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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
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[ x ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from To
Commission File Number 1-584
------------------------------------
FERRO CORPORATION
(Exact Name of Registrant as specified in its charter)
An Ohio Corporation 1000 LAKESIDE AVENUE CLEVELAND,OH 44114 IRS No. 34-0217820
(Address of principal executive offices)
Registrant's telephone number including area code: 216/641-8580
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At April 30 1996, there were 26,562,634 shares of Ferro common stock, par value
$1.00, outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The consolidated Balance Sheets as of March 31, 1996 (unaudited) and December
31, 1995, and the Consolidated Statements of Income and Consolidated Statements
of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) of
Ferro Corporation and Subsidiaries are set forth in Exhibit 20 hereof which is
incorporated by reference herein.
Those financial statements, which are subject to year-end audit adjustments,
should be read in conjunction with financial statements and notes thereto
included in the Company's annual report for the fiscal year ended December 31,
1995.
Cash dividends were paid at the rate of $0.135 per common share in the first
quarter of 1996 and 1995. Cash dividends on preferred shares were paid at the
rate of $0.81 per preferred share in the first quarter of 1996 and 1995.
Net sales and net income for the three months ended March 31, 1996 were $348.2
million and $13.2 million ($0.43 fully diluted earnings per common share) as
compared with net sales and net income of $342.9 million and $13.1 million
($0.41 fully diluted earnings per common share) for the corresponding 1995
period . Included in the 1995 quarter were severance charges of $5.6 million.
The foregoing figures are unaudited, but in the opinion of the Management of the
Company, all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation thereof have been made.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Comparison Between Three Months Ended March 31, 1996 and 1995.
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Net Sales. First quarter 1996 sales of $348.2 million were 1.5% greater than the
$342.9 million of the comparable 1995 period.
Sales increased 38% for the Chemicals segment, but decreased 4% in the Coatings,
Colors and Ceramics segment and 16% in the Plastics segment. The increase in
Chemicals is largely due to sales associated with the acquisition of the polymer
additives business (Synpro) from Cookson Group plc, during the fourth quarter of
1995. Coatings, Colors and Ceramics sales declined primarily because of
macroeconomic conditions in Latin America and the divestiture of a powder
coatings joint venture in Italy. Plastics sales declined largely because of the
divestiture of an operation in France. Geographically, consolidated sales were
up in the United States and Canada and Europe but down in the Latin America and
Asia-Pacific regions.
The variety of products sold by the Company makes it difficult to determine with
certainty the
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increases or decreases in sales resulting from changes in physical volume of
products sold and selling prices. Management's best estimate is that the 1.5%
increase in sales comprises: volume, -3.8%; price/mix, 1.2%; acquisitions 7.5%
and divestitures -3.4%.
Cost of Sales. Gross profit as a percent of sales was 24.5% as compared with
25.0% for the comparable 1995 period. This was due to a combination of
macroeconomic conditions in Latin America, softness in the domestic automotive
and appliance markets and product/mix changes.
Selling, administrative and general expenses. Such expenses as a percent of
sales declined from 17.7% in 1995 to 16.9% in 1996. First quarter 1995 included
a severance charge of $5.6 million.
Interest expense. The increase in interest expense from $3.1 million to $3.3
million is primarily attributable to lower level of capitalized interest.
Net foreign currency gain or loss. The net foreign currency gain is primarily
attributable to transaction gains in European operations.
Other income/expense. Net other expense was $2.1 million, up from the comparable
1995 period expense of $0.4 million, comprised of numerous income and expense
items.
Income taxes. Income taxes were comparable with the corresponding 1995 quarter.
Geographic discussion. European sales improved for each of the core businesses
and European operating profits improved despite signs of weakness in some
markets. Sales and operating income each improved in the United States and
Canada, mostly due to the strong performance of the profitable Synpro
acquisition. Domestic operating profit was also helped by margin improvement in
the Plastics business. Sales and operating profit in Latin America declined due
to overall macroeconomic conditions in the region. Asia-Pacific sales were down,
as was operating income due to margin pressures in several of the markets served
in the region.
Liquidity and Capital Resources
- -------------------------------
Working capital. Working capital was comparable to year-end 1995.
Cash flow. Net cash provided from operating activities for the three months
ended March 31, 1996 was $27.1 million. The increase in Net Cash used for
Financing Activities is due to the repayment of debt and the repurchase of some
of the Company's outstanding shares.
Financing requirements and resources. The long-term debt to equity ratio was
27.5% at March 31, 1996, excluding the loan guarantee of the Employee Stock
Ownership Plan adopted in April 1989. This equals the 27.5% ratio at December
31, 1995. The Company expects to be able to meet the financial requirements of
its existing businesses from existing cash and cash equivalents and future cash
flow. The Company has available to it a $150.0 million five-year revolving
credit facility with four domestic banks. There were no borrowings under this
facility as of the end of the quarter. The Company also
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has available a $300 million Universal Shelf Registration that was filed with
the Securities and Exchange Commission on October 31, 1995, under which various
types of securities may be issued.
OTHER SIGNIFICANT DEVELOPMENTS
In February 1996, J. Larry Jameson joined the Company as Vice President,
Powder Coatings.
Subsequent to the end of the quarter:
Adolph Posnick retired from the Board of Directors as of April 26, 1996,
pursuant to Ferro Corporation's mandatory retirement age policy for
directors.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS. NO CHANGE
ITEM 2 CHANGE IN SECURITIES. NO CHANGE.
ITEM 3 DEFAULT UPON SENIOR SECURITIES. NO CHANGE.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders held on April 26, 1996, the
Shareholders:
a) Re-elected four current Ferro Corporation directors - Sandra Harden
Austin, Werner F. Bush, Rex A. Sebastian and Dennis W. Sullivan to
serve the Board until the 1999 meeting.
The results of the voting for directors were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Harden Austin 21,628,045 0 4,436,758
Bush 21,650,232 0 4,414,571
Sebastian 21,704,000 0 4,360,803
Sullivan 21,728,627 0 4,336,176
</TABLE>
The terms of office for Albert C. Bersticker, Paul S. Brentlinger,
Glenn R. Brown, William E. Butler, A. James Freeman, John C. Morley
and Hector R. Ortino continued after the meeting.
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b) Approved a proposal to set the number of Board of Director members at
11.
Shareholders approved the proposal to set the number of Board of
Director members at 11 by a vote of 24,567,986 shares for, 156,497
against and 106,149 shares that were present but did not vote on this
issue.
c) Approved a proposal to adopt two amendments to the Employee Stock
Option Plan.
Shareholders approved the proposal to amend the Employee Stock Option
Plan by a vote of 24,469,358 shares for, 1,067,368 shares against and
214,872 shares that were present but did not vote on this proposal.
d) Adopted a resolution to ratify the designation of KPMG Peat Marwick
LLP as independent auditors of Ferro's books and accounts.
Shareholders approved the designation of KPMG Peat Marwick LLP as
independent auditors by a vote of 25,815,033 shares for, 172,298
shares against and 77,472 shares who were present but did not vote on
this issue.
ITEM 5 OTHER INFORMATION. NONE.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
The Company has not filed any reports on Form 8-K for the quarter
ended March 31, 1996.
Exhibits 4(a) through 4(k) referenced in Ferro Corporation's Form 10-K
for the year ended December 31, 1995 are incorporated herein by
reference.
Exhibit 4(l) - Shareholder Rights Plan
Exhibit 11 - Statement Regarding Computation of Earnings Per Share.
Exhibit 12 - Ratio of Earnings to Fixed Charges.
Exhibit 20- The Consolidated Balance Sheets as of March 31, 1996
(Unaudited) and December 31, 1995, and the Consolidated Statements of
Income and Consolidated Statements of Cash Flows for the three months
March 31, 1996 and 1995 (Unaudited) of Ferro Corporation and
Subsidiaries.
Exhibit 27 - Financial Data Schedule (Electronic Filing Only)
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRO CORPORATION
(Registrant)
Date: May 13, 1996
/s/Hector R. Ortino
-------------------
President
Date: May 13, 1996
/s/ Gary H. Ritondaro
---------------------
Vice President and
Chief Financial Officer
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EXHIBIT (4)(L)
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FERRO CORPORATION
and
NATIONAL CITY BANK
Rights Agent
----------------
Shareholder Rights Agreement
Dated as of March 22, 1996
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TABLE OF CONTENTS
<TABLE>
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PAGE
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Section 1. Certain Definitions................................................................................. 1
Section 2. Appointment of Rights Agent......................................................................... 3
Section 3. Issue of Rights Certificates........................................................................ 4
Section 4. Form of Rights Certificates......................................................................... 5
Section 5. Countersignature and Registration................................................................... 6
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.................................................................................. 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....................................... 7
Section 8. Cancellation and Destruction of Rights Certificates................................................. 9
Section 9. Reservation and Availability of Capital Stock....................................................... 9
Section 10. Common Stock Record Date............................................................................ 10
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.............................................................................. 10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.......................................... 18
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power......................................................................................... 18
Section 14. Fractional Rights and Fractional Shares............................................................. 20
Section 15. Rights of Action.................................................................................... 21
Section 16. Agreement of Rights Holders......................................................................... 21
Section 17. Rights Certificate Holder Not Deemed a Shareholder.................................................. 22
Section 18. Concerning the Rights Agent......................................................................... 22
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................................... 22
Section 20. Duties of Rights Agent.............................................................................. 23
Section 21. Change of Rights Agent.............................................................................. 24
Section 22. Issuance of New Rights Certificates................................................................. 25
Section 23. Redemption and Termination.......................................................................... 25
</TABLE>
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<TABLE>
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Page
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Section 24. Notice of Certain Events........................................................................... 26
Section 25. Notices............................................................................................ 27
Section 26. Supplements and Amendments......................................................................... 28
Section 27. Successors......................................................................................... 28
Section 28. Determination and Actions by the Board of Directors, etc........................................... 28
Section 29. Exchange........................................................................................... 29
Section 30. Benefits of this Agreement......................................................................... 30
Section 31. Severability....................................................................................... 30
Section 32. Governing Law...................................................................................... 30
Section 33. Counterparts....................................................................................... 30
Section 34. Descriptive Headings............................................................................... 30
Exhibit A-- Form of Rights Certificate......................................................................... A-1
Exhibit B-- Summary of Rights to Purchase Common Stock......................................................... B-1
</TABLE>
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SHAREHOLDER RIGHTS AGREEMENT
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SHAREHOLDER RIGHTS AGREEMENT, dated as of March 22, 1996 (the
"Agreement"), between FERRO CORPORATION, an Ohio corporation (the "Company"),
and NATIONAL CITY BANK, a national banking association (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on March 22, 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 $1 per
share, of the Company (the "Common Stock") outstanding at the close of business
on April 9, 1996 (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to Section 11 hereof)
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 upon the terms and subject to the conditions hereinafter
set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan. Notwithstanding the foregoing, no person shall
become an "Acquiring Person" as the result of an acquisition of shares of Common
Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 20% or more of the shares of Common Stock of the Company then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of 20% or
more of the shares of Common Stock of the Company then outstanding by reason of
share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional share of Common Stock of
the Company, then such Person shall be deemed to be an "Acquiring Person".
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person", as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be or
have ever been an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
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(i) which 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) 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 shall 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, or (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of
Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) hereof or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of
such Person's Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(iii) which are beneficially owned,
directly or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement
or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy
as described in the proviso to subparagraph (ii) of this
paragraph (c)) or disposing of any voting securities of the
Company; PROVIDED, HOWEVER, that nothing in this paragraph (c)
shall cause a person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such person's participation
in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then
2
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issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of Ohio are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean
5:00 P.M., Cleveland, Ohio time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 P.M., Cleveland, Ohio time, on the
next succeeding Business Day.
(f) "Common Stock" shall mean the common stock, par
value $1 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock (or
equity security) of such Person with the greatest voting power, or, if such
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(g) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(h) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii)(A) or (B) hereof.
(i) "Section 13 Event" shall mean any event described
in clauses (x), (y) or (z) of Section 13(a) hereof.
(j) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(k) "Subsidiary" shall mean, with reference to any
Person, any corporation or other entity of which voting power sufficient to
elect at least a majority of the directors (or other governing body) of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(l) "Triggering Event" shall mean any Section 11(a)
(ii) Event or any Section 13 Event.
(m) "Adverse Person" shall mean any Person declared
to be an Adverse Person by the Board of Directors upon determination that the
criteria set forth in Section 11(a)(ii)(B) hereof apply to such Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
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Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earliest of (i) the close of business
on the tenth day after the Stock Acquisition Date, (ii) the close of business on
the tenth business day after the date that a tender offer or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan) is first published or sent or given within the meaning
of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof, such Person would be the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding, or (iii) the close of
business on the tenth day after the Board of Directors of the Company
determines, pursuant to the criteria set forth in Section 11(a)(ii)(B) hereof,
that a Person is an Adverse Person (or such later date under clause (i), (ii)
and (iii) as may be determined by the Board of Directors of the Company;
provided, however, that if such determination occurs on or after the time there
is an Acquiring Person or Adverse Person, then such date may be extended only if
there are Continuing Directors (as such term is defined in Section 23 hereof) in
office and such extension is authorized by a majority of such Continuing
Directors) (the earliest of (i), (ii) and (iii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraphs (b) and (c) of this Section 3) by the certificates for
the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). Upon the occurrence of an
event described in clauses (i), (ii) or (iii) above, the Company shall give
prompt notice thereof to the Rights Agent. As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form of Exhibit A hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) 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 promptly as practicable following the Record
Date, the Company will send a copy of a Summary of Rights, in substantially the
form attached hereto as Exhibit B (the "Summary of Rights") 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 shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer or surrender
for transfer of any certificates representing shares of Common Stock in respect
of which Rights have been issued shall also constitute the transfer or surrender
for transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares
of Common Stock which are issued after the Record Date but prior to the earlier
of the Distribution Date or the Expiration Date. Certificates representing such
shares of Common Stock shall also be
4
<PAGE> 8
deemed to be certificates for Rights. All certificates issued after the Record
Date, whether with respect to new or to transferred shares, shall bear the
following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement
between Ferro Corporation (the "Company") and National City Bank
(the "Rights Agent") dated as of March 22, 1996 (the "Rights
Agreement"), the terms of which are hereby incorporated herein 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 therefor. Under
certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person, an Adverse Person or any Affiliates or
Associates thereof (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 such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
or surrender for transfer of any of such certificates shall also constitute the
transfer or surrender for transfer of the Rights associated with the Common
Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit A hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of shares of Common
Stock as shall be set forth therein at the price set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 hereof that represents Rights beneficially owned by (i) an
Acquiring Person or an Adverse Person or any Associate or Affiliate of any such
Person, (ii) a transferee of an Acquiring Person or any such Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person or an Adverse Person becomes such, or (iii) a transferee of an Acquiring
Person or an Adverse Person (or of any such Associate or Affiliate) who becomes
a transferee prior to or concurrently with the Acquiring Person or Adverse
Person becoming such and receives such Rights pursuant to either (A) a transfer
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(whether or not for consideration) from the Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an [Acquiring]
[Adverse] Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement). Accordingly, this
Rights Certificate and the Rights represented hereby may become
null and void in the circumstances specified in Section 7(e) of
such Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on
behalf of the Company by its President or any Vice President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent, 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 Certificates may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Rights Certificate, shall be 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
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of 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 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of shares of Common Stock (or, following a Triggering Event,
Common Stock, other securities, cash and/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
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<PAGE> 10
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or 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 shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon, the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a 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 Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably 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) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) 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 thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of shares (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 April 8, 2006 (the "Final
Expiration Date"), or (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the earlier of (i) and (ii) being herein referred to as
the "Expiration Date").
(b) The Purchase Price for each share of Common Stock
pursuant to the exercise of a Right shall initially be $110 and shall be subject
to adjustment from time to time as provided in Sections 11 and 13(a) hereof and
shall be payable in accordance with paragraph (c) below.
(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, with respect to each Right so exercised,
of the Purchase Price per share of Common Stock (or other shares, securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the 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 and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of
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<PAGE> 11
shares of Common Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary 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 shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary 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 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such 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) hereof) shall 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 of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be 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 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person, an Adverse Person or an
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person
becomes such, or (iii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or an Adverse Person
or any of their respective Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of
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<PAGE> 12
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of any authorized
and issued shares held in its treasury), the number of shares of Common Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, 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 and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after the first
occurrence of a Section 11(a)(ii) Event on which the consideration to be
delivered upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the Expiration Date of the Rights. The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(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 shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following a Distribution
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<PAGE> 13
Date, the Company may temporarily suspend the exerciseability 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
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or a registration statement shall not have
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, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(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 which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for shares of Common Stock (or
Common Stock and/or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of the shares
of Common Stock (or Common Stock and/or other securities, as the case may be) in
respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for shares of Common Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have 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 certificate for shares of Common Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Common Stock (or Common Stock and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, 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 (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Common Stock (or Common Stock
and/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 holder of a
Rights Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
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.
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<PAGE> 14
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Common Stock payable in shares of Common Stock, (B) subdivide the
outstanding Common Stock, (C) combine the outstanding Common Stock
into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number
and kind of shares of Common Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall 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, which, if such Right had been
exercised immediately prior to such date and at a time when the
Common Stock transfer books of the Company were open, he would
have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) Any person (other than the
Company, any Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary of the company, or any Person
or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan), alone or together
with its Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become the Beneficial Owner of
20% or more of the shares of Common Stock then outstanding,
unless the event causing the 20% threshold to be crossed is (1) a
transaction set forth in Section 13(a) hereof or (2) approved in
advance by the Board of Directors (with the approval of a
majority of the Continuing Directors), or
(B) the Board of Directors of the
Company shall declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with its
Affiliates and Associates, has at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner of an
amount of Common Stock which the Board of Directors determines to
be substantial (which amount shall in no event be less than 10%
of the shares of Common Stock then outstanding) and a
determination by the Board of Directors, after reasonable inquiry
and investigation, including consultation with such persons as
the Board of Directors shall deem appropriate, that (1) such
Beneficial ownership by such Person is intended to cause the
Company to repurchase the Common Stock beneficially owned by such
Person or to cause pressure on the Company to take action or
enter into a transaction or series of transactions intended to
provide such Person with short-term financial
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<PAGE> 15
gain under circumstances where the Board of Directors determines
that the best long-term interests of the Company and its
shareholders would not be served by taking such action or entering
into such transactions or series of transactions at that time or
(2) such Beneficial Ownership is causing or reasonably likely to
cause a material adverse impact (including but not limited to,
impairment of relationships with customers, impairment of the
Company's business reputation or impairment of the Company's
ability to maintain its competitive position) on the business or
prospects of the Company,
then, promptly following the first occurrence of a Section
11(a)(ii) Event, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, in lieu of the
number of shares of Common Stock for which a Right was theretofore
exercisable, such number of shares Common Stock as shall equal the
result obtained by (x) multiplying the then current Purchase Price
by the number of shares of Common Stock for which a Right was
exercisable immediately prior to the first occurrence of the
Section 11(a)(ii) Event and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to
as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the current per share market price of
the Common Stock (determined pursuant to Section 11(d)) on the
date of the occurrence of the Section 11(a)(ii) Event (such number
of shares is herein called the "Adjustment Shares"); provided,
however, that the Purchase Price and number of Adjustment Shares
shall be further adjusted as provided in this Agreement to reflect
any event occurring after the date of such first occurrence.
(iii) In the event that the number of
shares of Common Stock which are authorized by the Company's
certificate of incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such
excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock which the Board of
Directors of the Company has deemed to have the same value as
shares of Common Stock (such shares of preferred 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 determined by the Board of Directors of the
Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii)
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Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the
Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90)
days after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek shareholder approval for the authorization of
such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines
that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall
apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the value
of any "common stock equivalent" shall be deemed to have the same
value as the Common Stock on such date.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to holders of Common Stock entitling
them to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Common Stock (or shares having the same
rights, privileges and preferences as the shares of Common Stock ("equivalent
common stock")) or securities convertible into Common Stock or equivalent common
stock at a price per share of Common Stock or per share of equivalent common
stock (or having a conversion price per share, if a security convertible into
Common Stock or equivalent common stock) less than the current market price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date, plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares of
Common Stock and/or equivalent common stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Common Stock outstanding on such record
date, plus the number of additional shares of Common Stock and/or equivalent
common stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the
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<PAGE> 17
Rights Agent and the holders of the Rights. Shares of Common Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for
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) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights of
warrants applicable to a share of Common Stock and the denominator of which
shall be such current market price (as determined pursuant to Section 11(d)
hereof) per share of Common Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made pursuant
to Section 11(a)(iii) hereof, the "current market price" per share of Common
Stock on any date shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the ten (10) consecutive Trading Days
immediately following 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 (A) 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 (B) any subdivision, combination or reclassification of such Common Stock,
and prior to the expiration of the requisite thirty (30) Trading Day period or
ten (10) Trading Day period, as set forth above, after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the "current
market price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the 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 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
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<PAGE> 18
and low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or, if on any such date the 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 of the Company. 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 of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading in 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. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall 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 which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock, as the case may be. Notwithstanding the first sentence of this
Section 11(e), an adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Common
Stock shall 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 hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of shares of
Common Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercise its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares of Common Stock (calculated to the nearest one-thousandth) obtained by
(i) multiplying (x) the number of shares covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
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<PAGE> 19
(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 shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of shares of Common Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of shares of Common Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the shares of Common Stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares or securities upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith
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<PAGE> 20
judgment the Board of Directors of the Company shall determine 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 which 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 shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constituted, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof have received a distribution, directly or indirectly, of
Rights previously owned by such Person or any of its Affiliates or Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the date
of this Agreement and prior to the Distribution Date consolidate with, or merge
with or into, any other Person for the primary purpose of a change of domicile
of the Company, and, in connection with such consolidation or merger, all of the
outstanding shares of Common Stock shall be changed into or exchanged for shares
of Common Stock of the surviving corporation of such consolidation or merger
(the "Surviving Corporation"), then proper provision shall be made so that
Rights shall be associated with each share of Common Stock of the Surviving
Corporation, except as provided in Section 7(e) hereof, such that the number of
Rights associated with each share of Common Stock of the Surviving Corporation
following any such event shall 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 shall be the total number of
shares of Common Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of shares of Common
Stock of the Surviving Corporation which the shares of Common Stock were changed
into or exchanged for pursuant to the consolidation or merger. Following such a
consolidation or merger, this Agreement shall remain in effect and all
references to the Company shall be deemed to be references to the Surviving
Corporation.
(q) The failure by the Board of Directors to declare
a Person to be an Adverse Person following such Person becoming the Beneficial
Owner of 10% or more of the outstanding Common Stock shall not imply that such
Person is not an Adverse Person or
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<PAGE> 21
limit the Board of Directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common 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 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
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, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be 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 shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one 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) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price (disregarding any adjustment
of the Purchase Price pursuant to Section 11(a)(ii) hereof) in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely traceable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of shares of Common Stock 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 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
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current market price (as
determined pursuant to Section 11(d) hereof) per share of the Common Stock of
such Principal Party on the date of consummation of such Section 13 Event, (ii)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such Section 13 Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only
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<PAGE> 22
to such Principal Party following the first occurrence of a Section 13 Event;
(iv) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which 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
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that
is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
PROVIDED, HOWEVER, that in any 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" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, 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 Expiration Date; and
(ii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each
of its Affiliates which comply in all respects with the
requirements for registration on Form 10 (or any successor form)
under the Exchange Act.
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<PAGE> 23
The provisions of this Section 13 shall similarly apply to successive merges or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the first occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to
the contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which was carried out pursuant to the exception contained in clause
(2) of Section 11(a)(ii)(A) hereof (or a wholly owned subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
tender offer or exchange offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue
fractions of Rights, except, prior to the Distribution Date as provided in
Section 11(i) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall 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 shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board of Directors of the
Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which 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 herein provided
an amount in cash equal to the same fraction of the current market value of a
share of Common Stock. For purposes of this Section 14(b), the current market
value of a share of Common Stock shall be the closing price of one (1) share of
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<PAGE> 24
Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading
Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, 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, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such 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 shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right
by accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Common Stock;
(b) 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) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and 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, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Company nor the Rights Agent shall have any liability
to any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, that the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
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Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
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 corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent of any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; PROVIDED, HOWEVER, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
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<PAGE> 26
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes
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 thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of "current market price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or other securities to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or other
securities will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
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<PAGE> 27
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Executive Vice
President, the Vice President-Finance, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; PROVIDED, HOWEVER, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate identification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise transfer, the certificate attached
to the form of assignment or form of election to purchase, as the case may be,
has either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with the
Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (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 thirty (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 shall resign or be removed or shall otherwise become
incapable or acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any
registered
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<PAGE> 28
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of Ohio (or of any other state of the United States so long as such
corporation is authorized in the State of Ohio to perform all of the duties of
the Rights Agent hereunder), in good standing, having a principal office in the
State of Ohio, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificate. evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provision of this Agreement. In addition, in connection with
the issuance or sale of shares of Common Stock following the Distribution Date
and prier to the redemption or expiration of the Rights, the Company (a) shall,
with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may,
at its option, at any time prior to the earlier of (i) the close of business on
the fifteenth day following the Stock Acquisition Date (or if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the fifteenth day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.05 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided, however, that if such
authorization occurs on or after the date of a change (resulting from a proxy or
consent solicitation) in a majority of the directors in office at the
commencement of such solicitation,
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<PAGE> 29
and any Person who is or was a participant in such solicitation has stated (or
if upon the commencement of such solicitation, a majority of the Board of
Directors of the Company has determined in good faith) that such Person (or any
of its Affiliates or Associates) has taken or intends to take, or may consider
taking, any action that would result in such Person becoming an Acquiring Person
or that would cause the occurrence of a Triggering Event (the existence of the
circumstances described in this proviso being referred to herein as an "Adverse
Change of Control"), then the Rights may be so redeemed only if there are
Continuing Directors (as hereinafter defined) in office and such redemption is
authorized by a majority of such Continuing Directors. "Continuing Director"
shall mean (i) any member of the board of Directors of the Company who, while
such person is a member of the Board, is not an Acquiring Person or an Adverse
Person, or an Affiliate or Associate of such Person, or a representative of an
Acquiring Person or an Adverse Person or of any such Affiliate or Associate, and
was a member of the Board prior to the Record Date, or (ii) any Person who
subsequently becomes a member of the Board who, while such Person is a member of
the Board, is not an Acquiring Person or an Adverse Person, or an Affiliate or
Associate of such Person, or a representative of an Acquiring Person or an
Adverse Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. Notwithstanding the
foregoing, the Board of Directors may not redeem any Rights following a
determination pursuant to Section 11(a)(ii)(B) hereof that any Person is an
Adverse Person. Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired. The Company may, at its option, pay the Redemption Price
in cash, shares of Common Stock (based on the "current market price," as defined
in Section 11(d) hereof, of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and 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. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, 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 which complies with Section 11(o) hereof), or
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<PAGE> 30
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 assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation. dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least twenty (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 twenty (20)
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Common Stock whichever
shall be the earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Common Stock shall be deemed thereafter
to refer to Common Stock and/or other securities, if appropriate.
Section 25. 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 shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Ferro Corporation
1000 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Corporate Secretary
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 shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114-3484
Attention: Corporate Trust Department
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) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
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<PAGE> 31
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company shall so direct (upon the approval of a
majority of the Continuing Directors then in office), supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person, an Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person);
PROVIDED, HOWEVER, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26 (including the
Continuing Director approval requirements set forth herein), the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of shares of Common Stock for which a Right is exercisable.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock. Without
limiting the foregoing, the Board of Directors of the Company may at any time
prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the thresholds set forth in Section 1(a) and 3(a) to not less
than the greater of (i) the sum of .001% plus the largest percentage of the
outstanding shares of Common Stock then known by the Company to be beneficially
owned by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
entity holding shares of Common Stock for or pursuant to the terms of any such
plan) and (ii) 10%. Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be amended or supplemented as the Board of
Directors shall deem necessary or advisable (upon approval of a majority of the
Continuing Directors then in office), without the approval of any holders of
Right Certificates, to provide for the issuance of shares (or fractional shares)
of preferred stock of the Company in place of Common Stock which may be received
upon exercise of Rights hereunder prior to the occurrence of any Triggering
Event, and to modify or amend this Agreement in any respect to take into account
the use of such preferred stock (or fractional shares of preferred stock) in
place of such Common Stock.
Section 27. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. DETERMINATION 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, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i)
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<PAGE> 32
of the General Rules and Regulations under the Exchange Act. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
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 (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to attend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors), in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights Certificates and all other parties, and (y) not subject the Board to any
liability to the holders of the Rights.
Section 29. EXCHANGE.
(a) The Board of Directors of the Company may, at
its option, at any time and from time to time after the first occurrence of a
Section 11(a)(ii) Event, exchange all or part of the then outstanding and
exercisable Rights (which shall not include rights that become void pursuant to
the provisions of the Section 7(e) hereof) for shares of Common Stock or common
stock equivalents, or any combination thereof, at an exchange ratio of one share
of Common Stock per Right, appropriately adjusted as determined by the Board to
reflect any stock split, stock combination, stock dividend, or other similar
event after the date hereof (such exchange ratio being hereinafter referred to
as the "Exchange Ratio").
(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 29 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock and/or common stock equivalents equal to the number of such
rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall promptly mail a notice of any such exchange to
all of the holders of such Rights at their latest addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the shares of Common Stock for Rights will be effected and, in the event of
any partial exchange. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that the number of shares of Common
Stock which are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit any exchange of Rights as contemplated
in accordance with this Section 29, the Company may, at its option, take all
such action as may be necessary to authorize additional shares of Common Stock
for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the
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<PAGE> 33
registered holders of Rights with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal to the same
fraction of the value of a whole share of Common Stock. For purposes of this
Section 29, the value of a whole share of Common Stock shall be the "current
market price" (as determined pursuant to Section 11(d) hereof) for the Trading
Day immediately prior to the date of exchange pursuant to this Section 29, and
the value of any common stock equivalent shall be deemed to have the same value
as the Common Stock on such date.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or 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 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the state of Ohio and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contract 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 shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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<PAGE> 34
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: FERRO CORPORATION
By /s/ Gary H. Ritondaro By /s/ Albert C. Bersticker
---------------------------------- ------------------------------------
Name: Gary H. Ritondaro Name: Albert C. Bersicker
Title: Vice President and Title: Chairman and Chief Executive
Chief Financial Officer Officer
Attest: NATIONAL CITY BANK
By /s/ Constance L. Clark By /s/ J. Dean Presson
---------------------------------- ------------------------------------
Name: Constance L. Clark Name: J. Dean Presson
Title: Corporate Trust Officer Title: Vice President
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<PAGE> 35
Exhibit A
---------
[Form of Rights Certificate]
Certificate No. R- _________________ Rights
NOT EXERCISABLE AFTER APRIL 8, 2006 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.05 PER
RIGHTS ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING]
[ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]*
Rights Certificate
FERRO CORPORATION
This certifies that ____________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Shareholder Rights Agreement, dated as of March 22, 1996 (the
"Rights Agreement"), between Ferro Corporation, an Ohio corporation (the
"Company"), and National City Bank, a national banking corporation (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (Cleveland
time) on April 8, 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 the Common Stock (the "Common Stock") of the Company, at
a purchase price of $110 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 Purchase Price shall be paid in cash. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of April
9, 1996, based on the Common Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement),
- --------
* The portion of the legend in brackets shall be inserted only, if applicable
and shall replace the preceding sentence.
A-1
<PAGE> 36
(ii) a transferee of any such Acquiring Person, Adverse 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, an Adverse Person or an Affiliate or Associate of any such
Person, such Rights shall become null and void and no holder hereof shall have
any Rights with respect to such Rights from and after the occurrence of such
Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Common Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to notification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
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 shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company, at its option, at
a redemption price of $.05 per Right at any time prior to the earlier of the
close of business on (i) the fifteenth day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and (ii)
the Final Expiration Date. Notwithstanding the foregoing, the Rights evidenced
by this Rights Certificate may not be redeemed following a determination
pursuant to Section 11(a)(ii)(B) of the Rights Agreement that any Person is an
Adverse Person.
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 shall 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 which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or
A-2
<PAGE> 37
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ________________ __, ____
ATTEST:
-----------------------------
By
- --------------------------------- --------------------------
Secretary Title:
Countersigned:
- --------------------------------
By
------------------------------
Authorized Signature
A-3
<PAGE> 38
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
-------------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
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 and transferred by or on behalf of a Person who is or was
an Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person.
Dated: _____________________ __, ____
----------------------------------
Signature
Signature Guaranteed:
A-4
<PAGE> 39
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-5
<PAGE> 40
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: FERRO CORPORATION:
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 which 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 shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: __________________, ____
----------------------------------
Signature
Signature Guaranteed:
A-6
<PAGE> 41
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, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of an Acquiring Person.
Dated: __________________________, ____
--------------------------------
Signature
Signature Guaranteed
A-7
<PAGE> 42
NOTICE
------
The signature to the foregoing Election to Purchase 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.
A-8
<PAGE> 43
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On March 22, 1996, the Board of Directors of Ferro Corporation
(the "Company") declared a dividend distribution of one Right for each
outstanding share of common stock, par value $1 per share (the "Common Stock"),
of the Company to stockholders of record at the close of business on April 9,
1996 (the "Record Date"). Each Right entitles the registered holder to purchase
from the Company one share of Common Stock at a price of $110 per share (the
"Purchase Price"), subject to adjustment. The Purchase Price shall be paid in
cash. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and National City Bank,
as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate certificates
evidencing the Rights (the "Rights Certificates") will be distributed. Until the
earliest to occur of (i) 10 days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Common Stock (the "Stock Acquisition Date"), (ii)
10 business days following the commencement of a tender offer or exchange offer
if, upon consummation thereof, such person or group would be the beneficial
owner of 20% or more of such outstanding shares of Common Stock, or (iii) the
close of business on the tenth day after the Board of Directors of the Company
determines that a person, who alone or together with affiliates or associates
has beneficial ownership of at least 10% of the Common Stock then outstanding,
is an Adverse Person (the earliest of such dates being called the "Distribution
Date"), the Rights will be evidenced only by Common Stock certificates and will
be transferred with and only with Common Stock certificates. The Board of
Directors, after reasonable inquiry and investigation, may determine that a
person is an Adverse Person if the Board finds that (i) such person intends to
cause the Company to repurchase such person's shares or intends to attempt to
pressure the Company to take actions which will result in that person's
short-term financial gain under circumstances which would not be in the best
interest of the Company and the shareholders or (ii) ownership of the Common
Stock by such person is causing or is reasonably likely to cause a material
adverse impact on the business or prospects of the Company.
Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuance of the Common Stock 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 Stock outstanding as of the Record Date will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution Date and,
thereafter, such separate Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on April 8, 2006, unless earlier redeemed
by the Company as described below.
B-1
<PAGE> 44
In the event that (i) a Person (other than the Company and its
affiliates) becomes the beneficial owner of 20% or more of the then outstanding
shares of Common Stock or (ii) the Board determines that a person is an Adverse
Person, the Rights Agreement provides that proper provision shall be made so
that each holder of a Right (except for any Acquiring Person or Adverse Person
and certain Affiliates, Associates and transferees of such person) will
thereafter have the right to receive, upon exercise, Common Stock (or in certain
circumstances, cash, other securities or property) having a value equal to two
(2) times the Purchase Price of the Right. Notwithstanding the above, the
acquisition of beneficial ownership of 20% or more of the Common Stock under
(ii) above shall not permit the holder of a Right to purchase Common Stock at
such discounted purchase price if such acquisition of beneficial ownership is
approved in advance by the Board of Directors of the Company (with the approval
of a majority of the Continuing Directors).
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation, (ii) the
Company engages in a merger or other business combination transaction with
another person in which the Company is the surviving corporation, but in which
its Common Stock is changed or exchanged, or (iii) 50% or more of the Company's
assets or earning power is sold or transferred, the Rights Agreement provides
that proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, common stock of the acquiring company
having a value equal to two (2) times the exercise price of the Right.
The Purchase Price payable, and the number of shares of Common
Stock 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 Stock, (ii) upon the
grant to holders of the Common Stock of certain rights or warrants to subscribe
for Common Stock or convertible securities at less than the current market price
of the Common Stock, or (iii) upon the distribution to holders of the Common
Stock of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
The Rights may be redeemed by the Board in whole, but not in part,
at a price of $.05 per Right (the "Redemption Price") at any time prior to
fifteen (15) days (plus such extensions as the Board, in its discretion,
specifies) after the Stock Acquisition Date. However, the Board of Directors may
not redeem any Rights following a determination that a person is an Adverse
Person. Immediately upon the action of the Board of Directors of the Company,
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock, or
any other form of considerations deemed appropriate by the Board of Directors.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
B-2
<PAGE> 45
Other than those provisions relating to the Redemption Price,
final expiration date and number of shares of Common Stock (and/or other
securities or property, if applicable) issuable upon exercise of the Rights, any
of the provisions of the Rights Agreement may be amended by the Board of
Directors of the Company prior to the Distribution Date; and, thereafter, the
provisions of the Rights Agreement may be amended by the Board only in order to
cure any ambiguity, to correct or supplement any provision contained in the
Rights Agreement which may be defective or inconsistent with any other
provision, to shorten or lengthen any time period or to make such other changes
as do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person); PROVIDED, however, that no amendment shall
be made after the Distribution Date (a) to lengthen any time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, or benefits to, holders of Rights or (b) to lengthen the redemption period
at a time when the Rights are not then redeemable.
A copy of the Rights Agreement has been tiled with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated May 15, 1996. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
B-3
<PAGE> 1
EXHIBIT 11
FERRO CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
3 Months 3 Months
(Dollars in Thousands) March March
1996 1995
---- ----
PRIMARY:
<S> <C> <C>
Weighted average shares and common stock equivalents 26,934,790 27,985,977
Net Income $13,151 $13,096
Less Preferred Stock Dividend, Net of Tax (931) (911)
----------- -----------
Income Available to Common Shareholders $12,220 $12,185
PRIMARY EARNINGS PER COMMON SHARE $0.45 $0.44
FULLY DILUTED:
Weighted average shares and common stock equivalents 26,934,790 27,985,977
Adjustments (primarily assumed conversion of
convertible preferred stock) 2,515,204 2,432,577
----------- -----------
29,449,994 30,418,554
Net Income $13,151 $13,096
Additional ESOP Contribution, Net of Tax (495) (511)
----------- -----------
Adjusted Net Income $12,656 $12,585
FULLY DILUTED EARNINGS PER SHARE $0.43 $0.41
</TABLE>
<PAGE> 1
EXHIBIT 12
FERRO CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
MARCH MARCH
(DOLLARS IN THOUSANDS) 1996 1995
---------- ----------
<S> <C> <C>
EARNINGS:
PRE-TAX INCOME 21,384 21,403
ADD: FIXED CHARGES 3,938 3,487
LESS: INTEREST CAPITALIZATION (53) (211)
---------- ----------
TOTAL EARNINGS 25,269 24,679
========== ==========
FIXED CHARGES:
INTEREST EXPENSE 3,322 3,076
INTEREST CAPITALIZATION 53 211
INTEREST PORTION OF RENTAL EXPENSE 563 200
---------- ----------
TOTAL FIXED CHARGES 3,938 3,487
========== ==========
TOTAL EARNINGS 25,269 24,679
DIVIDED BY:
TOTAL FIXED CHARGES 3,938 3,487
---------- ----------
RATIO 6.42 7.08
<FN>
NOTE: PREFERRED DIVIDENDS ARE EXCLUDED. AMORTIZATION OF DEBT EXPENSE AND
DISCOUNTS AND PREMIUMS WERE DEEMED IMMATERIAL TO THE ABOVE CALCULATION.
INTEREST PORTION OF RENTAL EXPENSE ARE CONSERVATIVE ESTIMATES BASED ON
ACTUAL AMOUNTS FROM PRIOR YEARS.
</TABLE>
<PAGE> 1
EXHIBIT 20
FERRO CORPORATION
Consolidated Balance Sheets
As of March 31, 1996 (Unaudited) and December 31, 1995
Consolidated Statements of Income
For the Three Months Ended
March 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1996 and 1995 (Unaudited)
<PAGE> 2
CONSOLIDATED BALANCE SHEET
FERRO CORPORATION AND SUBSIDIARIES
MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
(Dollars in Thousands)
(Unaudited) (Audited)
ASSETS 1996 1995
======
=============== ===============
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $7,558 $16,695
Net Receivables 239,951 230,742
Inventories 157,874 155,253
Other Current Assets 35,280 29,676
--------------- ---------------
Total Current Assets $440,663 $432,366
Investments in Affiliated Companies 7,671 7,622
Unamortized Excess of Cost Over Net Assets Acquired 94,961 95,553
Other Assets 32,457 33,119
Net Plant & Equipment 300,957 307,288
--------------- ---------------
$876,709 $875,948
=============== ===============
LIABILITIES
===========
Current Liabilities:
Notes and Loans Payable $25,933 $35,587
Accounts Payable, Trade 128,455 115,889
Income Taxes 15,087 10,870
Accrued Payrolls 15,798 16,718
Accrued Expenses and Other Current Liabilities 79,210 78,244
--------------- ---------------
Total Current Liabilities $264,483 $257,308
Long - Term Debt 105,218 104,910
ESOP Loan Guarantee 28,332 30,470
Deferred Income Taxes 21,539 21,380
Postretirement Liabilities 44,003 43,570
Other Liabilities 30,701 36,160
Shareholders' Equity 382,433 382,150
--------------- ---------------
$876,709 $875,948
=============== ===============
</TABLE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
FERRO CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Unaudited) (Unaudited)
(Dollars in Thousands) 1996 1995
==============================================================================================================
<S> <C> <C>
Segment Sales
Coatings, Colors, and Ceramics $195,488 $202,819
Plastics 63,636 75,478
Chemicals 89,060 64,650
----------------- -----------------
Total Net Sales $348,184 $342,947
Cost of Sales 262,925 257,215
Selling, Administrative and General Expenses 58,768 60,735
----------------- -----------------
Operating Income 26,491 24,997
Interest Expense 3,322 3,076
Net Foreign Currency (Gain) Loss (267) 143
Other (Income) Expense - Net 2,052 375
----------------- -----------------
Income Before Taxes 21,384 21,403
Taxes on Income 8,233 8,307
----------------- -----------------
Net Income 13,151 13,096
Dividend on Preferred Stock, Net of Tax 931 911
----------------- -----------------
Net Income Available to Common Shareholders $12,220 $12,185
================= =================
Per Common Share Data:
Primary Earnings $0.45 $0.44
Fully Diluted Earnings $0.43 $0.41
Shares Outstanding:
Average Outstanding 26,934,790 27,985,977
Average Fully Diluted 29,449,994 30,458,096
Actual End of Period 26,676,272 27,815,359
==============================================================================================================
</TABLE>
<PAGE> 4
Consolidated Statements of Cash Flows
Ferro Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Unaudited) (Unaudited)
(Dollars in Thousands) 1996 1995
==================================================================================================================
<S> <C> <C>
Net Cash Provided from Operating Activities $27,143 $20,050
Cash Flow from Investing Activities:
Capital Expenditures for Plant and Equipment (12,048) (13,540)
Acquisition of Companies, net of cash acquired (5,500) 0
Proceeds From Divestitures 0 928
Change in Restricted Deposits 0 368
Other Investing Activities 437 282
- ------------------------------------------------------------------------------------------------------------------
Net Cash (Used for) Provided by Investing Activities (17,111) (11,962)
Cash Flow from Financing Activities:
Net Borrowings (Repayments) Under Short-Term Lines (7,707) 6,248
Proceeds from Long-Term Debt 1,615 0
Purchase of Treasury Stock (8,795) (588)
Cash Dividend Paid (4,751) (4,896)
Other Financing Activities 504 146
- ------------------------------------------------------------------------------------------------------------------
Net Cash (Used for) Provided by Financing Activities (19,134) 910
Effect of Exchange Rate Changes on Cash (35) (90)
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (9,137) 8,908
Cash and Cash Equivalents at Beginning of Period 16,695 19,822
- ------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $7,558 $28,730
==================================================================================================================
Cash Paid During the Period for:
Interest $1,245 $854
Income Taxes $4,569 $3,794
==================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000035214
<NAME> FERRO CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,558
<SECURITIES> 0
<RECEIVABLES> 239,951
<ALLOWANCES> 0
<INVENTORY> 157,874
<CURRENT-ASSETS> 440,663
<PP&E> 653,087
<DEPRECIATION> 352,130
<TOTAL-ASSETS> 876,709
<CURRENT-LIABILITIES> 264,483
<BONDS> 105,218
<COMMON> 31,549
0
0
<OTHER-SE> 350,884
<TOTAL-LIABILITY-AND-EQUITY> 876,709
<SALES> 348,184
<TOTAL-REVENUES> 348,184
<CGS> 262,925
<TOTAL-COSTS> 321,693
<OTHER-EXPENSES> 5,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,322
<INCOME-PRETAX> 21,384
<INCOME-TAX> 8,233
<INCOME-CONTINUING> 13,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,151
<EPS-PRIMARY> .45
<EPS-DILUTED> .43
</TABLE>
