maintain any suit, action, or proceeding
against the Company to enforce, or otherwise act in respect of, such registered
holder's right to exercise the rights evidenced by such Right in the manner
provided in such Rights Certificate and in this Agreement, and the Company
hereby agrees to reimburse such registered holder for all expenses (including
reasonable attorneys' fees) incurred by such registered holder in connection
therewith. 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 the obligations
hereunder, and shall be entitled to injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders.
---------------------------
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) from and after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer with a form of assignment and certificate set
forth on the reverse side thereof duly executed, accompanied by a signature
guarantee and such other documentation as the Rights Agent may reasonably
request;
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the Rights
Agent may deem and treat the person in whose name a Rights Certificate (or,
prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and
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<PAGE>
of the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificate or, prior to the Distribution Date, the
associated Common Stock certificate, made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company agrees to use its best efforts to
-------- -------
have any such order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends, or otherwise be deemed for any purpose the holder of any
securities of the Company which may be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote in
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any action by the Company, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or preemptive rights, or
otherwise, until the time specified in Section 10 hereof.
Section 18. Concerning the Rights Agent.
---------------------------
The Company agrees to pay to the Rights Agent such reasonable compensation
as shall be agreed to in writing between the Company and the Rights Agent 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 disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any and all loss, liability, damages, claims or expense, incurred without
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
(including reasonable attorneys' fees and expenses) of defending against any
claim of liability for any of the foregoing.
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<PAGE>
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 Rights Certificate or
certificate for any number of one one-tenths of a share of Preferred Stock, or
for shares of Common Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, instruction, direction, consent, certificate, statement, or other paper
or document believed by it to be genuine and to be signed and executed by the
proper Person or Persons, and verified or acknowledged as required by this
Agreement.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any corporation into which the 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 shall be a party, or any corporation
succeeding to the shareholder services business of the 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, however, 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 and any of the Rights Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver such Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes only the duties and obligations expressly
imposed upon it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent. The Rights Agent shall
perform its duties and obligations hereunder upon the following terms and
conditions:
Page 40 of 70
<PAGE>
(a) The Rights Agent may consult with legal counsel of its selection (who
may be legal counsel to the Company), 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 any Acquiring Person) be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate (an "Officers' Certificate") signed by a person believed by the
Rights Agent to be the Chairman of the Board, the President or any Vice
President and by the Treasurer or any Assistant Treasurer or the Clerk or any
Assistant Clerk of the Company and delivered to the Rights Agent; and such
Officers' 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 Officers' Certificate.
(c) The Rights Agent shall be liable hereunder only for its own 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 Rights
Certificates (except its countersignature on such Rights Certificate) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Sections 11
or 13 hereof or be responsible for the manner, method or amount of any such
adjustment or procedures or the ascertaining of the existence of facts that
would require any such adjustment or procedure (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt of a
certificate delivered pursuant to Section 12 hereof, describing any such
adjustment or procedures); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Stock, Common Stock or other securities to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock,
or any shares or similar units of other securities, will, when issued, be
validly authorized and issued, fully paid, and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts,
Page 41 of 70
<PAGE>
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
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President or the Clerk or any Assistant Clerk or the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent with respect to its duties or obligations under this Agreement
and the date on and/or after which such action shall be taken or omitted and the
Rights Agent shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which date shall not be less than three Business Days after the date
any such officer actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking or
omitting any such action, the Rights Agent has received written instructions
from the Company in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any stockholder, director, officer, or employee of
the Rights Agent may buy, sell, or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, that 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 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 certification appearing on the reverse side
thereof following the form of election to purchase has either not been completed
or indicates an affirmative response to
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<PAGE>
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise of transfer without first consulting
with the Company.
(l) The provisions of this Section 20 are solely for the benefit of the
Rights Agent or the Company and any failure or omission under this Section 20
shall not affect the rights of the Company under this Agreement and neither the
Rights Agent nor the Company shall have any liability to any holder of Rights or
other Person on account of such failure or omission.
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days' notice in writing mailed to
the Company and to each transfer agent of the Common Stock by registered or
certified mail, and, subsequent to the Distribution Date, to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent, to each transfer agent of the Common Stock by registered or
certified mail, and, subsequent to the Distribution Date, to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit such holder's Rights Certificate for
inspection by the Company), then the registered holder of any Rights 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 Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States, the State of New York or The Commonwealth of
Massachusetts (or of any other State of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of New York or The Commonwealth of Massachusetts), in good standing, having an
office designated for such purpose in the State of New York or The Commonwealth
of Massachusetts, which is authorized under such laws to exercise corporate
trust powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000. 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; and, except as the context herein otherwise requires, such
successor Rights Agent shall be deemed to be the "Rights Agent" for all purposes
of this Agreement. Not later than the effective date of any such appointment
the Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock, and mail a notice thereof in
writing to the registered holders of the Rights
Page 43 of 70
<PAGE>
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 Rights Certificates.
-----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale by the Company of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock 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 hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights evidenced by a
-------- -------
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights would be issued, and (ii) no such Rights 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.
--------------------------
The Board, by majority vote, may, at its option, at any time prior to the
Expiration Date, redeem all (but not less than all) of the then outstanding
Rights at a redemption price of $.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend, combination of shares, or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Immediately upon the taking
of such action ordering the redemption of all 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 so redeemed will terminate
and the only right thereafter of the holders of such Rights so redeemed shall be
to receive the Redemption Price (without the payment of any interest thereon).
Within 10 days after such action ordering the redemption of all of the Rights,
the Company shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
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<PAGE>
Each such notice of redemption shall state the method by which the payment of
the Redemption Price shall be made.
Section 24. Exchange.
--------
(a) The Board, by majority vote, may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then outstanding
and exercisable Rights for shares of Common Stock at an exchange ratio of one
share of Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio, as the same may be so adjusted from time to time, being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board shall not be empowered to effect such exchange at any time
after any Person (other than (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan of the Company or of any such
Subsidiary, or (iv) any entity holding Common Stock for or pursuant to the terms
of any such plan), together with all Affiliates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board 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 shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all 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 shall state the method by which the exchange of the
Common Stock for Rights shall 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) hereof) held
by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or shares of Equivalent
Preferred Stock) for shares of Common Stock exchangeable for Rights, at the
initial rate of one one-tenth of a share of Preferred Stock (or share of
Equivalent Preferred Stock) for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of shares of Preferred
Stock pursuant to the terms thereof, so that the fraction of a share of
Preferred Stock delivered in lieu of each share of Common Stock shall have the
same voting rights as one share of Common Stock.
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(d) In the event that there shall not be sufficient shares of Common Stock
or Preferred Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional Common Stock or Preferred Stock for issuance upon exchange of the
Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to each registered holder of a Right Certificate with regard to which
a fractional share of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (e), the current market value
of a whole share of Common Stock shall be the Closing Price of a share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Proposed Actions.
--------------------------
In case the Company shall after the Distribution Date propose (a) to pay
any dividend payable in stock of any class to the holders of its Preferred Stock
or to make any other distribution to the holders of its Preferred Stock (other
than a cash dividend out of earnings or the retained earnings of the Company),
or (b) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock, Common
Stock or shares of stock of any other class or any other securities, rights, or
options, or (c) to effect any reclassification of the Preferred Stock (other
than a reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (d) to effect any consolidation or merger into or with, or
to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 25% of (i) the assets of the
Company and its Subsidiaries (taken at net asset value as stated on the books of
the Company and determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied) or (ii) the earning power
of the Company and its Subsidiaries (determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied)
to any other Person or Persons, or (e) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
the Rights Agent and each holder of a Right, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, 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 Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least 20 days prior to the record date for
determining holders of the Preferred Stock for purposes of such action, and in
the case of any such other action, at least 20 days prior to the date of the
taking of such
Page 46 of 70
<PAGE>
proposed action or the date of participation therein by the holders of Common
Stock whichever shall be the earlier. The failure to give notice required by
this Section 25 or any defect therein shall not affect the legality or validity
of the action taken by the Company or the vote upon any such action.
In case any Common Stock Event described in Section 11(a)(ii) hereof shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and each holder of a Rights Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such Common
Stock Event, which shall specify such event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof.
Notwithstanding anything in this Agreement to the contrary, prior to the
Distribution Date a filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the holders of securities of
the Company, including the Rights, for purposes of this Agreement and no other
notice need be given.
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 Rights Certificate to the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Dynamics Research Corporation
60 Frontage Road
Andover, MA 01810-5498
Attention: Vice President and Treasurer
Copy to: Mary E. Weber
Ropes & Gray
One International Place
Boston, MA 02110-2624
Subject to the provisions of Sections 19 and 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
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<PAGE>
American Stock Transfer & Trust Company
40 Wall Street
46th Floor
New York, New York 10005
Attention: Shareholder Services Division
(Dynamics Research Corporation Rights Agreement)
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments.
--------------------------
Prior to the Distribution Date, the Board, upon the vote of a majority of
the Board, may from time to time supplement or amend this Agreement without the
approval of any holders of the Rights. From and after the Distribution Date,
the Board may, upon the vote of a majority of the Board, from time to time amend
this Agreement without the approval of any holders of the Rights 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 change any time period governing redemption of the Rights or any other time
period or (iv) to make any other provisions in regard to matters or questions
arising hereunder which the Board, upon the vote of a majority of the Board, may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of the Rights (other than any Acquiring Person or Disqualified
Transferee or any Affiliate of an Acquiring Person or Disqualified Transferee).
Any amendment made pursuant to this Section 27 after a Stock Acquisition Date
shall require the approval of a majority of the Board. The Rights Agent shall
join with the Company in the execution and delivery of any such supplement or
amendment, unless such supplement or amendment affects any of the rights,
duties, or obligations of the Rights Agent hereunder, in which case the Rights
Agent may, but shall not be required to, join in such execution and delivery.
Section 28. Successors.
----------
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board; etc.
--------------------------------------------
The Board shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board, or to the Company, or
Page 48 of 70
<PAGE>
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. 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 of Directors in good faith and with the concurrence of a
majority of the Board then in office shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties and (y) not subject any Director to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent, and the registered holders of the Rights
(and, prior to the Distribution Date, the associated shares of Common Stock) any
legal or equitable right, remedy, or claim under this Agreement or the Rights;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Rights Agent, and the registered holders of the Rights (and, prior to the
Distribution Date, the associated Common Stock).
Section 31. Severability.
------------
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision hereof.
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; provided, however, that
-------- -------
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would adversely
affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not expire until the
Close of Business on the tenth day following the date of such determination by
the Board.
Section 32. Governing Law.
-------------
This Agreement and each Rights Certificate issued hereunder shall be deemed
to be a contract made under the laws of The Commonwealth of Massachusetts and
for all purposes shall be governed by and construed in accordance with the laws
of said State applicable to contracts to be made and performed entirely within
said State.
Page 49 of 70
<PAGE>
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.
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.
Page 50 of 70
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and set their respective hands and seals, all as of the day and
year first above written.
DYNAMICS RESEARCH CORPORATION
By: /s/ Douglas R. Potter
-----------------------------------
Title: Vice President of Finance and CFO
Attest:
By: /s/ Mary Grzesik
-----------------
Title: Manager
AMERICAN STOCK TRANSFER &
TRUST COMPANY, AS RIGHTS
AGENT
By: /s/ Herbert J. Lemmer
------------------------------------
Title: Vice President
Attest:
By: /s/ Susan Silber
-------------------------------------
Title: Assistant Secretary
Page 51 of 70
<PAGE>
EXHIBIT A
---------
FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B
PREFERRED STOCK
of
DYNAMICS RESEARCH CORPORATION
Pursuant to Chapter 156B Section 26 of the
Massachusetts Business Corporation Law
We, Albert Rand, President, and David C. Proctor, Assistant Clerk, of
Dynamics Research Corporation, a corporation organized and existing under the
Massachusetts Business Corporation Law, (the "Corporation") in accordance with
the provisions of Chapter 156B Section 26 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors (the
"Board of Directors") by the Restated Articles of Organization of the
Corporation, as amended, the Board of Directors on February 17, 1998, adopted a
vote providing for the authorization of a series of Preferred Stock, as follows:
VOTED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Restated Articles
of Organization, as amended, a series of preferred stock of the Corporation
be and it hereby is created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series B Preferred Stock" (the "Series B Stock") and the number
of shares constituting such series shall be 3,000,000. The number of shares of
Series B Stock may be increased or decreased by a vote duly adopted by the Board
of Directors, but may not be decreased below the number of shares of Series B
Stock then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon conversion of any
outstanding securities convertible into Series B Stock.
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
shares of Series B Stock with respect to
Page 52 of 70
<PAGE>
dividends, the holders of shares of Series B 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 March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B 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 set forth in Section 8
hereof, 10 times the aggregate per share amount of all cash dividends, and
10 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, par value $.10 per share, of the Corporation (the "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 B Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series B Stock as provided in paragraph (a) of this Section 2 immediately
after it declares a dividend or distribution on the Common Stock (other
than a dividend payable in shares of or a subdivision with respect to
Common Stock); provided, however, 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, a dividend of $1.00 per share
on the Series B Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B 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 B Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
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 B Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B 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 B Stock shall
-------------
have the following voting rights:
Page 53 of 70
<PAGE>
(a) Subject to the provision for adjustment set forth in Section 8
hereof, each share of Series B Stock shall entitle the holder thereof to
ten votes on all matters submitted to a vote of the stockholders of the
Corporation.
(b) Except as otherwise provided herein or required by applicable
law, the holders of shares of Series B 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) Except as set forth herein or required by applicable law, holders
of Series B 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 B 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 B 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 B 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 B Stock, except dividends paid ratably on the Series B Stock
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock (A) 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 B Stock or (B) in accordance with subparagraph (iv) of this
Section 4(a); or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Stock, or any shares of stock ranking on a
parity with the Series B 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 the outstanding shares of such
Page 54 of 70
<PAGE>
stock upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(a) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Stock redeemed,
-----------------
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 vote or votes 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 Common Stock or any other stock of the Corporation ranking
junior (upon liquidation, dissolution or winding up) to the Series B Stock
unless, prior thereto, the holders of shares of Series B Stock shall have
received $10.00 per share plus an amount equal to all accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date
of such distribution (the "Series B Liquidation Preference"). Following
the payment of the full amount of the Series B Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series B
Stock unless, prior thereto, the holders of shares of Common Stock (which
term shall include, for the purposes only of this Section 6, any series of
the Corporation's Preferred Stock ranking on a parity with the Common Stock
upon liquidation, dissolution or winding up) shall have received an amount
per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series B Liquidation Preference by (ii 10 (as
appropriately adjusted as set forth in Section 8 hereof to reflect such
events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock; such number in this clause (ii), as the same may be
adjusted from time to time, is hereinafter referred to as the "Adjustment
Number". In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then any
remaining assets shall be distributed ratably to the holders of Common
Stock. Following the payment of the full amount of the Series B
Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series B Stock and Common Stock, respectively,
holders of shares of Series B Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of any remaining assets
to be distributed in the ratio of the Adjustment Number to one (1) with
respect to such Series B Stock and Common Stock, on a per share basis,
respectively.
Page 55 of 70
<PAGE>
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference
and the liquidation preferences of all other series of preferred stock, if
any, which rank on a parity with the Series B Stock, then any remaining
assets shall be distributed ratably to the holders of the Series B Stock
and the holders of such parity stock in proportion to their respective
liquidation preferences.
(c) None of the merger or consolidation of the Corporation into or
with any other entity, the sale of all or substantially all of the property
and assets of the Corporation or the distribution to the stockholders of
the Corporation of all or substantially all of the consideration for such
sale, unless such consideration (apart from the assumption of liabilities)
or the net proceeds thereof consists substantially entirely of cash, shall
be deemed to be a liquidation, dissolution or winding up within the meaning
of this Section 6.
(d) Each share of Series B Stock shall stand on a parity with each
other share of Series B Stock or any other series of the same class of
preferred stock upon voluntary or involuntary liquidation, dissolution or
distribution of assets or winding up of the Corporation.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the outstanding shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case the
outstanding shares of Series B Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment set forth in Section 8 hereof) equal to 10 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. Certain Adjustments. In the event the Corporation shall at any
-------------------
time declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the amounts set forth in
Sections 2(a) and (b), 3(a), 6(a) and 7 hereof with respect to the multiple of
(i) cash and non-cash dividends, (ii votes, (ii the Series B Liquidation
Preference and (iv an aggregate amount of stock, securities, cash and/or other
property referred to in Section 7 hereof, 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.
Section 9. Ranking. The Series B Stock shall rank pari passu with (or if
------- ---- -----
determined by the Board of Directors in any vote establishing any other series
of preferred stock, either senior and prior in preference to, or junior and
subordinate to, as the case may be) each other series of preferred stock with
respect to dividends and/or preference upon liquidation, dissolution or winding
up.
Page 56 of 70
<PAGE>
Section 10. Redemption. The shares of Series B Stock may be purchased by
----------
the Corporation at such times and on such terms as may be agreed to between the
Corporation and the redeeming stockholder, subject to any limitations which may
be imposed by law or the Restated Articles of Organization of the Corporation,
as amended.
Section 11. Amendment. The Restated Articles of Organization of the
---------
Corporation, as amended, shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series B Stock so as to affect them adversely without the affirmative vote of
the holders of two-thirds or more of the outstanding shares of Series B Stock,
voting together as a single class.
Section 12. Fractional Shares. Series B 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 B
Stock.
Page 57 of 70
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation was executed on behalf
of the Corporation by its President and attested by its Assistant Clerk on
February 17, 1998.
By_____________________________
President
Attest:
By___________________
Assistant Clerk
[SEAL]
Page 58 of 70
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JULY 27, 2008 OR EARLIER IF ORDER OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR
AN AFFILIATE (WHICH INCLUDES AFFILIATES AND ASSOCIATES) OF AN ACQUIRING
PERSON (AS EACH SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS
SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN
ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH
HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION
SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY
THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES AFFILIATES AND
ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED
IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Rights Certificate
DYNAMICS RESEARCH CORPORATION
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 February 17, 1998 (the "Rights
Agreement") between Dynamics Research Corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. (Boston, Massachusetts time) on July
27, 2008 (the "Expiration Date") at the office of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one one-
- -------------------
*The portion of the legend in brackets shall be inserted only if applicable.
Page 59 of 70
<PAGE>
tenth of a share of the Series B Preferred Stock, with a par value of $.10 per
share ("Series B Preferred Stock"), of the Company per each Right represented
hereby, at a purchase price of $65.00 per share (the "Purchase Price") upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase set forth on the reverse side hereof and the certificate contained
therein duly completed and executed, accompanied by a signature guarantee and
such other documentation as the Rights Agent may reasonably request. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of July 27,
1998, based on the shares of Common Stock of the Company as constituted at such
date.
As more fully set forth in the Rights Agreement, upon the occurrence of a
Common Stock Event (as such term is defined in the Rights Agreement), if the
Rights evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate of an Acquiring Person (as each such term is
defined in the Rights Agreement) or (ii) a Disqualified Transferee (as defined
in the Rights Agreement), such Rights shall automatically become null and void
and no holder hereof shall have any right with respect to such Rights from and
after the occurrence of such Common Stock Event.
The Rights evidenced by this Rights Certificate shall not be exercisable,
and shall be void so long as held, by a holder in any jurisdiction where the
requisite qualification to the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been obtained or be
obtainable.
As provided in the Rights Agreement, the Purchase Price and the number of
whole or fractional shares of Series B Preferred Stock which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events.
In the circumstances described in Section 13 of the Rights Agreement, the
securities issuable upon the exercise of the Rights evidenced hereby shall be
the common stock or similar equity securities or equity interests of an entity
other than the Company.
This Rights 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 Company, and the holders of the Rights 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 office of the Rights Agent
designated for such purpose and may be obtained by the holder of any Rights upon
written request to the Rights Agent.
Page 60 of 70
<PAGE>
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose,
accompanied by a signature guarantee and such other documentation as the Rights
Agent may reasonably request, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of whole or fractional shares of
Common Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate may be redeemed by the Company by a majority vote of the
Board (as defined in the Rights Agreement) then in office at any time prior to
the Expiration Date, at a redemption price of $.01 per Right (which amount is
subject to adjustment as provided in the Rights Agreement).
The Company is not obligated to issue whole or fractional shares of Series
B Preferred Stock (or other securities) upon the exercise of any Right or Rights
evidenced hereby, but in lieu thereof a cash payment may be made at the election
of the Company, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Series B Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company 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 action by the Company, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
Page 61 of 70
<PAGE>
WITNESS the facsimile signature of the proper officers and the seal of the
Company. Dated as of ______________.
DYNAMICS RESEARCH CORPORATION
By______________________________
Title:
ATTEST:
____________________
Title:
Countersigned:
____________________
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By____________________
Authorized Signatory
Date of Countersignature:
Page 62 of 70
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and
transfers unto _________________________________________________________
___________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________ whose
social security or tax identification number is: ______________ the Rights
evidenced by this Rights Certificate, together with all right, title and
interest herein, and does hereby irrevocably constitute and appoint
____________________ Attorney, to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Dated: _________________________, ____.
_________________________
Signature
Signature Guaranteed:*
- ---------------------------
* Signature must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guaranteee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
Page 63 of 70
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate of an Acquiring Person (as each such term is
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate after
the occurrence of a Common Stock Event from any Person who is, was or
subsequently became an Acquiring Person or an Affiliate of an Acquiring Person.
Dated:____________________ ______________________________
Signature
Signature Guaranteed:*
____________________________
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Page 64 of 70
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise the Rights Certificate)
To Dynamics Research Corporation
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Rights Certificate to purchase the number of one one-
tenths of a share of Preferred Stock (or other securities) issuable upon the
exercise of such Rights and requests that certificates for such shares be issued
in the name of:
Please insert social security
or other identifying number ________________________________________
_____________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ________________________________________
_________________________________________________________________
(Please print name and address)
Dated: _______________________, ____
______________________________
Signature
(Signature must conform in all respects to name of
holder as specified on the face of this Rights
Certificate)
Signature Guaranteed:**
- ---------------------------
** Signature must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guaranteee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
Page 65 of 70
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate of any such Acquiring Person (as each such term is defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate after
the occurrence of a Common Stock Event (as such term is defined in the Rights
Agreement) from any Person who is, was, or subsequently became an Acquiring
Person or an Affiliate of an Acquiring Person.
Dated: _________________, ____ _________________________
Signature
Signature Guaranteed:***
________________________
________________________
*** Signature must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guaranteee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
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EXHIBIT C
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DYNAMICS RESEARCH CORPORATION
SUMMARY OF PURCHASE RIGHTS
On February 17, 1998, Dynamics Research Corporation declared a dividend
distribution of one preferred stock purchase right for each share of Common
Stock. These New Rights replace and have the same practical effect as the Rights
that were in existence prior to July 27, 1998. Each New Right entitles the
registered holder to purchase from the Company after the Distribution Date
described below one-twelfth of a share of its Series B Preferred Stock. The
exercise price is $54.17 for each one-twelfth share of Preferred Stock. The
terms of the New Rights were adjusted to reflect the Common Stock dividend
distributed in May, 1998. The distribution of New Rights is payable on July 27,
1998 to the record holders of Common Stock at the close of business on that
date. One New Right will also be issued for each share of Common Stock issued
between July 27, 1998 and the Distribution Date.
Exercisability of the New Rights; Distribution Date. The New Rights are
not exercisable until the Distribution Date. The Distribution Date would occur,
if ever, ten business days after either of the following events:
. A public announcement that a person or group (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the Company's outstanding Common Stock (the "Stock Acquisition Date") or
. The commencement or announcement of an intention to make a tender offer
or exchange offer that would result in a person or group owning 15% or more of
the Company's outstanding Common Stock.
Mergers, Asset Sales and Self-Dealing Transactions. If after the Stock
Acquisition Date the Company is acquired in a merger or other business
combination, or 25% or more of its assets or earning power is sold, proper
provision is to be made so that each holder of a New Right would have the right
to receive, upon exercise of the New Right, that number of shares of common
stock of the acquiring company which at the time has a market value of two times
the exercise price of the New Right.
In the event that:
(1) the Company is the surviving corporation in a merger with an Acquiring
Person and its Common Stock is not changed or exchanged, or
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(2) an Acquiring Person engages in one of a number of self-dealing
transactions specified in the Rights Agreement described below, or
(3) during such time as there is an Acquiring Person any recapitalization,
reorganization or other transaction involving the Company occurs which result in
such Acquiring Person's ownership interest being increased by more than 1%,
then each holder of a New Right would have the right to receive, upon exercise
of the New Right, that number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
market value of two times the exercise price of the New Right.
Following the occurrence of any of the events described in this section,
any New Rights beneficially owned by any Acquiring Person would immediately
become null and void.
Exchange Option. The Board may, at its option, at any time after any person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable New Rights for shares of Common Stock at an exchange ratio of five-
sixths of one share of Common Stock per New Right. The Board, however, may not
effect an exchange at any time after any person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) any employee benefit plan of the
Company or any such subsidiary or any entity holding Common Stock for or
pursuant to the terms of any such plan), together with all affiliates of such
person, becomes the beneficial owner of 50% or more of the Common Stock then
outstanding. Immediately upon the action of the Board ordering the exchange of
any New Rights and without any further action and without any notice, the right
to exercise such New Rights will terminate and the only right thereafter of a
holder of such New Rights will be to receive that number of five-sixths of a
share of Common Stock equal to the number of such New Rights held by the holder.
Transferability of New Rights. Until the Distribution Date, the Common
Stock Certificates will evidence the New Rights, and the transfer of the Common
Stock certificates will constitute a transfer of the New Rights. After the
Distribution Date, separate certificates evidencing the New Rights would be
mailed to holders of record of the Company's Common Stock as of the close of
business on the Distribution Date, and such separate New Rights Certificates
alone would evidence the New Rights.
Redemption. The Board of Directors, by a majority vote, may redeem the New
Rights at any time at a redemption price of $.0083 per New Right. Immediately
upon such redemption, the right to exercise the New Rights will terminate, and
the New Rights Holders will become entitled only to receive the Redemption
Price.
Expiration of New Rights. If not previously exercised or redeemed, the New
Rights will expire on July 27, 2008.
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Anti-Dilution Adjustment. The exercise price, the redemption price, the
exchange ratio and the number of shares of the Preferred Stock or other
securities or property issuable upon exercise of the New Rights are subject to
adjustment from time to time to prevent dilution under the following
circumstances:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, or
. upon the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for shares of the Preferred Stock or convertible
securities at less than the current market price, or
. upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends out of the
earnings or retained earnings of the Company and dividends payable in shares of
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
With certain exceptions, no adjustment in the exercise price will be
required until cumulative adjustments require an adjustment of at least 1% in
such price. At the Company's option, cash (based on the market price on the
last trading date prior to the date of the exercise) will be paid instead of
issuing fractional shares of any securities (other than fractional shares of
Preferred Stock in integral multiples of one-twelfth of a share).
No Shareholder Rights. A New Right holder, as such, has no rights as a
shareholder of the Company, including, without limitation, the right to vote or
receive dividends.
Amendments. Any of the provisions of the Rights Agreement may be amended
by the Board of Directors prior to the Distribution Date without the approval of
any holders of the New Rights. After the Distribution Date, the Board of
Directors may amend the Rights Agreement to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of New Rights (excluding
the interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement. A majority vote of the Board of Directors is
required.
Tax Consequences. Although the Company believes that neither the
distribution of the New Rights nor the subsequent separation of the New Rights
on the Distribution Date should be taxable to the stockholders or the Company,
stockholders may, depending upon the circumstances, realize taxable income upon
the occurrence of an event described under "Mergers, Asset Sales and Self-
Dealing Transactions."
Rights Agreement. The terms of the New Rights are set forth in a Rights
Agreement between the Company and American Stock Transfer & Trust Company, as
Rights Agent. A copy of the Rights Agreement is an Exhibit to Form 8-A filed
with the Securities and Exchange Commission. A copy of the Rights Agreement is
available free of charge from the Rights Agent at the following address:
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American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Shareholder Services Division
(Dynamics Research Corporation Rights Agreement)
This summary does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated in this summary by
reference.
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