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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
August 30, 1996
Quest Medical, Inc.
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(Exact name of registrant as specified in its charter)
Texas 0-10521 75-1646002
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(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
201 Allentown Parkway, Allen TX 75002
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 390-9800
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ITEM 5. OTHER EVENTS
On August 26, 1996, the Registrant's Board of Directors voted to
redeem the rights outstanding under the Rights Agreement between the Registrant
and KeyCorp Shareholder Services, Inc. dated October 12, 1989 (as amended), and
adopted a new Rights Agreement pursuant to which Rights to purchase shares of
the Registrant's Common Stock will be distributed as a dividend, one Right per
share, to record owners of the registrant's Common Stock as of the close of
business on September 12, 1996. The Rights Agreement was not adopted in
response to any known offers for the Registrant. The Registrant's press
release and letter to shareholders announcing the Board's action, each dated
August 30, 1996, are attached hereto as Exhibits 20.1 and 20.2, respectively,
and are incorporated in their entirety herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
The following documents are filed as exhibits to this report:
4.1 Rights Agreement between Quest Medical Inc. and
KeyCorp Shareholder Services, Inc. as Rights Agent.
20.1 Press release dated August 30, 1996.
20.2 Letter to Shareholders of Quest Medical, Inc. dated
August 30, 1996, including attached Summary of Rights
to Purchase Shares of Quest Medical, Inc. Common
Stock.
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SIGNATURES
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 hereto duly authorized.
Date: September 3, 1996
QUEST MEDICAL, INC.
By: /s/ F. Robert Merrill III
---------------------------------
F. Robert Merrill III
Senior Vice President Finance/
Chief Financial Officer and Treasurer
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INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
4.1 Rights Agreement between Quest Medical Inc. and
KeyCorp Shareholder Services, Inc. as Rights Agent.
20.1 Press release dated August 30, 1996.
20.2 Letter to Shareholders of Quest Medical, Inc. dated
August 30, 1996, including attached Summary of Rights
to Purchase Shares of Quest Medical, Inc. Common
Stock.
</TABLE>
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EXHIBIT 4.1
QUEST MEDICAL, INC.
and
KeyCorp Shareholder Services, Inc.,
as Rights Agent
RIGHTS AGREEMENT
August 30, 1996
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Table of Contents
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. Certain Definitions ................................................... 1
2. Appointment of Rights Agent ........................................... 5
3. Issue of Rights Certificates .......................................... 5
4. Form of Rights Certificates ........................................... 6
5. Countersignature and Registration ..................................... 7
6. Transfer, Split Up, Combination, and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost, or
Stolen Rights Certificates ............................................ 7
7. Exercise of Rights; Purchase Price;
Expiration Date of Rights ............................................. 8
8. Cancellation and Destruction of
Rights Certificates ................................................... 9
9. Reservation and Availability of
Capital Stock ......................................................... 10
10. Common Stock Record Date .............................................. 12
11. Adjustment of Purchase Price, Number, and Kind of Shares or
Number of Rights ...................................................... 12
12. Certificate of Adjusted Purchase Price or Number of Shares ............ 19
13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power.. 19
14. Fractional Rights and Fractional Shares ............................... 22
15. Rights of Action ...................................................... 23
16. Agreement of Rights Holders ........................................... 23
17. Rights Certificate Holder Not Deemed a Stockholder .................... 24
18. Concerning the Rights Agent ........................................... 24
</TABLE>
i
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<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
19. Merger or Consolidation or Change of Name of Rights Agent ............. 24
20. Duties of Rights Agent ................................................ 25
21. Change of Rights Agent ................................................ 27
22. Issuance of New Rights Certificates ................................... 28
23. Redemption and Termination ............................................ 28
24. Exchange .............................................................. 29
25. Notice of Certain Events .............................................. 30
26. Notices ............................................................... 31
27. Supplements and Amendments ............................................ 31
28. Successors ............................................................ 32
29. Determinations and Actions by the Board of Directors, Etc. ............ 32
30. Benefits of this Agreement ............................................ 32
31 Severability .......................................................... 33
32. Governing Law ......................................................... 33
33. Counterparts .......................................................... 33
34. Interpretation ........................................................ 33
</TABLE>
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
ii
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of August 30, 1996 (the "Agreement"), between
Quest Medical, Inc., a Texas corporation (the "Company"), and KeyCorp
Shareholder Services, Inc., (the "Rights Agent").
BACKGROUND
On August 29, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right for each share of common stock, par value $.05 per share, of the Company
(the "Common Stock") outstanding at the Close of Business on September 12, 1996
(the "Record Date"), and has authorized the issuance of one Right (as such
number may be adjusted pursuant to the provisions of SECTION 11(P)) for each
share of Common Stock of the Company issued between the Record Date (whether
originally issued or delivered from the Company's treasury) and the
Distribution Date, each Right initially representing the right to purchase one
share of Common Stock of the Company upon the terms and subject to the
conditions set forth below (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth in this Agreement, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Acquiring Person" means any Person that, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding, but does not
include (i) the Company; (ii) any Subsidiary of the Company; (iii) any
employee benefit plan of the Company or of any Subsidiary of the Company;
(iv) any Person organized, appointed, or established by the Company for
or pursuant to the terms of any such plan; (v) any person that becomes an
Acquiring Person pursuant to a Permitted Transaction; (vi) any Person
that has become an Acquiring Person inadvertently and, within five
Business Days of being requested by the Company to advise it regarding
the same, certifies to the Company that such Person acquired beneficial
ownership of shares of Common Stock in excess of 14.9% inadvertently or
without knowledge of the terms of the Rights and such certification is
accepted as true by a Requisite Majority acting in good faith, and such
Person divests as promptly as practicable a sufficient amount of Common
Stock so that such Person would no longer hold in excess of 14.9% of the
Common Stock then outstanding; and (vii) any Person that becomes an
Acquiring Person solely as a result of a reduction in the number of
outstanding shares of Common Stock in a transaction that is approved by a
Requisite
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Majority, provided that such Person will immediately be an Acquiring
Person in the event such Person thereafter acquires any additional shares
of Common Stock (other than as a result of a stock split or stock
dividend) while the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding.
(c) "Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act and in effect on the date of this Agreement.
(d) A Person will be deemed the "Beneficial Owner" of, and will be
deemed to "beneficially own," any securities that:
(i) such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time or upon the occurrence of certain events) pursuant
to any agreement, arrangement, or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a Person will not be deemed the "Beneficial Owner"
of, or to "beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a
Distribution Date, or (C) securities issuable upon exercise of
Rights, which 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 (the "Original Rights") or pursuant
to SECTION 11(I) in connection with an adjustment made with respect
to any Original Rights;
(ii) 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 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 will not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this SECTION 1(C)(II) as a
result of an agreement, arrangement, or understanding to vote such
security if such agreement, arrangement, or understanding: (1)
arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (2) is not also then
reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such Person) with
which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement, or
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understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso in SECTION 1(c)(II)), or disposing of any
voting securities of the Company;
provided, however, that nothing in this SECTION 1(c) will 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 bona fide firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
(e) "Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of Texas are authorized or
obligated by law or executive order to close.
(f) "Close of Business" on any given date will mean 5:00 p.m.,
Dallas, Texas time, on such date; provided, however, that if such date is
not a Business Day it will mean 5:00 p.m., Dallas, Texas time, on the
next succeeding Business Day.
(g) "Common Stock" means the common stock, par value $.05 per share,
of the Company, except that "Common Stock" when used with reference to
any Person other than the Company will mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) "Continuing Director" means (i) any member of the Board of
Directors of the Company who (i) is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person and (ii) was either a
member of the Board of Directors of the Company on the date of this
Agreement or who subsequently became a director of the Company and whose
initial election or initial nomination for election was approved by a
majority of the Continuing Directors then on the Board of Directors of
the Company.
(i) "Distribution Date" means the Close of Business on the tenth
Business Day after the earlier to occur of (i) the Stock Acquisition Date
or (ii) the date any Person commences or publicly announces an intention
to commence a tender offer or exchange offer for the Common Stock which
would result in, upon the consummation of such offer, the Person making
such offer, together with all of its Affiliates and Associates, being the
Beneficial Owner of 20% or more of the Common Stock then outstanding
(including any such date that is after the date of this Agreement and
prior to the issuance of the Rights); provided, however, that if the
tender offer or exchange offer that gave rise to the Distribution Date is
cancelled, terminated or otherwise withdrawn within ten Business Days of
its announcement, such offer shall be deemed never to have been made and
no Distribution Date shall occur with respect thereto.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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(k) "NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotation System.
(l) "Permitted Transaction" means a stock acquisition or a tender or
exchange offer pursuant to a definitive agreement by which a Person (who
is not at the time an Acquiring Person) would become an Acquiring Person
and which has been approved by a Requisite Majority prior to the
execution of the definitive agreement providing for the acquisition or
the public announcement of the offer, as the case may be.
(m) "Person" means any individual, firm, corporation, partnership,
limited liability company or other public or private entity.
(n) "Redemption Price" with respect to each Right means $.01, as
such amount may from time to time be adjusted in accordance with SECTION
11. All references herein to the Redemption Price means the Redemption
Price as in effect at the time in question.
(o) "Requisite Majority" means, at any time, the affirmative vote of
a majority of the Continuing Directors then in office.
(p) "Rights Shares" means the shares of Common Stock issuable or
issued upon the exercise of the Rights.
(q) "Section 11(a)(ii) Event" means any event described in SECTION
11(a)(II).
(r) "Section 13 Event" means any event described in clauses (i),
(ii), or (iii) of SECTION 13(a).
(s) "Stock Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, will include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become an Acquiring Person.
(t) "Subsidiary" means, with reference to any Person, any entity of
which an amount of voting securities sufficient to elect at least a
majority of the directors or similar Persons of such entity is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(u) "Trading Day" means a day on which the principal national
securities exchange or quotation system on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business Day.
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(v) "Triggering Event" means any Section 11(a)(ii) Event or any
Section 13 Event.
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
(which, in accordance with SECTION 3, prior to the Distribution Date are also
the holders of the Common Stock) in accordance with the terms and conditions of
this Agreement, 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.
Section 3. Issue of Rights Certificates.
(a) Prior to the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of this SECTION 3(B)) by the certificates for
the Common Stock registered in the names of the holders of the Common
Stock (which certificates for Common Stock will be deemed also to be
certificates for Rights) and not by separate certificates, and (ii) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent
will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of EXHIBIT A (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided in this Agreement. In the event
that an adjustment in the number of Rights per share of Common Stock has
been made pursuant to SECTION 11(p), at the time of distribution of the
Rights Certificates, the Company will make the necessary and appropriate
rounding adjustments (in accordance with SECTION 14(a)) so that Rights
Certificates representing only whole numbers of Rights are distributed
and cash is paid in lieu of any fractional Rights. As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As soon as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form of
EXHIBIT B, by first-class, postage prepaid mail, to each record holder of
the Common Stock 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 the Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such
certificates for the Common Stock and the registered holders of the
Common Stock will also be the registered holders of the associated
Rights. Until the earlier of the Distribution Date or the Expiration
Date (as defined in SECTION 7), the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been
issued will also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights will be issued in respect of all shares of Common Stock
that are issued (whether originally issued or from the Company's
treasury) after the Record Date
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but prior to the earlier of the Distribution Date or the Expiration Date.
Certificates representing such shares of Common Stock will also be
deemed to be certificates for Rights, and will bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER TO
CERTAIN RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN
QUEST MEDICAL, INC. (THE "COMPANY") AND KeyCorp Shareholder
Services, Inc. (THE "RIGHTS AGENT") DATED AS OF AUGUST 30,
1996 (AS AMENDED FROM TIME TO TIME, THE "RIGHTS AGREEMENT"),
THE TERMS OF WHICH ARE HEREBY INCORPORATED IN THIS
CERTIFICATE BY REFERENCE AND A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICES OF THE 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 COMPANY
WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING,
WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO IS,
WAS, OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.
With respect to the shares of Common Stock issued after the Record
Date, until the earlier of (i) the Distribution Date or (ii) the
Expiration Date, the Rights associated with the Common Stock represented
by such certificates will be evidenced by such certificates alone and
registered holders of Common Stock will also be the registered holders of
the associated Rights, and the transfer of any of such certificates will
also constitute the transfer of the Rights associated with the Common
Stock represented by such certificates.
Section 4. Form of Rights Certificates.
The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse of the rights certificates)
will each be substantially in the form set forth in EXHIBIT A and may
have such marks of identification or designation and such legends,
summaries, or endorsements 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
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pursuant thereto or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of SECTION 11 and
SECTION 22, the Rights Certificates, whenever distributed, will be dated
as of the Record Date and on their face will entitle the holders of such
Rights Certificates to purchase such number of shares of Common Stock as
is set forth in such Rights Certificates at the price set forth in such
Rights Certificates (such exercise price per share, the "Purchase
Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price will be subject to
adjustment as provided in this Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates will be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its
Chief Operating Officer, its President, or any Vice President, either
manually or by facsimile signature, will have affixed thereto the
Company's seal or a facsimile thereof, and will be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates will be countersigned by
the Rights Agent, either manually or by facsimile signature and will not
be valid for any purpose unless so countersigned. In case any officer
of the Company who has signed any of the Rights Certificates ceases to be
such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the
Person who signed such Rights Certificates had not ceased to be such
officer of the Company, and any Rights Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the
execution of such Rights Certificate, is a proper officer of the Company
to sign such Rights 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 principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued under this Agreement. Such books will show the names and
addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on the face of the Rights Certificates, and
the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination, and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost, or Stolen Rights Certificates.
(a) Subject to the provisions of SECTION 7(E) and SECTION 14, at any
time after the Distribution Date, and at or prior to the Expiration Date,
any Rights Certificate or Certificates may be transferred, split up,
combined, or exchanged for another Rights Certificate or Rights
Certificates, entitling the registered holder to purchase a like number
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of Rights Shares (or, following a Triggering Event, preferred stock,
other securities, cash, or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine, or exchange
any Rights Certificate or Rights Certificates will make such request in
writing delivered to the Rights Agent, and will surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined,
or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company
will be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered
holder has completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and has
provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the
Company requests in good faith. Thereupon, the Rights Agent will,
subject to SECTION 4, SECTION 7(E) and SECTION 14, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may
require payment 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 any Rights Certificate.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction, or
mutilation of a Rights Certificate, and, in case of loss, theft, or
destruction, of indemnity or security satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed, or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to SECTION 7(E), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as
otherwise provided in this Agreement including, without limitation, the
restrictions on exercisability set forth in SECTION 9(C), SECTION
11(A)(III), SECTION 23(A) and SECTION 24) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse
side of the Rights Certificate duly executed, to the Rights Agent at the
principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for each
share of Common Stock (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the Close of Business on August 30, 2006,
(the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in SECTION 23 or (iii) the time at which such rights
are exchanged as provided in SECTION 24 (the earlier of the times, the
"Expiration Date")).
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(b) The Purchase Price for each share of Common Stock pursuant to
the exercise of a Right will initially be $30.00, subject to adjustment
from time to time as provided in SECTION 11, and SECTION 13(a). The
Purchase Price will be payable in accordance with SECTION 7(c).
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment of the Purchase Price for the shares of
Common Stock (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, the Rights Agent will, subject to SECTION 20(k), promptly
(i) (A) requisition from any transfer agent of the shares of Common Stock
(or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of shares of Common Stock to be
purchased (the Company hereby irrevocably authorizing its transfer agent
to comply with all such requests) or (B) if the Company has elected to
deposit the shares of Common Stock with a depository agent, requisition
from the depository agent depository receipts representing such number of
shares of Common Stock as are to be purchased (in which case certificates
for the shares of Common Stock represented by such receipts will be
deposited by the transfer agent with the depository agent) and the
Company will direct the depository agent to comply with such request;
(ii) requisition from the Company the amount of cash, if any, to be paid
in lieu of fractional shares in accordance with SECTION 14; (iii) after
receipt of such certificates or depository receipts, cause such
certificates or depository receipts to be delivered to or upon the order
of the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder; and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to SECTION
11(a)(III)) will be made in cash or by certified bank check or bank draft
payable to the order of the Company. In the event that the Company is
obligated to issue other securities (including Common Stock) of the
Company, pay cash, or distribute other property pursuant to SECTION
11(a), the Company will make all arrangements necessary so that such
other securities, cash, or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the
right to require prior to the occurrence of a Triggering Event that, upon
any exercise of Rights, a number of Rights be exercised so that only
whole shares of Common Stock would be issued.
(d) If the registered holder of any Rights Certificate exercises
less than all the Rights evidenced by such certificate, a new Rights
Certificate evidencing the unexercised Rights will be issued by the
Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as
may be designated by such holder, subject to the provisions of SECTION
14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by any Person referred to in CLAUSES (I) through (III)
below will become null and void
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without any further action and no holder of such Rights will have any
rights whatsoever with respect to such Rights, under any provision of
this Agreement or otherwise: (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee from an Acquiring
Person (or from any Associate or Affiliate of an Acquiring Person) that
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee from an Acquiring Person (or of any such Associate or
Affiliate) that 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 Rights
or (B) a transfer that the Board of Directors of the Company has
determined is part of an agreement, plan, arrangement, or understanding
that has as a substantial purpose or effect the avoidance of this SECTION
7(E). The Company will use reasonable efforts to insure that the
provisions of this SECTION 7(E) and SECTION 4(B) are complied with, but
will have no liability under this Agreement to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person, or any of its
Affiliates, Associates, or transferees.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company will be obligated to undertake
any action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this SECTION 7 unless such registered
holder has (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company
requests in good faith.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange will, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, will be cancelled by it, and no Rights
Certificates will be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company will deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent will so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will
deliver all cancelled Rights Certificates to the Company, or will, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case will deliver a certificate of destruction to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company will use its best efforts to reserve and keep
available out of its authorized and unissued shares of Common Stock
(and/or or other securities) or its authorized and issued shares of
Common Stock (and/or or other securities) held in its
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<PAGE> 14
treasury, the number of shares of Common Stock (and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Common Stock (and, following the
occurrence of a Triggering Event, Common Stock or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange or automated quotation system, the
Company will use its reasonable efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange or automated quotation system upon
official notice of issuance upon such exercise.
(c) The Company will use its best efforts to (i) file, as soon as
practicable following the first occurrence of a Section 11(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 11(A)(III),
a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights or issued in an exchange pursuant
to SECTION 24 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 Expiration Date. The Company will also
take such action as may be appropriate under, or to ensure compliance
with, the applicable state securities laws in connection with the
exercisability of the Rights. The Company may temporarily suspend, for
up to 90 days after the date described in CLAUSE (I) of this SECTION
9(C), 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 will 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 no longer remains in
effect. In addition, if the Company determines that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights will not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction has not been obtained, the exercise of such Rights is not
permitted under applicable law, or a registration statement has not been
declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock
(and/or other securities) delivered upon exercise of Rights will, at the
time of delivery of the certificates for such shares upon payment of the
Purchase Price, be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and any Common Stock or
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other certificates issued upon the exercise of Rights. The Company will
not, however, be required to pay any transfer tax that may be payable in
respect of any transfer or delivery of Rights Certificates to a Person
other than, or the issuance or delivery of Common Stock (or other
securities, as the case may be) in respect of a name other than that of
the registered holder of the Rights Certificates or to issue or deliver
any Common Stock or other certificates in a name other than that of the
registered holder until such tax has been paid (any such tax being
payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Common Stock Record Date. Each Person in whose name any
Rights Share certificate is issued will, for all purposes, be deemed to have
become the record holder of such Rights Shares represented thereby, and such
certificate will be dated, on the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Common Stock (other
securities, as the case may be) transfer books of the Company are closed, such
Person will be deemed to have become the record holder of the Rights Shares on,
and such certificate will be dated, the next succeeding Business Day on which
the Common Stock (or other securities, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the Rights Certificate holders will not be entitled to any stockholder rights
with respect to Rights Shares, including, without limitation, the right to
vote, to receive dividends or other distributions, or to exercise any
preemptive rights, and will not be entitled to receive any notice of any
proceedings of the Company, except as provided in this Agreement.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares, or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this SECTION 11.
(a) (i) In the event the Company at any time after the date of this
Agreement (A) declares a dividend on the Common Stock payable in
shares of Common Stock, (B) subdivides the outstanding Common
Stock, (C) combines the outstanding Common Stock into a smaller
number of shares, or (D) issues any shares of its capital stock in
a reclassification of the Common Stock (including, without
limitation, 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 this
SECTION 11(a) and SECTION 7(e), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the
number and kind of shares of Common Stock or capital stock, as the
case may be, issuable on such date, will be proportionately
adjusted so that the holder of any Right exercised after such time
will be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of Common
Stock or capital stock, as the case may be, that, if such Right had
been exercised
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<PAGE> 16
immediately prior to such date and at a time when the Common Stock
transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. If
an event occurs that would require an adjustment under both this
SECTION 11(a)(I) and SECTION 11(a)(II), the adjustment provided for
in this SECTION 11(a)(I) will be in addition to, and will be made
prior to, any adjustment required pursuant to SECTION 11(a)(II).
(ii) In the event that any Person, alone or together with its
Affiliates and Associates, at any time after the Rights Dividend
Declaration Date, becomes an Acquiring Person, then, proper
provision will be made so that each Right holder (except as
provided in SECTION 7(e)) will thereafter have the right to
receive, upon exercise of such Right at the then current Purchase
Price in accordance with the terms of this Agreement, such number
of Rights Shares equal to the result obtained by (x) multiplying
the then current Purchase Price by the then number of Rights Shares
for which a Right is then exercisable and (y) dividing that product
by 50% of the Current Market Price (defined in SECTION 11(d)) per
share of Common Stock on the date such Person became an Acquiring
Person (such number of Rights Shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's articles of incorporation but
not issued, or issued but not outstanding, are not sufficient to
permit the exercise in full of the Rights in accordance with
SECTION 11(a)(II), the Company will, upon the exercise of a Right
and payment of the applicable Purchase Price, (A) determine the
value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), and (B) with respect to each Right
(subject to SECTION 7(e)), make adequate provision to substitute
for the Adjustment Shares (1) cash, (2) a reduction in the Purchase
Price, (3) other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred
stock), that a Requisite Majority has deemed to have essentially
the same rights, privileges and preferences as shares of Common
Stock ("Common Stock 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 conclusively determined by a Requisite
Majority based upon the advice of a nationally recognized
investment banking firm selected by a Requisite Majority; provided,
however, that if the Company has not made adequate provision to
deliver value pursuant to CLAUSE (B) above within 30 days following
the first occurrence of a Section 11(a)(ii) Event, then the Company
will be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary,
cash, which shares or cash have an aggregate value equal to the
Spread. The term "Spread" means the excess of (i) the Current
Value over (ii) the Purchase Price. If the Board of Directors
determines in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for
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<PAGE> 17
issuance upon exercise in full of the Rights, the 30-day period set
forth above may be extended to the extent necessary, but not more
than 90 days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the
authorization of such additional shares (such 30-day period, as it
may be extended, being the "Substitution Period"). To the extent
that action is to be taken pursuant to this SECTION 11(a)(III), the
Company (1) will provide, subject to SECTION 7(e), that such action
will apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any required shareholder
approval or to decide the appropriate form of distribution to be
made and the value thereof. In the event of any such suspension,
the Company will 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 no
longer remains in effect. For purposes of this SECTION 11(A)(III),
the Current Value of each Adjustment Share will be the Current
Market Price per share of the Common Stock on the effective date of
the Section 11(a)(ii) Event and the per share or per unit value of
any Common Stock Equivalent will be deemed to equal the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company fixes a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase (for a period expiring within 45 calendar
days after such record date) Common Stock (and/or Common Stock
Equivalents) (or securities convertible into Common Stock) at a price per
share of Common Stock (or having a conversion price per share, if a
security convertible into Common Stock) less than the Current Market
Price per share of Common Stock on such record date, the Purchase Price
to be in effect after such record date will be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, (i) the numerator of which is the number of shares of Common
Stock outstanding on such record date, plus the number of shares of
Common Stock that the aggregate offering price of the total number of
shares of Common Stock (and/or Common Stock Equivalents) so to be offered
(or the aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such Current Market Price, and (ii)
the denominator of which is the number of shares of Common Stock
outstanding on such record date, plus the number of additional shares of
Common Stock (and/or Common Stock Equivalents) to be offered for
subscription or purchase (or into which the convertible securities so to
be offered are initially convertible). In the event that the number of
shares of Common Stock issuable under the terms of a convertible
security, or the conversion or exercise price of such convertible
security, changes after the initial issuance of such convertible
security, an adjustment will be made to the Purchase Price that conforms
with the adjustment set forth in this SECTION 11(b). In case such
subscription price may be paid by delivery of consideration part or all
of which may be in a form other than cash, the value of such
consideration will be as conclusively determined in good faith by the
Board of Directors of the Company, whose determination will be described
in a statement filed with the Rights Agent and will be binding on the
Rights Agent and the holders of the Rights. Shares of Common Stock owned
by or held for the
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<PAGE> 18
account of the Company will be deemed not to be outstanding for the
purpose of any such computation. Such adjustment will 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 will be
adjusted to be the Purchase Price that would then be in effect if such
record date had not been fixed.
(c) In case the Company fixes a record date for a distribution to
all holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Common Stock,
but including any dividend payable in stock other than Common Stock) or
subscription rights or warrants (excluding those referred to in SECTION
11(b)), the Purchase Price to be in effect after such record date will be
determined by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, (i) the numerator of which is the
Current Market Price per share of Common Stock on such record date, less
the fair market value (as conclusively determined in good faith by the
Board of Directors of the Company, whose determination will be described
in a statement filed with the Rights Agent) of the portion of the cash,
assets, or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Common Stock and
(ii) the denominator of which is such Current Market Price per share of
Common Stock. Such adjustments will be made successively whenever such a
record date is fixed, and in the event that such distribution is not so
made, the Purchase Price will be adjusted to be the Purchase Price that
would have been in effect if such record date had not been fixed.
(d) The "Current Market Price" per share of Common Stock on any date
will be deemed to be the average of the daily closing prices per share of
such Common Stock for the 30 consecutive Trading Days immediately prior
to such date; provided, however, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (i) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (ii) any subdivision, combination, or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination, or reclassification has not occurred prior to the
commencement of the requisite 30 Trading Day period, as set forth above,
then, and in each such case, the Current Market Price will be properly
adjusted to take into account ex-dividend trading. The closing price for
each day will be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national
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<PAGE> 19
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock 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 shares of Common
Stock 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 Common Stock selected by the Board of Directors. If on any
such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good faith by the
Board of Directors will be used. If the Common Stock is not publicly
held or not so listed or traded, Current Market Price per share will mean
the fair value per share as determined in good faith by the Board of
Directors, the determination of which will be described in a statement
filed with the Rights Agent and will be conclusive for all purposes.
(e) Anything in this Agreement to the contrary notwithstanding, no
adjustment in the Purchase Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments that by reason of
this SECTION 11(e) are not required to be made will be carried forward
and taken into account in any subsequent adjustment. All calculations
under this SECTION 11 will be made to the nearest cent or to the nearest
one-hundredth of a share of Common Stock. Notwithstanding the first
sentence of this SECTION 11(e), any adjustment required by this SECTION
11 will be made no later than the earlier of (i) three (3) years from the
date of the transaction that mandates such adjustment or (ii) the Final
Expiration Date.
(f) If, as a result of an adjustment made pursuant to SECTION
11(A)(II) or SECTION 13(A), the holder of any Right thereafter exercised
becomes entitled to receive any shares of capital stock other than Common
Stock, then the number of such other shares so receivable upon exercise
of any Right and the Purchase Price will 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 Common Stock contained in SECTIONS
11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m), and (q) and the
provisions of SECTIONS 7, 9, 10, 13, and 14 with respect to the Common
Stock will apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price under this Agreement will evidence
the right to purchase, at the adjusted Purchase Price, the number of
Rights Shares purchasable from time to time under this Agreement, all
subject to further adjustment as provided in this Agreement.
(h) Unless the Company has exercised its election as provided in
SECTION 11(I), upon each adjustment of the Purchase Price as a result of
the calculations made in SECTIONS 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment will thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of Rights Shares (calculated to the nearest one-hundredth)
obtained by (i)
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<PAGE> 20
multiplying (x) the number of Rights 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 (ii)
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 lieu of any
adjustment in the number of Rights Shares purchasable upon the exercise
of a Right. Each of the Rights outstanding after such an adjustment in
the number of Rights will be exercisable for the number of Rights 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 will become that number of Rights (calculated to the nearest
one-hundredth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Company will make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, will be at
least ten Business Days later than the date of the public announcement.
If Rights Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this SECTION 11(I), the Company will, as
promptly as practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates evidencing,
subject to SECTION 14, the additional Rights to which such holders are
entitled as a result of such adjustment, or, at the option of the
Company, will cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the
Rights to which such holders are entitled after such adjustment. Rights
Certificates so to be distributed will be issued, executed, and
countersigned in the manner provided for in this Agreement (and may bear,
at the option of the Company, the adjusted Purchase Price) and will be
registered in the names of the holders of record of Rights Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the Rights Shares, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per Rights Shares and
the number of Rights Shares that were expressed in the initial Rights
Certificates issued under this Agreement.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of
Rights Shares, the Company will take any corporate action that may, in
the opinion of its counsel, be necessary in order that the Company may
validly and legally issue such number of fully paid and nonassessable
Rights Shares at such adjusted Purchase Price.
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<PAGE> 21
(l) In any case in which this SECTION 11 requires 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 issuance to the holder of any Right exercised after such
record date the number of Rights Shares and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the number of Rights 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 will deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this SECTION 11 to the contrary notwithstanding, the
Company will 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, in its good faith judgment, the Board of
Directors of the Company determines it to be advisable in order that any
(i) consolidation or subdivision of the Common Stock, (ii) issuance
wholly for cash of any shares of Common Stock at less than the current
market price, (iii) issuance wholly for cash of shares of Common Stock or
securities that by their terms are convertible into or exchangeable for
shares of Common Stock, (iv) stock dividends, or (v) issuance of rights,
options, or warrants referred to in this SECTION 11, hereafter made by
the Company to holders of its Common Stock will not be taxable to such
stockholders.
(n) The Company covenants and agrees that it will not, at any time
after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction that complies with
SECTION 11(o)), (ii) merge with, from, or into any other Person (other
than a Subsidiary of the Company in a transaction that complies with
SECTION 11(o)), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or any of
its Subsidiaries in one or more transactions each of which complies with
SECTION 11(o)), 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 that could
reasonably be expected to substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with, or immediately after, such consolidation, merger, or
sale, the stockholders of the Person that constitutes, or would
constitute, the "Principal Party" for purposes of SECTION 13(a) has
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 27, take
(or permit any Subsidiary to take) any action if at the time such action
is taken it is reasonably foreseeable that such
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<PAGE> 22
action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the contrary, in
the event that the Company at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declares a
dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivides the outstanding shares of Common Stock, or
(iii) combines the outstanding shares of Common Stock into a smaller
number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, will be proportionately adjusted so that
the number of Rights thereafter associated with each share of Common
Stock following any such event will equal the result obtained by
multiplying the number of Rights associated with each share of Common
Stock immediately prior to such event by a fraction the numerator of
which is the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of
which is the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
(q) In the event that the Rights become exercisable following a
Section 11(a)(ii) Event, the Company, by action of a Requisite Majority,
may permit the Rights, subject to SECTION 7(e), to be exercised for 50%
of the shares of Common Stock (or cash or other securities or assets to
be substituted for the Adjustment Shares pursuant to SECTION 11(a)(iii))
that would otherwise be purchasable under SECTION 11(a) in consideration
of the surrender to the Company of the Rights so exercised and without
other payment of the Purchase Price. Rights exercised under this SECTION
11(q) will be deemed to have been exercised in full and will be
cancelled.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in SECTION 11 or SECTION 13, the
Company will (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 Stock,
a copy of such certificate, and (c) mail a brief summary thereof to each holder
of a Rights Certificate (or, if prior to the Distribution Date, to each holder
of a certificate representing shares of Common Stock) in accordance with
SECTION 25. The Rights Agent will be fully protected in relying on any such
certificate and on any adjustment contained in such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (i) the Company consolidates with, or merges
with, or into, any other Person (other than a Subsidiary of the Company
in a transaction that complies with SECTION 11(o)), and the Company is
not the continuing or surviving Person of such consolidation or merger;
(ii) any Person (other than a Subsidiary of the Company in a transaction
that complies with SECTION 11(o)) consolidates with, or merges with, or
into, the Company,
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and the Company is the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock is changed
into or exchanged for stock or other securities of any other Person or
cash or any other property; or (iii) the Company sells or otherwise
transfers (or one or more of its Subsidiaries sells or otherwise
transfers), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to
any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with SECTION
11(o)), then, and in each such case (except as contemplated by SECTION
13(d)), proper provision will be made so that (A) each holder of a Right,
except as provided in SECTION 7(e) or SECTION 13(e), will thereafter have
the right to receive, upon the exercise of such Right 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 shares of Common Stock of the Principal Party (as defined
below), not subject to any liens, encumbrances, preemptive rights, rights
of first refusal, or other adverse claims, as are equal to the result
obtained by (1) multiplying the then current Purchase Price by the number
of Rights Shares for which a Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such Rights Shares for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence), and (2) dividing that product (which, following the
first occurrence of a Section 13 Event, will be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (B)
such Principal Party will thereafter be liable for, and will assume, by
virtue of such Section 13 Event, all the obligations and duties of the
Company pursuant to this Agreement; (C) the term "Company" will
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of SECTION 11 will apply only
to such Principal Party following the first occurrence of a Section 13
Event; (D) such Principal Party will take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions of this Agreement will
thereafter be applicable, as nearly as may be, in relation to its shares
of Common Stock thereafter deliverable upon the exercise of the Rights;
and (E) the provisions of SECTION 11(a)(ii) will be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" means
(i) in the case of any transaction described in CLAUSE (i) or
(ii) of the first sentence of SECTION 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to
such merger or consolidation; and
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(ii) in the case of any transaction described in CLAUSE (III)
of the first sentence of SECTION 13(a), the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock
of such Person is not at such time and has 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 Stock of which is
and has been so registered, "Principal Party" will refer to such
other Person; and (2) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, with Common Stock that is
and has been so registered, "Principal Party" will refer to
whichever of such Persons is the issuer of the Common Stock having
the greatest aggregate market value.
(c) The Company will not consummate any such consolidation, merger,
sale, or transfer unless the Principal Party has a sufficient number of
authorized shares of its Common Stock that 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 Principal Party have executed and delivered to the Rights Agent a
supplemental agreement providing for the Principal Party to assume and
perform the terms set forth in SECTIONS 13(a) and (b) and further
providing that, as soon as practicable after the date of any
consolidation, merger, or transfer mentioned in SECTION 13(a), the
Principal Party will
(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 Final Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
(d) In the event that the Rights become exercisable under SECTION
13(a), the Company, by action of a Requisite Majority, may agree with the
Principal Party that the Principal Party may permit the Rights to be
exercised for 50% of the Common Shares of the Principal Party that would
otherwise be purchasable under SECTION 13(a), in consideration of the
surrender to the Principal Party, as the successor to the Company under
SECTION 13(a)(ii), of the Rights so exercised and without other payment
of the
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Purchase Price. Rights exercised under this SECTION 13(e) will be deemed
to have been exercised in full and cancelled.
(e) The provisions of this SECTION 13 will similarly apply to
successive mergers, consolidations, and sales or other transfers. In the
event that a Section 13 Event occurs at any time after the occurrence of
a Section 11(a)(ii) Event, the Rights that have not theretofore been
exercised will thereafter become exercisable in the manner described in
SECTION 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company will not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in SECTION 11(p), or to
distribute Rights Certificates that evidence fractional Rights. In lieu
of such fractional Rights, there will be paid to the registered holders
of the Rights 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 purposes of this
SECTION 14(a), the current market value of a whole Right will 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 of the Rights for any day will be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then
in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished 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 conclusively determined in good faith by the
Board of Directors of the Company will be used.
(b) The Company will not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates
that evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as provided in
this Agreement an amount in cash equal to the same fraction of the
Current Market Price of one share of Common Stock as of 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 the right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this
SECTION 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), may, on its own behalf and for its
own benefit, enforce, and may institute and maintain any suit, action, or
proceeding against the Company to enforce, or otherwise act in respect of, its
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights 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 this Agreement and injunctive relief
against actual or threatened violations of the obligations under this Agreement
of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the Rights consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer, and with the appropriate forms and certificates
fully executed;
(c) subject to SECTION 6(a) and SECTION 7(f), the Company and the
Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, will
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 will have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree, or ruling
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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 will use its reasonable best
efforts to have any such order, decree, or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate will be entitled to vote or receive
dividends or be deemed for any purpose the holder of the number of shares of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise of the Rights represented thereby, nor will anything
contained in this Agreement or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in SECTION 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate have been exercised in accordance with the
provisions of this Agreement.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it under this Agreement and,
from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties under this Agreement. 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 to be done by the Rights Agent in connection
with the acceptance and administration of this Agreement, including,
without limitation, the costs and expenses of defending against any claim
of liability.
(b) The Rights Agent will be protected and will incur no liability
for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock 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.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into or with which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
Person resulting from
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any merger or consolidation to which the Rights Agent or any successor
Rights Agent is a party, or any corporation succeeding to the corporate
trust or shareholder services business of the Rights Agent or any
successor Rights Agent, will 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 to this Agreement;
provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of SECTION
21. In case at the time such successor Rights Agent succeeds to the
agency created by this Agreement, any of the Rights Certificates have
been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of the
Rights Certificates have not been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates will have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed and
at such time any of the Rights Certificates have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates have not been countersigned,
the Rights Agent may countersign such Rights Certificates either in its
prior name or in its changed name, and in all such cases such Rights
Certificates will have the full force provided in the Rights 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 Rights Certificates,
by their acceptance of such Rights Certificates, will 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 will 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 deems it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of "Current Market Price") be proved
or established by the Company prior to taking or suffering any action
under this Agreement, such fact or matter (unless other evidence in
respect of such fact or matter is specifically prescribed in this
Agreement) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the Chief Executive
Officer, the Chief Operating Officer, the President, any Vice President,
the Treasurer, any Assistant Treasurer, the Secretary, or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate will be
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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 will be liable under this Agreement only for
its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements
and recitals are and will be deemed to have been made by the Company
only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution of this Agreement by the Rights
Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature); nor will it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor will it be responsible for
any adjustment required under the provisions of SECTION 11 or SECTION 13,
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
Rights Certificates after actual notice of any such adjustment); nor will
it by any act under this Agreement be deemed to make any representation
or warranty as to the authorization or reservation of any shares of
Common Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock will, when so
issued, be validly authorized or issued, fully paid, or 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 under this
Agreement from the Chairman of the Board, the Chief Executive Officer,
the Chief Operating Officer, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it will not be liable for
any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(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, contract with or
lend money to the Company, or otherwise act as fully and
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freely as though it were not Rights Agent under this Agreement. Nothing
in this Agreement will preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers vested by this Agreement in it or perform any duty under this
Agreement either itself or by or through its attorneys or agents, and the
Rights Agent will not be answerable or accountable for any act, default,
neglect, or misconduct of any such attorneys or agents or for any loss to
the Company resulting from any such act, default, neglect, or misconduct;
provided, however, reasonable care was exercised in the selection and
continued employment of such Person.
(j) No provision of this Agreement will 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 under this Agreement or in the
exercise of its rights if there are 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 or 2 of such certificate, the Rights Agent will 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 Stock, by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent resigns or is removed or otherwise becomes incapable of acting,
the Company will appoint a successor to the Rights Agent. If the Company fails
to make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who will, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, will be a corporation organized
and doing business under the laws of the United States or a State of the United
States, in good standing, that is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and that has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $25,000,000. After appointment, the
successor Rights Agent will
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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, except
that the predecessor Rights Agent will deliver and transfer to the successor
Rights Agent any property at the time held by it under this Agreement 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 will file notice of such appointment in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Common Stock, and mail a notice of such appointment in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this SECTION 21, however, or any defect in such notice, will
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, in its discretion, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number, kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the Expiration Date, the Company (a) will, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion, or exchange of securities
issued by the Company, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (y) no such Rights Certificate will be issued
if, and to the extent that, the Company is advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Company or the Person to whom such Rights Certificate would be issued,
and (z) no such Rights Certificate will be issued if, and to the extent that,
appropriate adjustment has otherwise been made in lieu of the issuance of such
Rights Certificate.
Section 23. Redemption and Termination.
(a) The Company may, at its option, by action of a Requisite
Majority, at any time prior to the earlier of (i) such time as a Person
becomes an Acquiring Person, or (ii) the Final Expiration Date, redeem
all but not fewer than all the then outstanding Rights at the Redemption
Price (the date of such redemption, the "Redemption Date"), and the
Company, at its option, may pay the Redemption Price either in cash or
Common Stock or other securities of the Company, deemed by the Board of
Directors, in the exercise of its sole discretion, to be at least
equivalent in value to the Redemption Price.
(b) Immediately upon the action of a Requisite Majority ordering the
redemption of the Rights, evidence of which has 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 will be to receive the
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Redemption Price. Promptly after the action of a Requisite Majority
ordering the redemption of the Rights, the Company will give notice of
such redemption to the Rights Agent and to the holders of the then
outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Each such notice of redemption will
state the method by which the payment of the Redemption Price will be
made. Any notice that is mailed in the manner in this Agreement provided
will be deemed given, whether or not the holder receives such notice. In
any case, failure to give such notice by mail, or any defect in the
notice, to any particular holder of Rights shall not affect the
sufficiency of the notice to other holders of Rights.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after a Triggering Event, exchange all or part of the then
outstanding and exercisable Rights (which will not include Rights that
have become void pursuant to the provisions of SECTION 7(E) hereof) for
shares of Common Stock, each Right being exchangeable for one share of
Common Stock, appropriately adjusted to reflect any transaction specified
in SECTION 11(A)(I) occurring after the Record Date (such number of
shares of Common Stock issuable in exchange for one Right being referred
to herein as the "Exchange Shares"). 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 Subsidiary of the
Company, any employee benefit plan of the Company or any of its
Subsidiaries or any Person or entity organized, appointed or established
by the Company 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 Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of
this SECTION 24 and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive the Exchange
Shares. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will state the method by which
the exchange of the Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to
the provisions of SECTION 7(E) hereof) held by each holder of Rights.
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(c) In the event that there shall not be sufficient Common Stock
issued but not outstanding, or authorized but unissued, to permit any
exchange of Rights as contemplated in accordance with this SECTION 24,
the Company shall take all such action as may be necessary to authorize
additional Common Stock for issuance upon exchange of the Rights or shall
take such other action specified in SECTION 11(A)(III) hereof.
(d) The Company shall not be required to issue fractions of shares
of Common Stock to distribute certificates which evidence fractional
Common Stock. 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 Price of a whole share
of Common Stock. For the purposes of this SUBSECTION (D), the Current
Market Value of a whole share of Common Stock shall be determined as of
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 proposes, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the
holders of Common Stock or to make any other distribution to the holders
of Common Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the
holders of Common Stock rights or warrants to subscribe for or to
purchase any additional shares of Common Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or
(iv) to effect any consolidation or merger into, or with any other Person
(other than a Subsidiary of the Company in a transaction that complies
with SECTION 11(O)), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company or any of its Subsidiaries in one or more transactions
each of which complies with SECTION 11(O)), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company will give to each holder of a Rights Certificate, to
the extent feasible and in accordance with SECTION 26, a notice of such
proposed action, which will 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 shares of Common Stock, if
any such date is to be fixed, and such notice will 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 shares of Common
Stock for purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the shares
of Common Stock, whichever is the earlier.
30
<PAGE> 34
(b) In case of a Triggering Event, then (i) the Company will as soon
as practicable give to each holder of a Rights Certificate, to the extent
feasible and in accordance with SECTION 26, a notice of the occurrence of
such event, which will specify the event and the consequences of the
event to holders of Rights under this Agreement, and (ii) all references
in SECTION 25(A) to Common Stock will be deemed thereafter to refer to
other securities, if appropriate.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company will 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:
Quest Medical, Inc.
201 Allentown Parkway
Allen, Texas 75002
Attention: Chief Executive Officer
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Ken Hawari
Subject to the provisions of SECTION 21, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent will 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:
KeyCorp Shareholder Services, Inc.
1201 Elm Street, Suite 5050
Dallas, Texas 75270
Attention: Bernetta Young
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) will 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. Supplement and Amendments. The Company, by action of its
Board of Directors, and the Rights Agent may from time to time supplement or
amend this Agreement
31
<PAGE> 35
without the approval of any holders of Rights in order to cure any ambiguity,
to correct or supplement any provision contained in this Agreement that may be
defective or inconsistent with any other provisions in this Agreement, or to
make any other provisions in regard to matters or questions arising under this
Agreement that the Company and Rights Agent may deem necessary or desirable and
that will be consistent with, and for the purpose of fulfilling, the objectives
of the Board of Directors in adopting this Agreement; provided, however, that
following the Stock Acquisition Date, this Agreement shall not be amended in
any manner that would adversely affect the basic economic terms of the Rights;
provided, further, that, once the Rights are no longer redeemable in accordance
with SECTION 23 of this Agreement, no amendment to this Agreement may have the
effect of making the Rights redeemable.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent will bind
and inure to the benefit of their respective successors and assigns under this
Agreement.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, will be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act as in effect on the date of this Agreement.
The Board of Directors of the Company (with, where specifically provided for in
this Agreement, the concurrence of the Continuing Directors) will have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors (with, where
specifically provided for in this Agreement, the concurrence of the Continuing
Directors) or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (a) interpret the provisions of this Agreement, and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of CLAUSE (Y)
below, all omissions with respect to the foregoing) that are done or made by
the Board of Directors (with, where specifically provided for in this
Agreement, the concurrence of the Continuing Directors) in good faith, will (x)
be final, conclusive, and binding on the Company, the Rights Agent, the holders
of the Rights, and all other parties, and (y) not subject the Board of
Directors or the Continuing Directors to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement will be
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy, or claim under this Agreement; and this Agreement will
be for the sole and exclusive benefit of the Company, the Rights Agent, and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
32
<PAGE> 36
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 will remain in
full force and effect and will in no way be affected, impaired, or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant, or restriction is held by such
court or authority to be invalid, void, or unenforceable and the Board 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 will
be reinstated and will 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 requiring action
by a Requisite Majority is held by any court of competent jurisdiction or other
authority to be invalid, void, or unenforceable, such determination will then
be made by the Board of Directors of the Company in accordance with applicable
law and the Company's articles of incorporation and by-laws.
SECTION 32. GOVERNING LAW. THIS AGREEMENT, EACH RIGHT, AND EACH RIGHTS
CERTIFICATE ISSUED UNDER THIS AGREEMENT WILL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND FOR ALL PURPOSES WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to
be an original, and all such counterparts will together constitute but one and
the same instrument.
Section 34. Interpretation. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and will not control or
affect the meaning or construction of any of the provisions of this Agreement.
References in this Agreement to Sections and Exhibits are references to the
Sections of and Exhibits to this Agreement unless the context requires
otherwise. In this Agreement, the word "or" is not exclusive.
33
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto 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: QUEST MEDICAL, INC.
By: /s/F. Robert Merrill III
----------------------------------
F. Robert Merrill III
Senior Vice President Finance/
Chief Financial Officer and Treasurer
Attest: KEYCORP SHAREHOLDER SERVICES,
INC.
By: /s/Bernetta Young
---------------------------------
Bernetta Young, Trust Officer
34
<PAGE> 38
Exhibit A
to Rights Agreement
Certificate No. R-
[FORM OF RIGHTS CERTIFICATE]
________ Rights
NOT EXERCISABLE AFTER __________________, 2006 OR EARLIER IF REDEEMED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
QUEST MEDICAL, INC.
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 August 30, 1996 (as amended from time to
time, the "Rights Agreement"), between Quest Medical, Inc., a Texas corporation
(the "Company"), and KeyCorp Shareholder Services, Inc. (the "Rights Agent"),
to purchase from the Company at any time prior to 5:00 p.m. (Dallas, Texas
time) on August 30, 2006 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one fully paid,
nonassessable share of Common Stock (the "Common Stock") of the Company, at a
purchase price of $30.00 per share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares that may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of August 30, 1996 based on the
Common Stock as constituted at such date. As provided in the Rights Agreement,
the Purchase Price and the number and kind of shares of Common Stock or other
securities, that may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.
This Rights Certificate is subject to all of the terms, provisions, and
conditions of the Rights Agreement, which terms, provisions, and conditions are
incorporated herein by reference and made a part of this certificate and to
which Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties, and immunities hereunder of
the Rights Agent, the Company, and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the certain circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at
1
<PAGE> 39
the above-mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent. All capitalized terms not otherwise
defined have the meaning set forth in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced
by this Rights Certificate are beneficially owned by (i) an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person, (ii) a transferee of
any such Acquiring Person, Associate, or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a Person who,
after such transfer, became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, such Rights will become null and void and no holder of
this certificate will have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered have
entitled such holder to purchase. If this Rights Certificate is exercised in
part, the holder will be entitled to receive upon surrender of this certificate
another Rights Certificate or Rights Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.01 per Right. In addition, in certain circumstances the Rights may
be exchanged, in whole or in part, for shares of the Common Stock. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights that are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
Under certain circumstances set forth in the Rights Agreement, the decision to
redeem the Rights will require the concurrence of a majority of the Continuing
Directors.
No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.
No holder of this Rights Certificate will be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Common Stock or
of any other securities of the Company that may at any time be issuable on the
exercise hereof, nor will anything contained in the Rights Agreement or herein
be construed to confer upon the holder of this certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice
of meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights Certificate have
been exercised as provided in the Rights Agreement.
2
<PAGE> 40
This Rights Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ____________________
ATTEST: QUEST MEDICAL, INC.
By:
- ----------------------------- ---------------------------------------
Title:
------------------------------------
Countersigned:
KEYCORP SHAREHOLDER SERVICES, INC.
By
---------------------------
Authorized Signature
3
<PAGE> 41
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby sells, assigns, and transfer unto
(Please print name and address of transferee)
This Rights Certificate, together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint _________________
attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
------------------------- ------------------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned, or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (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 Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate
or Associate of an Acquiring Person.
Dated:
------------------------- ------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
4
<PAGE> 42
FORM OF ELECTION TO PURCHASE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
To: QUEST MEDICAL, INC.:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security or other identifying number:
----------------
Please print name and address:
--------------------------------------------
--------------------------------------------------------------------------
If such number of Rights are not all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights will be
registered in the name of and delivered to:
Please insert social security or other identifying number:
----------------
Please print name and address:
--------------------------------------------
--------------------------------------------------------------------------
Dated:
------------------------- ------------------------------------
Signature
Signature Guaranteed:
5
<PAGE> 43
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Adverse Person or an Affiliate or Associate of any such Acquiring Person
or an Adverse Person (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 Rights Certificate from
any Person who is, was or became an Acquiring Person or Adverse Person or an
Affiliate or Associate of an Acquiring Person or an Adverse Person.
Dated:
------------------------- ------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
6
<PAGE> 1
EXHIBIT 20.1
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
F. Robert Merrill Karl Plath Kate Rajeck
Sr. Vice-President/Finance General Inquiries Analyst Inquiries
214-390-9800 312-640-6738 312-640-6669
QUEST MEDICAL, INC. REDEEMS OUTSTANDING RIGHTS;
ADOPTS NEW SHAREHOLDERS' RIGHTS PLAN
DALLAS, AUGUST 30, 1996-QUEST MEDICAL, INC. (NASDAQ: QMED) announced today that
its Board of Directors has voted to redeem the outstanding rights issued under
the Shareholders' Rights Plan adopted in 1989, at the pre-established
redemption price of 1 cent per right, and has adopted a new Shareholders'
Rights Plan in which Rights to purchase shares of Quest Medical's Common Stock
will be distributed as a dividend, one Right per share, to record owners of
Quest Medical's Common Stock as of the close of business on September 12, 1996.
The Shareholders' Rights Plan was not adopted in response to any known offers
for Quest Medical, Inc.
Quest Medical's Board of Directors noted in a letter to shareholders that
the action was being taken to replace the old plan, which was already scheduled
to expire in 1999 and to implement a number of innovators that have developed
over the last several years to ensure that the plan would have its intended
effect of enhancing shareholder value. The new Plan is designed to require
that any potential acquirer seeking to obtain control of Quest Medical treat
all Quest Medical shareholders fairly and equally and to deter the use of
coercive takeover tactics.
"The Board has been considering adopting a new plan for several weeks,"
said Chairman Richard A. Gilleland. Just recently, a Quest Medical shareholder
urged the Board to put the company up for sale or seek a merger partner. The
Board has since stated publicly that the company is not for sale.
"In the event of an unsolicited offer," Gilleland added, "the Board
believes that the new Plan will enable it to take the necessary time to
evaluate the proposal and to make sure that shareholder value is enhanced. The
Board is not aware of any actual effort to acquire control of Quest Medical and
the new Plan is not being adopted in response to the shareholder's
recommendation or any other specific event. We believe that the current market
and economic environment make the redemption of the existing rights and the
adoption of the new Plan prudent steps to take at this time."
Upon becoming exercisable, each Right entitles holders to purchase one
share of Common Stock for $30.00. The rights are not exercisable, however,
until a person or group acquires more than 15 percent of Quest Medical's common
stock or announces a tender or exchange offer for more than 20 percent of the
stock. The purchase price and number of shares purchasable will be adjusted if
a person or group acquires more than 15 percent of Quest Medical's common
stock.
Details of the Plan and the Rights are outlined in a letter that is being
mailed to all Quest Medical shareholders.
<PAGE> 2
QUEST MEDICAL, INC.
Dallas-based Quest Medical designs, develops, manufactures and markets a
variety of healthcare products used primarily in cardiovascular surgery,
interventional pain management and intravenous fluid delivery applications.
<PAGE> 1
EXHIBIT 20.2
August 30, 1995
Dear Shareholder:
Your Board of Directors has voted to redeem the outstanding rights issued
under the Shareholder's Rights Plan adopted in 1989, and has adopted a new
shareholders' rights plan. You will be receiving a check for the redemption of
your existing rights at $0.01 per right (or for each share of Quest Medical,
Inc. Common Stock) you beneficially owned at September 12, 1996 (the "Record
Date"). The payment of the redemption price will occur on September 27, 1997.
In addition, the Board has approved a dividend distribution of one new Common
Stock purchase right (a "Right") for each share of Quest Medical Common Stock
outstanding as of the Record Date. Under the new plan, each shareholder of
record as of that date will receive one Right for each share of Common Stock
held. Initially, the Rights will not be exercisable and will automatically
trade with the Common Stock. Therefore, separate Rights certificates will not
be sent to you at this time.
Upon becoming exercisable, each Right entitles the holder to purchase one
share of Quest Medical Common Stock for $30.00. The plan and the Rights are
described in more detail in the attached Summary of Rights to Purchase Shares
of Quest Medical, Inc. Common Stock.
Your Board of Directors is taking these actions to replace the old plan
(which was already scheduled to expire in 1999) to implement a number of
innovations that have developed over the last several years to ensure that the
plan will have its intended effect of enhancing shareholder value. Under the
old plan, the rights gave shareholders the ability to purchase only one-half of
a share of the Company's Common Stock, and thus provided less protection from a
coercive takeover effort. Other aspects of the old plan were, in the Board's
judgment, outmoded or outdated. Your Board of Directors has designed the new
Plan to require that any potential acquirer seeking to obtain control of Quest
Medical treat all Quest Medical shareholders fairly and equally and to deter
the use of coercive takeover tactics.
The Board has been considering adopting a new plan for several weeks.
Just recently, a Quest Medical shareholder urged the Board to put the company
up for sale or seek a merger partner. The Board has since stated publicly that
the Company is not for sale. In the event of an unsolicited offer, however,
the Board believes that the new Plan will enable it to take the necessary time
to evaluate the proposal and to make sure that shareholder value is enhanced.
The Board is not aware of any actual effort to acquire control of Quest Medical
and the new Plan is not being adopted in response to the shareholder's
recommendation or any other specific event. We believe that the current market
and economic environment make the redemption of the existing rights and the
adoption of the new Plan prudent steps to take at this time.
The new Plan and the Rights will not in any way affect Quest Medical's
financial strength or interfere with its ongoing business plans. The dividend
of the new Rights are not currently taxable to Quest Medical or its
shareholders. The distribution will not dilute your holdings or Quest
Medical's reported earnings per share in any manner, nor will it change the way
Quest Medical's Common Stock is traded.
<PAGE> 2
The Board of Directors firmly believes the shareholders' rights plan is in
the best interest of Quest Medical and its shareholders. If you have any
questions, we invite you to call Mr. F. Robert Merrill III at (214) 390-9800
ext. 204.
Sincerely,
/s/ Richard A. Gilleland
Richard A. Gilleland
Chairman of the Board
RAG/grs
Attachment
<PAGE> 3
Exhibit B
to Rights Agreement
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF QUEST MEDICAL, INC. COMMON STOCK
On August 26, 1996, the Board of Directors of Quest Medical, Inc. (the
"Company") declared a dividend of one common share purchase right (a "Right")
for each outstanding share of common stock, $0.05 par value (the "Common
Shares"), of the Company. The dividend was made to the shareholders of record
at the close of business on September 12, 1996 (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company one share of Common
Stock, par value $0.05 per share (the "Common Shares"), of the Company, at a
price of $30.00 (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated as of August
30, 1996 (the "Rights Agreement") between the Company and KeyCorp Shareholder
Services, Inc. as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) ten Business Days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding Common Shares (an "Acquiring Person") or (ii) ten Business
Days following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer, the consummation of which would result in the
beneficial ownership by a person or group of 20% or more of such outstanding
Common Shares (the earlier of such dates being the "Distribution Date"), the
Rights will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate with a copy
of this Summary of Rights attached to the certificate.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding even without such notation or a copy of this Summary
of Rights being attached to such Certificate, will also constitute the transfer
of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "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.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on September 12, 2006 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed by
the Company, in each case, as described below.
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 (i) 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 the Common Shares of certain rights
or warrants to subscribe for or purchase Common Shares at a price or securities
convertible into Common Shares with a conversion price less than the then
current market price of the Common Shares; or (iii) upon the distribution to
holders of the Common Shares of evidences of indebtedness or assets or of
subscription rights or warrants (other than those referred to above).
In the event that any person or entity becomes an Acquiring Person (the
beneficial owner of 15% or more of the Common Shares), provision will be made
so that each holder of a Right, other than Rights
<PAGE> 4
beneficially owned by the Acquiring Person (which will then be void), will have
the right to receive upon exercise that number of Common Shares having a
market value of two times the applicable exercise price of the Right.
The Rights Agreement excludes from the definition of Acquiring Person,
Persons who certify to the Company that they inadvertently acquired in excess
of 14.9% of the outstanding Common Shares and thereafter divest such excess
Common Shares or who acquire 15% or more of the Common Shares in a Permitted
Transaction. A "Permitted Transaction" is a stock acquisition or tender or
exchange offer pursuant to a definitive agreement which would result in a
person beneficially owning 15% or more of the Common Shares and which has been
approved by the Board of Directors (including a majority of the Directors not
in association with an Acquiring Person) prior to the execution of the
agreement or the public announcement of the offer.
In the event that the Company is acquired in a merger or other business
combination transaction, or 50% or more of its consolidated assets or earning
power are sold, proper provisions will be made so that each holder of a Right
will have the right to receive, upon the exercise of the Right at the then
applicable exercise price, that number of shares of common stock of the
acquiring company that at the time of such transaction will have a market value
of two times the applicable exercise price of the Right.
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
of such fractional shares, an adjustment in cash will be made based on the
market price of the Common Shares on the last trading day prior to the date of
exercise.
After a person becomes an Acquiring Person, the Company's Board of
Directors may exchange the Rights, other than those Rights owned by the
Acquiring Person, in whole or in part, at an exchange ratio of one share of
Common Stock per Right, subject to adjustment. However, the Board of Directors
cannot conduct an exchange at any time after any Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or more of the
outstanding Common Stock.
At any time prior to any Person becoming an Acquiring Person, a Requisite
Majority may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (the "Redemption Price"). In addition, the Board of Directors may
extend or reduce the period during which the Rights are redeemable, so long as
the Rights are redeemable at the time of such extension or reduction.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an
amendment to extend the Final Expiration Date, except that from and after the
date any Person becomes an Acquiring Person, no such amendment may adversely
affect the economic interests of the holders of the Rights.
Until a Right is exercised, the holder of the Right, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote, or to receive dividends.
