SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 6, 1998
Date of earliest event reported: July 22, 1998
The Eastern Company
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(Exact name of Registrant as specified in its charter)
Connecticut 0-599 06-0330020
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(State of (Commission File Number) (IRS Employer
incorporation) Identification No.)
112 Bridge Street, Naugatuck, Connecticut 06770
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(Address of principal executive offices) (Zip Code)
(203) 729-2255
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On July 22, 1998, the Board of Directors of The Eastern Company (the
"Company"), voted to redeem the rights issued pursuant to its existing Rights
Agreement, dated as of September 16, 1991, between the Company and The First
National Bank of Boston, as amended (the "Existing Rights Agreement"), by paying
one cent ($.01) per Right to holders of record at the close of business on
August 7, 1998, effective at the close of business on August 21, 1998, and
adopted a new Rights Agreement between the Company and BankBoston, N.A., as
rights agent (the "1998 Rights Agreement"). Pursuant to the 1998 Rights
Agreement, the Company declared a dividend distribution of one right for each
share of the Company's common stock, no par value, (the "Common Stock"), payable
on August 21, 1998 to shareholders of record on August 7, 1998 (the "Record
Date"), and authorized the issuance of one right for each share of Common Stock
that becomes outstanding between the Record Date and the Distribution Date (as
defined in the 1998 Rights Agreement), and under certain circumstances
thereafter. The new Rights are redeemable under certain circumstances at $.01
per Right and will expire on July 22, 2008, subject to extension or earlier
redemption.
This description of the provisions of the 1998 Rights Agreement and the terms of
the new Rights is qualified by reference to the 1998 Rights Agreement, a copy of
which is filed herewith and incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit No. Exhibit
(4) 1. Rights Agreement dated as of July 22, 1998 between
The Eastern Company and BankBoston, N.A. (which
includes as Exhibits A and B thereto the Form of Right
Certificate and Summary of Rights)
2. Letter to Shareholders dated as of July 22, 1998 together
with attached Press Release dated July 22, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE EASTERN COMPANY
By /s/Leonard F. Leganza
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Leonard F. Leganza
President and Chief Executive Officer
DATE: August 6, 1998
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EXHIBIT INDEX
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Exhibit No. Description
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(4) 1. Rights Agreement dated as of July 22, 1998 between
The Eastern Company and BankBoston, N.A. (which
includes as Exhibits A and B thereto the Form of Right
Certificate and Summary of Rights)
2. Letter to Shareholders dated as of July 22, 1998 together
with attached Press Release dated July 22, 1998
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EXHIBIT (4) 1
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THE EASTERN COMPANY
and
BANKBOSTON, N.A.
Rights Agent
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RIGHTS AGREEMENT
Dated as of July 22, 1998
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TABLE OF CONTENTS
Page
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Section 1. Certain Definitions. . . . . . . . . . l
Section 2. Appointment of Rights Agent. . . . . . 9
Section 3. Issue of Right Certificates. . . . . . 9
Section 4. Form of Right Certificates . . . . . . 12
Section 5. Countersignature and Registration. . . 14
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates. . . . 16
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. . . . 17
Section 8. Cancellation and Destruction of
Right Certificates . . . . . . . 21
Section 9. Reservation and Availability of
Common Shares. . . . . . . . . . 22
Section 10. Common Shares Record Date. . . . . 24
Section 11. Adjustment of Purchase Price,
Number of Shares or Number
of Rights. . . . . . . . . . . . . 25
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares. . . . . 41
Section 13. Consolidation, Merger or Sale or
Transfer of Assets, Cash Flow or
Earning Power. . . . . . . . . . . 42
Section 14. Fractional Rights and Fractional
Shares . . . . . . . . . . . . . . 48
Section 15. Rights of Action . . . . . . . . . . . 50
Section 16. Agreement of Right Holders . . . . . . 51
Section 17. Right Certificate Holder Not Deemed
a Shareholder. . . . . . . . . . 52
Section 18. Concerning the Rights Agent. . . . . . 53
Section 19. Merger or Consolidation or Change of
Name of Rights Agent . . . . . . 54
Section 20. Duties of Rights Agent . . . . . . . . 55
Section 21. Change of Rights Agent . . . . . . . . 60
Section 22. Issuance of New Right Certificates . . 61
Section 23. Redemption . . . . . . . . . . . . . . 62
Section 24. Exchange . . . . . . . . . . . . . . . 64
Section 25. Notice of Certain Events . . . . . . . 66
Section 26. Notices. . . . . . . . . . . . . . . . 68
Section 27. Supplements and Amendments . . . . . . 69
Section 28. Successors . . . . . . . . . . . . . . 70
Section 29. Determinations and Actions by the
Board of Directors, etc.. . . . 70
Section 30. Benefits of this Agreement . . . . . . 71
Section 31. Severability . . . . . . . . . . . . . 72
Section 32. Governing Law. . . . . . . . . . . . . 73
Section 33. Counterparts . . . . . . . . . . . . . 73
Section 34. Descriptive Headings . . . . . . . . . 73
Signatures. . . . . . . . . . . . . . . . 73-74
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Rights to Purchase Common Shares
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 22, 1998 (the "Agreement"), between
THE EASTERN COMPANY, a Connecticut corporation (the "Company"), and BANKBOSTON,
N.A., a national banking association, as rights agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one common share purchase right (a "Right") for each share of Common
Stock, no par value, of the Company ("Common Share") outstanding at the Close of
Business (as hereinafter defined) on August 7, 1998 (the "Record Date") and has
authorized the issuance of one Right with respect to each Common Share that
shall become outstanding between the Record Date and the earlier of the
Distribution Date, the Expiration Date and the Final Expiration Date (as such
terms are hereinafter defined), each right representing the right to purchase
one Common Share.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person(as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 10% or more of the Common Shares
then outstanding, but shall not include any employee benefit plan of the Company
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or any Subsidiary of the Company or any Person organized, appointed or
established by the Company or such Subsidiary as a fiduciary for or pursuant to
the terms of any such employee benefit plan and shall not include any Person or
Persons who are the Beneficial Owners of 10% or more of the Common Shares then
outstanding by virtue of ownership of Common Shares by such Person's Affiliates
and/or Associates which Affiliates and/or Associates are deemed to be Affiliates
and/or Associates solely by reason of each of them being members of either the
Board of Directors of the Company or a slate of directors, proposed by
management, standing for election to such Board. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as a result of an acquisition of
Common Shares by the Company which, by reducing the number of Common Shares
outstanding, increases the proportionate number of shares Beneficially Owned by
such Person to 10% or more of the Common Shares of the Company then outstanding,
provided, however, that if a Person shall become the Beneficial Owner of 10% or
more of the Common Shares of the Company by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company other than as a
direct or indirect result of any corporate action taken by the Company, then
such Person shall be deemed to be an "Acquiring Person."
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Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as a result of becoming the Beneficial Owner of ten percent (10%) or
more of the Common Shares then outstanding if such acquisition occurs
inadvertently or unintentionally or without actual knowledge of the consequences
of such acquisition under this Agreement, and in any such case without an
intention to change or influence control of the Company, the factual
determination of each of these issues to be made by the Board of Directors of
the Company, which determination shall be conclusive; and further provided that
such Person within ten (10) business days thereafter sells or transfers to a
Person who is not one of its Affiliates or Associates a sufficient number of
Common Shares as to reduce its beneficial ownership of Common Shares of the
Company to less than ten percent (10%) of the Common Shares then outstanding.
(b) "Adjustment Shares" shall have the meaning set forth in Section ll
(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the Record Date.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) Which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
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of the General Rules and Regulations under the Exchange Act), 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 of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (i)
arises solely from a revocable proxy given to such Person in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange
Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(ii) Which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or
upon the exercise of conversion rights, exchange rights, rights (other
than these Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, (A) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a Triggering
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<PAGE>
Event, or (C) securities issuable upon exercise of Rights from and
after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior
to the Distribution Date or pursuant to Section 3(a) or Section 22
hereof (the "Original Rights") or pursuant to Section ll(i) hereof in
connection with an adjustment made with respect to any Original Rights;
or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in subparagraph (i) of this paragraph (d))
or disposing of any securities of the Company; provided, however, that
nothing in this paragraph (d) shall cause a person engaged in business
as an underwriter of securities to be the Beneficial Owner of, or to
beneficially own, any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday, or
a day on which banking institutions in The Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.
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(f) "Close of Business" on any given date shall mean 5:00 P.M., Boston
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., Boston time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
the shares of Common Stock, no par value, of the Company. "Common Shares" when
used with reference to any Person other than the Company shall mean the capital
stock with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person, or,
if such Person is a Subsidiary of another Person, the capital stock with the
greatest voting power of the Person which ultimately controls such
first-mentioned Person. "Common Shares" when used with reference to any Person
which is not organized in corporate form shall mean units of beneficial interest
which (1) shall represent the right to participate generally in the profits and
losses of such Person (including, without limitation, any flow-through tax
benefits resulting from an ownership interest in such Person) and which (11)
shall be entitled to exercise the greatest voting power of such Person or, in
the case of a limited partnership, shall have the power to remove the general
partner or partners.
(h) "Common Share Equivalents" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(i) "Company" shall have the meaning set forth in the first paragraph
of this Agreement.
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(j) "Current Market Price" shall have the meaning set forth in Section
ll(d) hereof.
(k) "Current Value" shall have the meaning set forth in Section ll(a)
(iii) hereof.
(1) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(m) "Exchange Act" shall have the meaning specified in Section l(c)
hereof.
(n) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(o) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(p) "NASDAQ" shall have the meaning set forth in Section ll(d) hereof.
(q) "Outside Directors" shall have the meaning set forth in Section ll
(a)(ii) hereof.
(r) "Person" shall mean any individual, firm, corporation, partnership,
trust or other entity, and shall include any successor (by merger or otherwise)
of such entity.
(s) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(t) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(u) "Record Date" shall have the meaning set forth in the second
paragraph at the beginning of this Agreement.
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(v) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(w) "Right" shall have the meaning set forth in the second paragraph at
the beginning of this Agreement.
(x) "Right Certificate" shall have the meaning set forth in Section
3(a) hereof.
(y) "Rights Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
(z) "Section ll(a)(ii) Event" shall have the meaning set forth in
Section ll(a)(ii) hereof.
(aa) "Section ll(a)(ii) Trigger Date" shall have the meaning set forth
in Section ll(a)(iii) hereof.
(bb) "Section 13 Event" shall have the meaning set forth in Section
13(a) hereof.
(cc) "Spread" shall have the meaning set forth in Section ll(a)(iii)
hereof.
(dd) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company that an Acquiring Person has become such.
(ee) "Subsidiary" shall mean, with respect to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions are at the time beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
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<PAGE>
(ff) "Substitution Period" shall have the meaning set forth in Section
ll(a)(iii) hereof.
(gg) "Trading Day" shall have the meaning set forth in Section ll(d)
hereof.
(hh) "Triggering Event" shall mean a Section 11(a)(ii) event or a
Section 13 event as defined above.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
here of, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable upon ten (10) days' prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and in no event be liable for, the
acts or omissions of any such co-Rights Agent.
Section 3. Issue of Right Certificates. (a) Until the earlier of the
Close of Business on (i) the tenth Business Day after the Shares Acquisition
Date or (ii) the tenth Business Day, or such specified or unspecified later date
as may be determined by action of the Board of Directors of the Company, after
the date of the commencement of (as determined by reference to Rule 14d2(a), as
now in effect under the Exchange Act), or first public announcement of the
intent of any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, or any
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Person organized, appointed or established by the Company or such Subsidiary as
a fiduciary pursuant to the terms of any such employee benefit plan) to commence
(which intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer for an amount of Common Shares of the
Company which, together with the Common Shares already owned by such Person,
constitutes 10% or more of the outstanding Common Shares (including any such
date which is after the date of this Agreement and prior to the issuance of the
Rights; the earlier of such dates described in (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates for Common Shares shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. 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 Common Shares as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of Exhibit A hereto (a
"Right Certificate"), evidencing one Right for each Common Share so held,
subject to adjustment as provided herein and to the provisions of Section 14(a)
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<PAGE>
hereof. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Common Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Record Date at the address of such holder shown
on the records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the earlier of the Distribution Date or
the Expiration Date, the Rights will be evidenced by such certificates for
Common Shares registered in the names of the holders thereof (together with a
copy of the Summary of Rights). Until the earlier of the Distribution Date or
the Expiration Date, the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date, with or without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Certificates for Common Shares issued after the Record Date but
prior to the earlier of the Distribution Date or the Expiration Date or the
Final Expiration Date (as such terms are defined in Section 7 hereof) shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
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This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
The Eastern Company and BankBoston, N.A. dated as of July 22,
1998, and as it may be amended or superceded from time to time
(the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of The Eastern
Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Eastern Company will mail to the record
holder of the shares evidenced by this certificate a copy of
the Rights Agreement without charge after receipt of a written
request therefor. Under certain circumstances, Rights issued
to Acquiring Persons or any Affiliates or Associates thereof
(as defined in the Rights Agreement) 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 for 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.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
Section 4. Form of Right Certificates. (a) The Right Certificates (and
the forms of election to purchase shares, certificate and assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit A
hereto and may have such marks of identification or designation and such
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<PAGE>
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 11 and 22 hereof, the Right
Certificates, whenever issued, shall be dated as of the Record Date, and on
their face shall entitle the holders thereof to purchase such number of Common
Shares as shall be set forth therein at the price per share set forth therein
(the "Purchase Price"), but the number of such shares and the Purchase Price
shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to action 3(a) or Section 22
hereof that represents Rights beneficially owned by: (1) an Acquiring Person or
any Affiliate or Associate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
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Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding (whether or not in
writing) which has as a primary purpose or effect the avoidance of the
provisions of Section 7(e), Section ll(a)(ii) or of Section 13 hereof with
respect to the limitation of the Rights beneficially owned by an Acquiring
Person (or any Affiliate or Associate thereof), and any Right Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend modified as necessary to
apply to such Person:
The Rights represented by this Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement). Accordingly, this Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President, either manually or by
facsimile signature, and have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary of the Company, either manually
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<PAGE>
or by facsimile signature. The Right Certificates shall be manually
countersigned 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 Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
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Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Section 14 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the earlier of the Expiration Date or the Final Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Right Certificates, entitling the registered
holder to purchase a like number of Common Shares (or other securities, cash or
assets, as the case may be) as the Right Certificate surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged at the
office of the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate or Right Certificates
until the registered holder shall have completed and signed the certificate
contained in the form of assignment on the reverse side of such Right
Certificate or Right Certificates and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
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<PAGE>
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity of
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. (a) Subject to Section 7(e)hereof, the registered
holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certificate on the reverse side thereof duly executed,
to the Rights Agent at the office of the Rights Agent designated for such
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purpose, together with payment of the Purchase Price for each Common Share as to
which the Rights are exercised, at or prior to the earliest of (i) the Close of
Business on July 22, 2008 (the "Final Expiration Date"), (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof, (iii) the time at
which the Rights are exchanged as provided in Section 24, or (iv) the time at
which the Rights expire pursuant to Section 13(d) hereof (such earliest time
being herein referred to as the "Expiration Date").
(b) The Purchase Price for each Common Share pursuant to the exercise
of a Right shall initially be $120.00, shall be subject to adjustment from time
to time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Common Shares (or other shares,
securities, cash or other assets, as the case may be) to be purchased and an
amount equal to any applicable transfer tax in cash, or by certified check or
bank draft payable to the order of the Company, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) requisition from any transfer
agent of the Common Shares (or make available, if the Rights Agent is the
transfer agent) certificates for the number of Common Shares to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
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<PAGE>
such requests, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14, (iii) after receipt of such certificates, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Of Certificate. In the
event that the Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section ll(a) here of, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section ll(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or any Affiliate or Associate of
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an Acquiring Person, (ii) a transferee of any such Acquiring Person (or of any
such Affiliate or Associate) who becomes a transferee after such Acquiring
Person becomes such, or (iii) a transferee of any such Acquiring Person (or of
any such Affiliate or Associate) who becomes a transferee prior to or
concurrently with such Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration)from such
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), 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
shall have no liability to any holder of Right Certificates or any other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or any of their respective Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of any Right Certificate upon the occurrence of
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<PAGE>
any purported transfer or exercise as set forth in this Section ~ unless such
registered holder shall have (i) completed and signed the certificate following
the form of assignment or election to purchase set forth on the reverse side of
the Right Certificate surrendered for such assignment or exercise and (ii)
provided such additional evidence of the identity of the Beneficial owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company or shall, at the written request
of the Company, destroy such cancelled Right Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
-21-
Section 9. Reservation and Availability of Common Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Common Shares or any authorized and
issued Common Shares held in its treasury, the number of Common Shares that will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the Common Shares issuable upon the exercise of Rights
may be listed or traded on any national securities exchange, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed or admitted to
trading on such exchange upon official notice of issuance upon such exercise.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Common Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
(d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Common Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
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<PAGE>
issuance or delivery of certificates for the Common Shares in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates for Common
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
(e) The Company shall use its best efforts to (1) file, as soon as
practicable following the earliest date after the first occurrence of a Section
ll(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section ll(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as
amended (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration 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"
-23-
laws of the various states in connection with the exercisability of the Rights.
The Company may, acting by resolution of its Board of Directors, 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 and 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, as well as 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. Common Shares Record Date. Each person in whose name any
certificate for Common Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Common Shares transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Common Shares
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate, as such, shall not be
-24-
<PAGE>
entitled to any rights of a shareholder of the Company with respect to shares
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
meetings or other proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price Number of Shares or Number of
Rights. The Purchase Price, the number of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares into a smaller number of shares or (D) issue any shares of its
capital stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in Section 7(e) and this Section ll(a), the Purchase Price in effect at
the time of the record date for such dividend or of the effective date of such
-25-
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Common Shares transfer books of the Company were open, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both Section ll(a)(i) and Section ll(a)(ii), the
adjustment provided for in this Section ll(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section ll(a)(ii).
(ii) In the event (a "Section ll(a)(ii) Event") that any Person, alone
or together with its Affiliates and Associates, shall become an Acquiring
Person, unless the event causing such Person to become an Acquiring Person is a
Section 13 Event (as such term is defined in Section 13 hereof) or is an
acquisition of the Common Shares of the Company pursuant to a tender or exchange
offer for all outstanding Common Shares of the Company at a price and on terms
determined by at least a majority of the members of the Board of Directors of
the Company who are not Acquiring Persons or representatives, nominees,
Affiliates or Associates of Acquiring Persons (the "Outside Directors"), after
receiving advice from one or more investment banking firms, to be (A) at a price
-26-
<PAGE>
which is fair to shareholders (taking into account all factors which such
Outside Directors deem relevant, including, without limitation, prices which
could reasonably be achieved if the Company or its assets were to be sold on an
orderly basis designed to realize maximum value) and (B) otherwise in the best
interests of the Company and its shareholders (taking into account all factors
which such Outside Directors deem relevant, including, without limitation (1)
the long-term as well as the short-term interests of the Company and the
shareholders, including the possibility that those interests may be best served
by the continued independence of the Company, (2) the interests of the Company's
employees, customers, creditors and suppliers, and (3) community and societal
considerations including those of any community in which any office or other
facility of the Company is located) then proper provision shall be made so that
each holder of a Right, except as provided below and in Section 7(e) hereof,
shall thereafter have a right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of Common Shares
of the Company for which a Right was exercisable immediately prior to the first
occurrence of such Section ll(a)(ii) Event, whether or not such Right was then
exercisable, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price" for each
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Right and for all purposes of this Agreement) by 50% of the Current Market Price
per share of the Common Shares of the Company (determined pursuant to Section
ll(d)) on the date of the occurrence of such Section ll(a)(ii) Event (such
number of shares being hereinafter referred to as the "Adjustment Shares"). The
Company shall notify the Rights Agent in writing as to any Persons who are
deemed by the Company to be Acquiring Persons or Affiliates, Associates or
transferees (as described in subparagraphs (ii) and (iii) of Section 7(e)
hereof) of such Persons and shall identify any Rights pertaining thereto.
(iii) In lieu of issuing Common Shares of the Company in accordance
with Section ll(a)(ii) hereof, the Company, acting by resolution of its Board of
Directors, may, and, in the event that the number of Common Shares which are
authorized by the Company's Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit exercise in full of the Rights in accordance with
Section ll(a)(ii) hereof, the Company, acting by resolution of its Board of
Directors, shall(A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value"), over (2) the
Purchase Price attributable to each Right (such excess, the "Spread") and (B)
with respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
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<PAGE>
Common Shares or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board of
Directors of the Company has deemed to have the same value as Common Shares of
the Company (such shares or units of preferred stock hereinafter called "Common
Share Equivalents")), (4) debt securities of the Company,(5) other assets or (6)
any combination of the foregoing having an aggregate value equal to the Current
Value, where such aggregate value has been determined by action of the Board of
Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company which
has theretofore performed no services for the Company or any Subsidiary of the
Company in the past five years; provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence of a Section
ll(a)(ii) Event and (y) the first date that the right to redeem the Rights
pursuant to Section 23 hereof, as such date may be amended pursuant to Section
26 hereof, shall expire (the later of (x) and (y) being referred to herein as
the "Section ll(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Common Shares of the Company (to the extent
available) and then, if necessary, cash, which shares or cash have an aggregate
value equal to the Spread. If, after the occurrence of a Section ll(a)(ii)
-29-
Event, the number of Common Shares that are authorized by the Company's
Certificate of Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise or the Rights are not sufficient to permit
exercise in full of the Rights in accordance with Section ll(a)(ii) hereof and
the Company, acting by resolution of its Board of Directors shall determine in
good faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section ll(a)(ii) Trigger Date, in order that
the Company may seek shareholder approval for the authorization of such
additional shares (such period as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action is to be
taken pursuant to the terms of this Section ll(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek such
shareholder approval for the authorization of additional shares or to decide the
appropriate form of distribution to be made pursuant to the first sentence of
this Section ll(a)(iii) 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, as well as a public
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<PAGE>
announcement at such time as the suspension is no longer in effect. For purposes
of this Section ll(a)(iii), the value of the Common Shares of the Company shall
be the Current Market Price (as defined in Section ll(d)) per share of the
Common Shares of the Company on the date of the first occurrence of the Section
ll(a)(ii) Event, and the per share or per unit value of any Common Share
Equivalents shall be deemed to equal the Current Market Price per share of the
Common Shares of the Company on such date.
(b) In the event that the Company shall fix a record date for the
issuance of rights or warrants to all holders of Common Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Common Shares (or securities convertible into Common
Shares) at a price per Common Share (or having a conversion price per Common
Share, if a security convertible into Common Shares) less than the Current
Market Price per share of the Common Shares on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such Current Market Price and the denominator
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of which shall be the number of Common Shares outstanding on such record date
plus the number of additional Common Shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Common Shares owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular periodic cash dividend at a rate not in excess
of 125% of the rate of the last regular periodic cash dividend theretofore paid
or a dividend payable in Common Shares) or subscription rights or warrants
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<PAGE>
(excluding those referred to in Section ll(b)), 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 Current Market Price per share of the Common
Shares on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one Common Share and the denominator of which
shall be such Current Market Price per share of the Common Shares. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) For the purpose of any computation hereunder, the "Current Market
Price" per share of the Common Shares on any date shall be deemed to be the
average of the daily closing prices per share of such Common Shares for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date; Provided, however, that in the event that the Current Market Price
per share of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (i) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares or (11) any subdivision, combination or
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reclassification of such Common Shares, and prior to the expiration of 30
Trading Days after the ax-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "Current Market Price" shall be appropriately adjusted to
take into account the ex-dividend trading. The closing price for each day shall
be the last sale price, regular way, or, in the case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the American
Stock Exchange or, if the Common Shares are not listed or admitted to trading on
the American Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or admitted
to trading or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or, if on any such
date the Common Shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
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<PAGE>
making a market in the Common Shares selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the Common
Shares, the fair value of such shares on such date as determined in good faith
by the Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Common Shares are listed or admitted to trading is open for the transaction
of business or, if the Common Shares are not listed or admitted to trading on
any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are not authorized
or obligated by law or executive order to close. If the Common Shares are not
publicly held or not so listed or traded, Current Market Price shall mean the
fair value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least It in such price;
provided, however, that any adjustments which by reason of this Section ll(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 ten-thousandth of a share as the case may
be. Notwithstanding the first sentence of this Section ll(e), any adjustment
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required by this Section 11 shall be made no later than the earlier of (1) three
years from the date of the transaction which requires such adjustment or (ll)
the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section ll(a) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than Common
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
shares contained in Section ll(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to
the Common Shares shall apply on like terms to any such other shares; provided,
however, that the Company shall not be liable for its inability or failure to
reserve and keep available for issuance upon exercise of the Rights pursuant to
Section ll(a)(ii) a number of its Common Shares greater than the number then
authorized by the Certificate of Incorporation of the Company but not
outstanding or reserved for any other purpose.
(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 Common Shares
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<PAGE>
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section ll(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section ll(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares (calculated to
the nearest ten thousandth) obtained by (1) multiplying (x) the number of shares
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
(ll) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares issuable 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 Common Shares 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 adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
-37-
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section ll(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
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<PAGE>
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Common Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Common Shares
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Shares
at such adjusted Purchase Price.
(1) 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
the Common Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
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(m) Anything in this Section 11 to the contrary notwithstanding, the
Company, acting by resolution of its Board of Directors, shall be entitled to
make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any consolidation or
subdivision of the Common Shares, the issuance wholly for cash of any of the
Common Shares at less than the current market price, the issuance wholly for
cash of Common Shares or securities which by their terms are convertible into or
exchangeable for Common Shares, stock dividends or the issuance of rights,
options or warrants referred to hereinabove in this Section 11, hereafter made
by the Company to holders of its Common Shares shall not be taxable to such
shareholders.
(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 which complies with Section ll(o)
hereof), (it) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section ll(o) hereof) or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
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<PAGE>
Company and its Subsidiaries (taken as a whole) 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 ll(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 in effect
which 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 shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 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
eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares a
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copy of such certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate in accordance with Section 25 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to make such certificates or give
such notice shall not affect the validity or the force or effect of the
requirement for such adjustment. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate. Any adjustment to be made pursuant to
Sections 11 and 13 shall be effective as of the date of the event giving rise to
such adjustment.
Section 13. Consolidation. Merger or Sale or Transfer of Assets Cash
Flow or Earning Power. (a) In the event (a "Section 13 Event") that, following
the Shares Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section ll(o)
hereof) and the Company shall not be the surviving or continuing corporation of
such consolidation, combination or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section ll(o)
hereof) shall consolidate with the Company, or merge with and into the Company
and the Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for stock or other securities of any Person or cash or
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<PAGE>
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets, cash flow or earning power aggregating more than fifty
percent (50%) of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole and calculated on the basis of the Company's most
recent regularly prepared financial statement) to any other Person (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section ll(o) hereof), then, and in each such case (except
as provided in Section 13(d) hereof), proper provisions shall be made so that
(1) 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 then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable and freely
tradable Common Shares of the Principal Party (as hereinafter defined), not
subject to any liens, encumbrances, rights of call, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of Common Shares for
which a Right was exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section ll(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of Common Shares
for which a Right was exercisable immediately prior to the first occurrence of a
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Section ll(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) fifty percent
(50%) of the Current Market Price per share of the Common Shares of such
Principal Party (determined pursuant to Section ll(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ll) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights; and (v)
the provisions of Section ll(a)(ii) hereof shall be of no effect following the
first occurrence of any Section 13 Event. The Company shall not consummate any
such consolidation, merger, sale or transfer unless prior thereto the Company
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<PAGE>
and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a) hereof, the Person that is
the issuer of any securities into which Common Shares of the Company
are converted in such merger or consolidation, and if no securities are
so issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets, cash flow or
earning power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at any time and have not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall refer
to such other Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
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such Persons is the issuer of the Common Shares having the greatest aggregate
market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares which
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement containing the provisions set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any such Section 13 Event, the Principal Party:
(i) prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
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<PAGE>
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section ll(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary, this
Section 13 shall not be applicable to a transaction described in subparagraphs
(a) and (b) of Section 13(a) hereof if (1) such transaction is consummated with
a Person or Persons who acquired Common Shares of the Company pursuant to a
tender offer or exchange offer for all outstanding Common Shares of the Company
which complies with the provisions of Section ll(a)(ii)hereof (or a wholly owned
Subsidiary of any such Person or Persons), (ii) the price per Common Share of
the Company offered in such transaction is not less than the price per Common
Share of the Company paid to all holders of Common Shares of the Company whose
shares were purchased pursuant to such tender offer or exchange offer and (iii)
the form of consideration being offered to the remaining holders of Common
Shares of the Company pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
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(e) The Company covenants and agrees that it will not, after the Shares
Acquisition Date, engage in any Section 13 Event if at the time of or after such
event there are any charter or by-law provisions or any rights, warrants or
other instruments outstanding or any other action taken which would diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the American Stock Exchange or, if the Rights
are not listed or admitted to trading on the American Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
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<PAGE>
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares upon
exercise of the Rights or to distribute certificates which evidence fractional
shares. In lieu of fractional shares, the Company may pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Common Share. For purposes of this Section 14(b), the current
market value of a Common Share shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section ll(d) hereof) for the
Trading Day immediately prior to the date of such exercise.
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(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, except the rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
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<PAGE>
Section 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates duly completed and fully executed; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
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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 must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
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<PAGE>
Section 18. Concerning the Rights Agent. (a) The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
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Section 19. Merger or Consolidation or Chance of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the shareholder
services business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. The purchase of all or
substantially all of the Rights Agent's assets employed in the performance of
transfer agent activities shall be deemed a merger or consolidation for purposes
of this Section 19. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
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<PAGE>
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
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determination of the Current Market Price per Common Share) 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 certificate signed by a person reasonably believed by the Rights Agent to be
any one of the Chairman of the Board, the President, Vice President, or the
Treasurer or the Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
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<PAGE>
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
13 hereof or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate describing such adjustment,
delivered pursuant to Section 12); nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any Common Shares to be issued pursuant to his Agreement or any Right
Certificate or as to whether any Common Shares will, when so 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, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the persons reasonably believed by the Rights Agent to be the Chairman of
the Board, the President, a Vice President, the Treasurer or the Secretary of
the Company, and to apply to such officers for advice or instructions in
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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 a
person reasonably believed by the Rights Agent to be 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 (i) any action proposed
to be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Rights Agreement and (ii) the date on and/or after which
such action shall be taken or omitted, which date shall not be less than five
business days after the date the Company actually receives such application,
unless the Company shall consent in writing to an earlier date. If the
application contains in writing the matters described in items (i) and (ii) then
the Rights Agent shall not be liable for any action taken or omitted in
accordance with a proposal described in any such application on or after the
date specified therein unless, prior to taking or omitting any such action, the
Rights Agent has received written instructions in response to such application
specifying what action shall 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
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<PAGE>
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity, except it
may not act for an Acquiring Person in an investment banking capacity, or
otherwise assist an Acquiring Person in ways hostile to the Company, without the
consent of the Company.
(i) The Rights Agent may execute and exercise any of the rights and
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 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 Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
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thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares by registered, certified or express mail, and to the
holders of the Right 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 or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares by registered, certified or express
mail, and to the holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the 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 Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
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<PAGE>
business under the laws of the United States or of any state of the United
States, in good standing, which is authorized under such laws to exercise
corporate trust powers or provide shareholder services and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares, and mail a notice thereof in writing to the registered holder
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
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as may be approved by resolution of its Board of Directors to reflect any
adjustment or change in the Purchase Price per share and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (1) shall, with respect to Common Shares so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or upon
the exercise, conversion or exchange of securities hereinafter issued by the
Company, and (ii) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (x) no such Right Certificates shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Right Certificates would be issued, and (y) no such
Right Certificates 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. (a) The Board of Directors of the Company may,
by resolution, at its option, at any time prior to such time as any Person
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<PAGE>
becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The Board of Directors may, in its
discretion, at any time prior to such time as any Person becomes an Acquiring
Person, extend the time within which to redeem the then outstanding Rights prior
to their exercise. The redemption of the Rights by the Board of Directors may be
made effective at such time, on such basis and with such conditions as the Board
of Directors in its sole discretion may establish. The Company may, at its
option, pay the Redemption Price in cash, Common Shares (based on the Current
Market Price of the Common Shares at the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors of the Company.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
Within 10 days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then outstanding Rights by mailing such notice to all such
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holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase any Rights at any time
in any manner other than that specifically set forth in this Section 23 and
other than in connection with the repurchase of Common Shares of the Company
prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any wholly owned Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
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<PAGE>
any entity holding Common Shares as a fiduciary for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The 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 shall promptly mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
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Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
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 Shares
for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional shares, the Company shall pay to the registered holders
of the Right Certificates with regard to which such fractional shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this paragraph
(d), the current market value of a whole Common Share shall be the closing price
of a Common Share (as determined pursuant to the second sentence of Section
ll(d) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
Common Shares or to make any other distribution to the holders of Common Shares
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid) or (ii) to
offer to the holders of Common Shares rights or warrants to subscribe for or to
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<PAGE>
purchase any additional Common Shares or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Common Shares (other than a reclassification involving only the subdivision
of outstanding Common Shares), or (iv) to effect any merger, consolidation or
other combination into or with, or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of more than 50% of the assets or earning power or
assets representing 50% or more of the cash flow of the Company and its
Subsidiaries (taken as a whole) to, any other Person, or (vi) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to 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 the Common Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the Common Shares 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
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of such proposed action or the date of participation therein by the holders of
the Common Shares whichever shall be earlier.
(b) In case any of the events set forth in Section ll(a)(ii) or Section
13(a) of this Agreement shall occur, then, in any such case, the Company shall
as soon as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section ll(a)(ii) or Section 13(a) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
President
The Eastern Company
112 Bridge Street
P.O. Box 460
Naugatuck, Connecticut 06770
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
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<PAGE>
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royal Street
Canton, MA 02021
Attention: Client Administration
(The Eastern Company 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 Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may, by resolution
of its Board of Directors, and the Rights Agent shall, if the Company so
directs, from time to time supplement or amend this Agreement in any respect
whatsoever (including without limitation any extension of the period in which
the Rights may be redeemed) at any time prior to such time as any Person becomes
an Acquiring Person, without the approval of any holders of certificates
representing Common Shares or, after the Distribution Date, of Right
Certificates. From and after such time as any Person becomes an Acquiring
Person, the Company may, by resolution of its Board of Directors, and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of certificates representing Common Shares
or of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
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with any other provisions herein, or (iii) to change or supplement or make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Rights Agent may deem necessary or desirable, which shall not
adversely affect the interests of the holders of Right Certificates (other than
an Acquiring Person or an Affiliate or Associate of any such Person). Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Prior to the Share Acquisition Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders of Common Shares.
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 of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company (with, where specifically provided for
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<PAGE>
herein, the concurrence of the Outside Directors) shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to such Board of Directors (with, where specifically
provided for herein, the concurrence of the Outside Directors), or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the 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 of the Company (with, where specifically provided for herein, the
concurrence of the Outside Directors), the Outside Directors or the Company in
good faith, (x) shall be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Right Certificates and all other parties and
(y) shall not subject the Board of Directors of the Company or the Outside
Directors to any liability to the holders of the Rights and Right Certificates.
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 Right Certificates (and, prior to the Distribution
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Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
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 enforceable and the Board of Directors
of the Company 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, written notice of which shall be given by the Company to the Rights
Agent, and shall not expire until the Close of Business on the tenth Business
Day following the date of such determination by the Board of Directors. Without
limiting the foregoing, if any provision of this Agreement requiring that a
determination be made by the Board of Directors with the concurrence of a
majority of the Outside Directors or by the Outside Directors is held by a court
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<PAGE>
of competent jurisdiction or other authority to be invalid, void, or
unenforceable, such determination shall then be made by the Board of Directors
in accordance with applicable law and the Company's certificate of incorporation
and by-laws.
Section 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Connecticut and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
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.
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ATTEST: THE EASTERN COMPANY
By /s/Donald E. Whitmore, Jr. By /s/Leonard F. Leganza
--------------------------- ----------------------------
Donald E. Whitmore, Jr. Leonard F. Leganza
Secretary President and Chief
Executive Officer
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ATTEST: BANKBOSTON, N.A.
By /s/William Gustafson By /s/Katherine Anderson
--------------------- -----------------------
Name: William Gustafson Name: Katherine Anderson
Title: Account Manager Title: Administration Manager
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<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto __________________
______________________________________________________________ (Please print
name and address of transferee) this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
Attorney, to transfer the within Right Certificate on the books of the within
named Company, with full power of substitution.
Dated: ____________, 19__
----------------------------
Signature
Signature Guaranteed:
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ]are[ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined pursuant to the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became in Acquiring Person or an
Affiliate or Associate thereof.
Dated: ______ ___, 19__
------------------------------
Signature
Signature Guaranteed:
NOTICE
In the event the certification set forth above in the Form of
Assignment or Election is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Right Certificates issued in exchange for this Right Certificate.
<PAGE>
EXHIBIT A
[Form of Right Certificate]
Certificate No. R- _______Rights
NOT EXERCISABLE AFTER JULY 22, 2008 OR EARLIER IF THE BOARD OF DIRECTORS ORDERS
THE REDEMPTION OR EXCHANGE OF THE RIGHTS. THE RIGHTS ARE SUBJECT TO REDEMPTION
AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE 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 OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
Right Certificate
THE EASTERN COMPANY
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 July 22, 1998 (the "Rights Agreement"), between The Eastern Company,
a Connecticut corporation (the "Company"), and BankBoston, N.A., a national
banking association (the "Rights Agent"), to purchase from
- ---------------------
* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
-1-
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 time) on July 22, 2008, at
the office of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one fully paid nonassessable share of Common Stock, no par value
(the "Common Shares"), of the Company, at a purchase price of $120.00 per Common
Share (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase and the Certificate contained
therein duly executed. The number of Rights evidenced by this Right Certificate
(and the number of Common Shares which may be purchased upon exercise thereof)
set forth above, and the Purchase Price per Common Share set forth above, are
the number and Purchase Price as of August 7, 1998, based on the Common Shares
as constituted at such date.
From and after the first occurrence of a Section ll(a)(ii) Event (as
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person (or of any Associate or Affiliate
thereof) who becomes a transferee after such Acquiring Person (or any Associate
or Affiliate thereof) becomes such or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of such Acquiring Person (or of
any Associate or Affiliate thereof) who becomes a transferee prior to or
concurrently with such Acquiring Person becoming such, such Rights shall become
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<PAGE>
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section ll(a)(ii) Event.
The Rights evidenced by this Right 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 Common Shares or the number and kind of other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Section ll(a)(ii) Events and Section 13 Events (as defined in the
Rights Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
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the Company and the above mentioned office of the Rights Agent and are also
available upon written request to the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, with
the Form of Assignment and Certificate set forth on the reverse side duly
executed, may be exchanged for another Right Certificate or Right Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Common Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate may be redeemed by the Company at a redemption price
of $.01 per Right (payable, at the Company's option, in cash, Common Shares or
any other form of consideration deemed appropriate by the Board of Directors) at
any time prior to the time a person becomes an Acquiring Person (as defined in
the Rights Agreement). Subject to the provisions of the Rights Agreement, the
rights evidenced by this Right Certificate may be exchanged in whole or part for
Common Shares.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
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<PAGE>
made, as provided in the Rights Agreement.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company in any respect up until the time a person
becomes an Acquiring Person and thereafter in certain respects which do not
adversely affect the interests of holders of Right Certificates (other than an
Acquiring Person or the Affiliates or Associates thereof).
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Shares 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
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
-5-
Company and its corporate seal. Dated as of , 19 .
ATTEST: THE EASTERN COMPANY
__________________________ By___________________________
Secretary Title
Countersigned:
BANKBOSTON, N.A.
By_______________________
Authorized Signature
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<PAGE>
EXHIBIT B
THE EASTERN COMPANY
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
On July 22, 1998, the Board of Directors of The Eastern
Company (the "Company") declared a dividend distribution of one common share
purchase right (a "Right") for each outstanding share of Common Stock, no par
value (the "Common Shares"), of the Company. The following is a summary of the
terms of the Rights.
Each Right entitles the registered holder to purchase from the
Company one Common Share of the Company at a price of $120.00 per share (the
"Purchase Prices), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, as of July 22, 1998 (the "Rights
Agreement"), between the Company and BankBoston, N.A., as Rights Agent (the
"Rights Agent").
Initially, the Rights will be attached to all Common Share
certificates representing shares then outstanding, and no separate certificates
representing the Rights ("Right Certificates") will be distributed. The Rights
will separate from the Common Shares and a "Distribution Date" will occur upon
the earlier to occur of (i) ten days following the time (the "Shares Acquisition
Date") of a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") acquired, or obtained the right to
acquire, beneficial ownership of ten percent (10%) or more of the outstanding
Common Shares of the Company and (ii) ten business days following the
commencement or announcement of an intention to make a tender offer or exchange
offer which, if successful, would cause the bidder to own 10% or more of the
outstanding Common Shares.
The Rights Agreement provides that, until the Distribution
Date, (i) the Rights will be transferred with and only with the Common Shares,
(ii) new Common Share certificates issued after August 7, 1998, upon transfer or
new issuance of the Common Shares, will contain a notation incorporating the
Rights Agreement by reference and (iii) the surrender for transfer of any of the
Common Share certificates outstanding will also constitute the transfer of the
Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate Right Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights. Except as otherwise determined by the Board of
Directors, only Common Shares issued prior to the Distribution Date will be
issued with Rights.
-1-
<PAGE>
The Rights are not exercisable until the Distribution Date.
The Rights will expire on July 22, 2008, unless earlier redeemed by the Company
as described below.
In the event that, after the Shares Acquisition Date, the
Company is acquired in a merger or other business combination transaction
(except transactions described in clause (i) of the next succeeding paragraph or
certain mergers which follow an offer described in clause (ii) of the next
succeeding paragraph) or 50% or more of its assets, cash flow or earning power
is sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value (as defined in the Rights Agreement) of two times the Purchase Price of
the Right.
If at any time following the Distribution Date, (i) the
Company is the surviving corporation in a merger and its Common Shares are not
changed or exchanged, or (ii) an Acquiring Person has acquired beneficial
ownership of 10% or more of the Common Shares (except pursuant to a tender offer
for all outstanding Common Shares determined to be at a fair price and otherwise
in the best interests of the Company and its shareholders by a majority of the
Outside Directors), proper provision shall be made so that each holder of a
Right (other than the Acquiring Person) will thereafter have the right to
receive upon exercise that number of Common Shares (or, in certain
circumstances, cash, a reduction in the Purchase Price, Common Shares, other
equity securities of the Company, debt securities of the Company, other property
or a combination thereof) having a market value (as defined in the Rights
Agreement) of two times the Purchase Price of the Right. However, Rights are not
exercisable following the occurrence of the events set forth above until such
time as the Rights are no longer redeemable by the Company as set forth below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or an affiliate, associate or transferee thereof) will be null
and void.
The Purchase Price payable, and the number of Common Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (1) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares, (ii) upon the grant to holders of Common Shares of certain rights or
warrants to subscribe for Common Shares or convertible securities at less than
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<PAGE>
the current market price of Common Shares or (iii) upon the distribution to
holders of Common Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends or dividends payable in Common Shares) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Common Shares will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the Common Shares on the last trading date prior to the date of exercise.
At any time prior to the time a person becomes an Acquiring
Person (as defined in the Rights Agreement), the Board of Directors may redeem
the Rights in whole, but not in part, at a price of $.O1 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 Redemption Price.
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such Person of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights beneficially owned by such Person which have become void), in whole
or part, at an exchange ratio of one Common Share per Right (subject to
adjustment).
Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, other than rights resulting from
such holder's ownership of Common Shares, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Shares (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors prior to the time a person becomes an Acquiring
Person. After such time, the provisions of the Rights Agreement may be amended
by the Board of Directors in order to cure any ambiguity, to correct or
supplement defective or inconsistent provisions, or to make changes which do not
adversely affect the interests of the holders of Rights (excluding the interests
of any Acquiring Person).
A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
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EXHIBIT 2
July 22, 1998
Dear Shareholder:
The Board of Directors today approved a new Shareholder Rights Plan. The purpose
of the plan is to assure that all shareholders receive fair and equal treatment
if efforts are ever made to gain control of The Eastern Company.
The attached release contains more details about the 1998 Shareholders Rights
Plan and the redemption of existing Rights granted under the 1991 Program.
A copy of the 1998 Rights Agreement is available free of charge from the
company.
Sincerely,
/s/ Leonard F. Leganza
Leonard F. Leganza
<PAGE>
FOR IMMEDIATE RELEASE
Wednesday, July 22, 1998
THE EASTERN COMPANY ADOPTS NEW SHAREHOLDER RIGHTS
PLAN AND REDEEMS EXISTING RIGHTS
Naugatuck, CT - The Eastern Company (AMEX - EML) announced the adoption today of
a new Shareholder Rights Plan and the redemption of the Company's existing
Rights.
Mr. Leonard F. Leganza, President and CEO of The Eastern Company, stated, "The
new Rights are intended to assure that our shareholders will receive fair and
equal treatment if efforts are ever made to gain control of The Eastern Company
without paying a fair price to all of our shareholders. The Plan provides for a
$120.00 exercise price. We believe this price reflects the significant
improvement in sales and earnings that have taken place in 1997 and to date in
1998, as well as management's and the Board's continued confidence in the
Company's future growth." He added, "The new Rights are not being issued in
response to any known effort to acquire The Eastern Company."
The Rights will be exercisable only if a person or group acquires 10% or more of
the Company's common stock or announces a tender offer, which if successful,
would result in a person or group owning 10% or more of the common stock. If a
person or group acquires 10% or more of the Company's common stock, each Right
will entitle its holder (other than the acquiring person or group) to purchase,
at the then current market price, a number of shares of the Company's common
stock having an aggregate market value of twice the exercise price of the
Rights.
Prior to any acquisition by a person or group of beneficial ownership of 10% or
more of the Company's common stock, the Rights are redeemable for one cent
($0.01) per Right at the option of the Board of Directors.
If the Company is acquired in a merger or other business combination, each Right
will entitle its holder to purchase, at the then current market price, a number
of the acquiring company's common shares having a market value of twice the
exercise price of the Rights.
The new Rights will be distributed as a dividend on August 21, 1998 to
shareholders of record on August 7, 1998. No separate Rights certificates will
be issued on August 21, 1998 because the Rights will initially trade together
with the Company's common stock and will be represented by the Company's common
stock certificates.
The Eastern Company will make a payment of one cent ($0.01) per share for the
redemption of each original Right granted under the 1991 program (which the
Company intends to treat as a dividend for tax purposes) on August 21, 1998 to
common shareholders of record on August 7, 1998.
The Eastern Company manufactures and markets a broad range of locks, latches,
fasteners and other security hardware that meets diverse security and safety
needs of industrial and commercial customers. Headquartered in Naugatuck, CT,
the company has seven manufacturing locations in the U.S.A., Canada, Mexico and
the Pacific Rim.
It has paid consecutive quarterly dividends since 1940.
Forward-Looking Statements:
Information in this news release contains statements which reflect the company's
current expectations regarding its future operating performance and
achievements. Actual results may differ due to the many economic uncertainties
that affect the Company's business environment. Further information about the
potential factors which could affect the Company's financial result are included
in the Company's reports and filings with the Securities and Exchange
Commission. The Company is not obligated to update or revise the aforementioned
statements for those new developments.
