SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Graco Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 41-0285640
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(State of incorporation or (I.R.S. Employer Identification No.)
organization)
4050 Olson Memorial Highway, Golden Valley, Minnesota 55422
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(Address of principal executive offices) (Zip Code)
If this Form relates to the registration of a class of securities pursuant
to Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [X]
If this Form relates to the registration of a class of securities pursuant
to Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box. [ ]
Securities Act registration statement file number to which this form
relates: N/A (if applicable).
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered Each class is to be Registered
------------------------------- ------------------------------
Preferred Share Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
<PAGE>
Item 1. Description of Securities to be Registered.
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On February 25, 2000, the Board of Directors of Graco Inc. (the
"Company"), declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, $1.00 par value (the
"Common Shares"), of the Company. The dividend is payable on March 29, 2000 (the
"Record Date") to shareholders of record at the close of business on that date.
Each Right entitles the registered holder to purchase from the Company
1/400th of a Series A Junior Participating Preferred Share, $1.00 par value (the
"Preferred Shares"), of the Company at a price of $180 per 1/400th of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement"), dated as of February 25, 2000, between the Company and Norwest Bank
Minnesota, National Association, as Rights Agent (the "Rights Agent").
Initially, the Rights will attach to all certificates representing Common
Shares then outstanding and no separate Right Certificates will be distributed.
The Rights will separate from the Common Shares and a Distribution Date for the
Rights will occur upon the earlier of:
(1) the close of business on the 15th day following a public
announcement that a person or group of affiliated or associated persons
has become an "Acquiring Person" (i.e., has, subject to certain
exceptions, become the beneficial owner of 15% or more of the outstanding
Common Shares), or
(2) the close of business on the 15th day following the first public
announcement of a tender offer or exchange offer the consummation of which
would result in a person or group of affiliated or associated persons
becoming, subject to certain exceptions, the beneficial owner of 15% or
more of the outstanding Common Shares (or such later date as may be
determined by the Board of Directors of the Company before a person or
group of affiliated or associated persons becomes an Acquiring Person).
Until the Distribution Date,
(a) the Rights will be evidenced by the Common Share certificates
and will be transferred with and only with the Common Shares,
(b) new Common Share certificates issued after the Record Date upon
transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and
(c) the surrender for transfer of any Common Share certificate, even
without such notation or a copy of this Summary of Rights attached to it,
will also constitute the transfer of the Rights associated with the Common
Shares represented by such certificate.
As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on March 29, 2010, unless extended or
earlier redeemed or exchanged by the Company as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution:
(A) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Shares,
(B) upon the grant to holders of the Preferred Shares of certain
rights, options or warrants to subscribe for or purchase Preferred Shares
or convertible securities at less than the then current market price of
the Preferred Shares, or
(C) upon the distribution to holders of the Preferred Shares of
evidences of indebtedness or assets (excluding regular periodic cash
dividends or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those described in clause (B) above).
The number of Preferred Shares issuable upon the exercise of a Right is
also subject to adjustment in the event of a dividend on Common Shares payable
in Common Shares, or a subdivision, combination or consolidation of the Common
Shares.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Preferred Shares will be issued (other than
fractional shares that are integral multiples of 1/400th (subject to adjustment)
of a Preferred Share, which may, at the election of the Company, be evidenced by
depositary receipts) if in lieu of such issuance, a payment in cash is made
based on the closing price (pro-rated for the fraction) of the Preferred Shares
on the last trading date before the date of exercise.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights that are or were beneficially owned by the Acquiring Person
(which will thereafter be void), will have the right to receive upon exercise of
the Right at the then-current exercise price of the Right that number of Common
Shares having a market value of two times the exercise price of the Right,
subject to certain possible adjustments.
If, on or after the Distribution Date or within 15 days prior thereto, the
Company is acquired in certain mergers or other business combination
transactions or 50% or more of the assets or earning power of the Company and
its subsidiaries (taken as a whole) are sold on or after the Distribution Date
or within 15 days before the Distribution Date in one or a series of related
transactions, each holder of a Right (other than Rights that have become void
under the terms of the Rights Agreement) will have the right to receive, upon
exercise of the Right at the then current exercise price of the Right, that
number of Common Shares of the acquiring company (or, in certain cases, one of
its affiliates) having a market value of two times the exercise price of the
Right.
In certain events specified in the Rights Agreement, the Company is
permitted temporarily to suspend the exercisability of the Rights.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and before the acquisition by a person or group of
affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights that have become void under the terms of the Rights Agreement), in
whole or in part, for Common Shares or equivalent securities at an exchange
ratio per Right equal to the result obtained by dividing the exercise price of a
Right by the current per share market price of the Common Shares, subject to
adjustment.
At any time before the time that a person or group of affiliated or
associated persons has become an Acquiring Person, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right, subject to adjustment (the "Redemption Price"), payable in cash. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The Board of Directors and the Company shall not have any liability
to any person as a result of the redemption or exchange of the Rights pursuant
to the provisions of the Rights Agreement.
The terms of the Rights may be amended by the Board of Directors of the
Company, subject to certain limitations after the Distribution Date, without the
consent of the holders of the Rights, including an amendment before the date a
person or group of affiliated or associated persons becomes an Acquiring Person
to lower the threshold for exercisability of the Rights from 15% to not less
than the greater of (a) the sum of .001% and the largest percentage of the
outstanding Common Shares then known by the Company to be beneficially owned by
any person or group of affiliated or associated persons, or (b) 10% (subject to
certain exceptions).
Until a Right is exercised, the holder of the Right, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement (including all exhibits thereto) is
attached to this Registration Statement as Exhibit 1 and is incorporated by
reference herein. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.
Item 2. Exhibits.
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1. Rights Agreement, dated as of February 25, 2000, between Graco
Inc. and Norwest Bank Minnesota, National Association, as Rights
Agent.
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
GRACO INC.
Date: March 10, 2000 By: /s/Robert M. Mattison
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Its: Vice President, General Counsel
and Secretary
<PAGE>
Exhibit 1
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RIGHTS AGREEMENT
between
Graco Inc.
and
Norwest Bank Minnesota, National Association,
as Rights Agent
Dated as of February 25, 2000
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<PAGE>
TABLE OF CONTENTS
Page
Section 1. Certain Definitions........................................ 1
Section 2. Appointment of Rights Agent................................ 4
Section 3. Issue of Right Certificates................................ 5
Section 4. Form of Right Certificates................................. 6
Section 5. Countersignature and Registration.......................... 7
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Lost, Stolen, Destroyed or Mutilated Right
Certificates............................................... 7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights..................................................... 8
Section 8. Cancellation and Destruction of Right Certificates......... 10
Section 9. Reservation and Availability of Preferred Shares........... 10
Section 10. Preferred Shares Record Date............................... 11
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights........................................... 11
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. 20
Section 13. Consolidation, Merger, Share Exchange or Sale or Transfer
of Assets or Earning Power................................. 20
Section 14. Fractional Rights and Fractional Shares.................... 23
Section 15. Rights of Action........................................... 24
Section 16. Agreement of Right Holders................................. 24
Section 17. Right Certificate Holder Not Deemed a Shareholder.......... 25
Section 18. Concerning the Rights Agent................................ 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent.. 26
Section 20. Duties of Rights Agent..................................... 27
Section 21. Change of Rights Agent..................................... 29
Section 22. Issuance of New Right Certificates......................... 29
Section 23. Redemption................................................. 30
Section 24. Exchange................................................... 30
Section 25. Notice of Certain Events................................... 32
Section 26. Notices.................................................... 33
Section 27. Supplements and Amendments................................. 33
Section 28. Successors................................................. 34
Section 29. Benefits of this Agreement................................. 34
Section 30. Severability............................................... 34
Section 31. Governing Law.............................................. 34
Section 32. Counterparts............................................... 34
Section 33. Descriptive Headings....................................... 34
Exhibit A-- Articles of Amendment of Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock
Exhibit B-- Form of Right Certificate
Exhibit C-- Summary of Rights to Purchase Preferred Shares
<PAGE>
RIGHTS AGREEMENT
This Agreement is dated as of February 25, 2000, between Graco Inc., a
Minnesota corporation (the "Company"), and Norwest Bank Minnesota, National
Association, a national banking association (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (each a "Right" and collectively
the "Rights") for each Common Share of the Company outstanding at the Close of
Business on March 29, 2000 (the "Record Date"), each Right initially
representing the right to purchase 1/400th of a Preferred Share, upon the terms
and subject to the conditions set forth herein, and has further authorized the
issuance of one Right (as such number may hereafter be adjusted pursuant to
Section 11) with respect to each Common Share that shall become outstanding (a)
at any time between the Record Date and the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date or (b) upon the exercise or
conversion, before the earlier of the Redemption Date or the Final Expiration
Date, of any option or other security exercisable for or convertible into Common
Shares, which option or other such security is outstanding on the Distribution
Date.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" means any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding,
but shall not include (1) the Company, (2) any wholly owned Subsidiary of
the Company, (3) any employee benefit plan of the Company or of any
Subsidiary of the Company, or (4) any entity holding Common Shares for or
pursuant to the terms of any such plan described in clause (3) of this
sentence (each Person described in clauses (1) through (4) is called an
"Exempt Person"). Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares by the
Company that, by reducing the number of Common Shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person, together with all
Affiliates or Associates of such Person, shall become the Beneficial Owner
of 15% or more of the Common Shares of the Company then outstanding by
reason of share acquisitions by the Company and if such Person or such
Person's Affiliates or Associates, after such share acquisitions by the
Company, shall become the Beneficial Owner of any additional Common Shares
of the Company, and, immediately after becoming the Beneficial Owner of
such additional Common Shares, such Person, together with all Affiliates
and Associates of such Person, shall be the Beneficial Owner of 15% or
more of the Common Shares of the Company then outstanding, then such
Person (unless such Person is an Exempt Person) shall be deemed an
"Acquiring Person." An entity other than the Company or any wholly owned
Subsidiary of the Company holding Common Shares for or pursuant to the
terms of an employee benefit plan of the Company or of any Subsidiary of
the Company and in addition being the Beneficial Owner of Common Shares
that are not held for or pursuant to the terms of any such plan shall be
deemed to constitute an Acquiring Person, notwithstanding anything herein
stated, if, but only if, it, together with its Affiliates and Associates,
shall be the Beneficial Owner of 15% or more, exclusive of those Common
Shares held by it for or pursuant to the terms of any such plan, of the
Common Shares then outstanding. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person
who would otherwise be deemed an "Acquiring Person," pursuant to the
foregoing provisions of this paragraph (a), has become such inadvertently
(including, without limitation, because (A) such Person was unaware that
it beneficially owned a percentage of the Common Shares that would
otherwise cause such Person to be an "Acquiring Person" or (B) such Person
was aware of the extent of its Beneficial Ownership but had no actual
knowledge of the consequences of such Beneficial Ownership under this
Agreement), and without any intention of changing or influencing control
of the Company, and such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be
deemed an "Acquiring Person," pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person."
(b) "Affiliate" and "Associate" have the respective meanings
ascribed to those terms in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," or have beneficial ownership of, any
securities:
(1) that such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, including
without limitation securities with respect to which such Person or
any of such Person's Affiliates or Associates has "beneficial
ownership" pursuant to Rule 13d-3 promulgated under the Exchange
Act;
(2) that such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding, whether or not in writing (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, other rights
(other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own or to have beneficial ownership of,
any securities pursuant to subparagraph (1), (2) or (3) of this
paragraph (c) solely because such securities are tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right
to vote or dispose of (including without limitation 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 or have beneficial
ownership of, any security pursuant to subparagraph (1), (2) or (3)
of this paragraph (c) solely because of the right to vote such
security pursuant to an agreement, arrangement or understanding if
the agreement, arrangement or understanding to vote such security
(A) arises solely from a revocable proxy or consent given to such
Person or any of such Person's Affiliates or Associates in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable 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) as being beneficially owned by such Person; or
(3) that 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 (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described
in the final proviso to subparagraph (2) of this paragraph (c)), or
disposing of, any securities of the Company.
Notwithstanding anything in these definitions of Beneficial Owner,
beneficially own or 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 issued and outstanding together with the number of such securities
not then actually issued and outstanding that such Person would be deemed
to beneficially own hereunder.
(d) "Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York or Minnesota
are authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date means 5:00 p.m.,
Minneapolis, Minnesota time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 p.m., Minneapolis, Minnesota
time, on the next Business Day.
(f) "Common Shares," when used with reference to the Company, means
Common Shares, $1.00 par value (as such par value may be changed from time
to time), of the Company. "Common Shares," when used with reference to any
Person other than the Company, means the class or series of capital stock
(or equity interest) with the greatest voting power of such other Person
or if such other Person is a Subsidiary of another Person, the Person or
Persons that ultimately control such first mentioned Person.
(g) "Distribution Date" has the meaning set forth in Section 3.
(h) "Final Expiration Date" has the meaning set forth in Section 7.
(i) "Person" means any individual, firm, corporation, limited
liability company, partnership, trust or other entity, and shall include
any successor (by merger or otherwise) of such entity.
(j) "Preferred Shares" means Series A Junior Participating
Preferred Shares, $1.00 par value (as such par value may be changed from
time to time), of the Company, having the rights and preferences set forth
in the form of Certificate of Designation, Preferences and Rights
previously filed with the Minnesota Secretary of State, amended in its
entirety as provided in Exhibit A hereto.
(k) "Redemption Date" has the meaning set forth in Section 7.
(l) "Section 11(a)(2) Event" means an event described in the first
sentence of Section 11(a)(2).
(l) "Section 13 Event" means any event described in clauses (1),
(2), (3) or (4) of Section 13(a).
(m) "Shares Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, includes, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act)
by the Company or an Acquiring Person that an Acquiring Person has become
such.
(n) "Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power of the voting equity
securities or other equity interests entitled to vote in the election of
directors (or Persons with comparable responsibilities if the entity has
no directors) is beneficially owned, directly or indirectly, by such
Person or otherwise controlled by such Person.
Section 2. Appointment of Rights Agent.
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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, shall
before the Distribution Date also be the holders of the Common Shares) 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.
Section 3. Issue of Right Certificates.
---------------------------
(a) Until the earlier of (1) the Close of Business on the 15th day
after the Shares Acquisition Date or (2) the Close of Business on the 15th
day (or such later date as may be determined by action of the Board of
Directors of the Company before such time as any Person becomes an
Acquiring Person) after the date of the first public announcement (as
defined in Rule 14d-2 promulgated under the Exchange Act) by any Person
(other than an Exempt Person) relating to a tender or exchange offer the
consummation of which would result in any Person (other than an Exempt
Person) becoming the Beneficial Owner of 15% or more of the
then-outstanding Common Shares (including any such date that is after the
date of this Agreement and before the issuance of the Rights; the earlier
of such dates being referred to as the "Distribution Date"), (A) the
Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for Common Shares registered in the
names of the holders thereof (which certificates shall also be deemed to
be Right Certificates when the context so requires) and not by separate
Right Certificates, and (B) the right to receive Right Certificates will
be transferable only in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the Company will prepare
and execute, the Rights Agent will countersign, and the Company will send
or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more Right
Certificates, in substantially the form of Exhibit B hereto (the "Right
Certificates"), evidencing one Right for each Common Share so held,
subject to adjustment pursuant to Section 11(i). If an adjustment in the
number of Rights per Common Share has been made pursuant to Section 11(i),
at the time Right Certificates are distributed, the Company may, to the
extent provided in Section 14(a), make the necessary and appropriate
rounding adjustments (as set forth in Section 14(a)) so that Right
Certificates are distributed representing only whole numbers of Rights and
pay cash in lieu of fractional Rights pursuant to Section 14(a). As of and
after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of
Rights"), by first class, postage-prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company. With respect
to certificates for Common Shares outstanding as of the Record Date, until
the Distribution Date (or the earlier Redemption Date or Final Expiration
Date), the Rights will be evidenced by such certificates registered in the
names of the holders thereof and the registered holders of the Common
Shares shall also be the registered holders of the associated Rights.
Until the Distribution Date (or the earlier Redemption Date or Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares (including without limitation the surrender for transfer of any
certificate for Common Shares outstanding as of the Record Date), with or
without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. Notwithstanding any legend contained on any such
surrendered stock certificate, from and after the Close of Business on the
Record Date, the surrender for transfer of any such certificate for Common
Shares shall not constitute the transfer of the rights granted pursuant to
the Rights Agreement between the Company and the Rights Agent dated March
9, 1990 (the "Expiring Rights"), which Expiring Rights expire at the Close
of Business on March 29, 2000.
(c) Certificates for Common Shares that become outstanding after the
Record Date and (1) before the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date or (2) upon the exercise or
conversion, before the earlier of the Redemption Date or the Final
Expiration Date, of any option or other security exercisable for or
convertible into Common Shares, which option or other security is
outstanding on the Distribution Date, shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Graco Inc.
(the "Company") and Norwest Bank Minnesota, National Association,
dated as of February 25, 2000 (the "Rights Agreement"), the terms of
which (including restrictions on the transfer of such Rights) are
hereby incorporated herein by reference and a copy of which is on
file at the principal executive 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 without
charge after receipt of a written request therefor from such holder.
Under certain circumstances, as set forth in the Rights Agreement,
Rights that are or were beneficially owned by an Acquiring Person or
any Associate or Affiliate thereof (as those terms are defined in
the Rights Agreement) may become void.
With respect to such certificates containing any such legend, until the
earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, the
registered holders of the Common Shares shall also be the registered
holders of the associated Rights and the surrender for transfer of any
such certificate shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby. If the Company
purchases or acquires any Common Shares after the Record Date but before
the Distribution Date, any Rights associated with such Common Shares shall
be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares that are no
longer outstanding.
Section 4. Form of Right Certificates.
--------------------------
The Right Certificates (and the forms of election to purchase Preferred
Shares and of assignment to be printed on the reverse thereof) shall be in
substantially the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be 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 or automated quotation system on which
the Rights may from time to time be listed, or to conform to usage or to reflect
adjustments to the Rights made pursuant to this Agreement. Subject to Sections
11 and 22, the initial Right Certificates, whenever distributed, shall entitle
the holders thereof to purchase such number of 1/400ths of a Preferred Share as
shall be set forth therein at the price per 1/400th of a Preferred Share set
forth therein (the price per 1/400th of a Preferred Share being called the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman, Chief Executive Officer, President, or the Vice
President, General Counsel and Secretary, either manually or by facsimile
signature. The Right Certificates shall be countersigned, either manually
or by facsimile signature, by the Rights Agent and shall not be valid for
any purpose unless so countersigned. If any officer of the Company who
shall have signed or whose facsimile signature shall appear on any of the
Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the
Company, such Right Certificates, nevertheless, may be countersigned by
the Rights Agent, and issued and delivered by the Company with the same
force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at
the actual date of the signing of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at
the date of the execution of this Rights Agreement any such person was not
such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or the office or offices
designated as the appropriate place for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right Certificates and the
date and certificate number of each of the Right Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
-------------------------------------------------------------
Certificates; Lost, Stolen, Destroyed or Mutilated Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to Section 14, at any time after the Close of Business
on the Distribution Date, and at or before the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(2) or
that have been exchanged pursuant to Section 24) may be transferred, split
up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of
1/400ths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in
the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Rights
Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the office or offices
of the Rights Agent designated for such purpose. Thereupon the Rights
Agent shall, subject to Section 14, countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment by the registered
holder of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split-up, combination or
exchange of Right Certificates. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate until the registered
holder shall have duly completed and executed the form of assignment on
the reverse side of such Right Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of such Right Certificate or Affiliates or Associates
thereof as the Company shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to
the Rights Agent and cancellation of the Right Certificate if mutilated,
the Company will make and deliver a new Right Certificate of like tenor to
the Rights Agent for countersignature and delivery to the registered owner
in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 11(a)(2), the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution
Date upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly completed and executed, to the
Rights Agent at the office or offices of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each 1/400th
of a Preferred Share as to which Rights are exercised, at or before the
earliest of (1) the Close of Business on March 29, 2010 (the "Final
Expiration Date"), (2) the time at which the Rights are redeemed as
provided in Section 23 (the "Redemption Date"), or (3) the time at which
such Rights are exchanged as provided in Section 24.
(b) The Purchase Price for each 1/400th of a Preferred Share
pursuant to the exercise of a Right shall initially be $180, shall be
subject to adjustment from time to time as provided in Sections 11 and 13
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly completed and executed,
accompanied by payment of the Purchase Price for the shares to be
purchased and an amount equal to any applicable transfer tax required to
be paid by the holder of such Right Certificate in accordance with Section
9 in cash, or by certified check or bank cashiers' check or money order
payable to the order of the Company, the Rights Agent shall, subject to
Section 20(k), thereupon promptly (1) (A) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the number of
Preferred Shares 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 Preferred
Shares issuable upon exercise of the Rights under this Agreement with a
depositary agent, requisition from the depositary agent depositary
receipts representing such number of 1/400ths of a Preferred Share as are
to be purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company hereby directs the depositary agent
to comply with such request, (2) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional
interests in shares in accordance with Section 14, (3) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (4) when appropriate, after receipt, promptly deliver such cash
for fractional interests to or upon the order of the registered holder of
such Right Certificate.
(d) If the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to the registered holder of such
Right Certificate or to such holder's duly authorized assigns, subject to
Section 14.
(e) 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 (1) duly completed and executed the form of election to
purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (2) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) of such
Right Certificate or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
All Right Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by 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 Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company.
Section 9. Reservation and Availability of Preferred Shares.
------------------------------------------------
(a) The Company will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, the number of Preferred
Shares that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) At such time, if any, as, and so long as, the Preferred Shares
issuable upon the exercise of 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 will prepare and file, as soon as practicable
following the Shares Acquisition Date, a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the Rights
and the Company's securities purchasable upon exercise of the Rights on an
appropriate form, and use its best efforts to cause such registration
statement to (1) become effective as soon as practicable after such
filing, and (2) remain effective (with a prospectus at all times meeting
the requirements of the Act) until the earlier of (A) the date as of which
the Rights are no longer exercisable for such securities or (B) the Final
Expiration Date. 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 90 days after the date the registration statement is filed, the
exercisability of the Rights in order to permit the registration statement
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 the
Distribution Date, the Company may temporarily suspend the exercisability
of the Rights until such time as a registration statement has been
declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained
or the exercise thereof is not permitted under applicable law.
(d) The Company will take all such action as may be necessary to
ensure that all Preferred Shares delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price and any applicable transfer
taxes), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company will pay when due and payable any and all federal
and state transfer taxes and charges that may be payable in respect of the
issuance or delivery of the Right Certificates or of any Preferred Shares
upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax that may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares
in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates or depositary receipts for Preferred Shares upon
the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date.
----------------------------
Each person in whose name any certificate for Preferred Shares is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Shares transfer books
of the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next Business
Day on which the Preferred Shares transfer books of the Company are open. Before
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
as such shall not be entitled to any rights of a holder of Preferred 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.
(a) (1) If the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation, merger or statutory
share exchange in which the Company is the continuing, surviving or
acquiring corporation), except as otherwise provided in this Section
11(a), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date pursuant to the exercise of the Rights, 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 (and any applicable transfer taxes), the aggregate number
and kind of shares of capital stock that, if such Right had been exercised
immediately before such date and at a time when the Preferred Shares
transfer books of the Company were open, such holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that
would require an adjustment under both Section 11(a)(1) and Section
11(a)(2), the adjustment provided for in this Section 11(a)(1) shall be in
addition to, and shall be made before, any adjustment required pursuant to
Section 11(a)(2).
(2) Subject to Section 24, if any Person shall become an Acquiring
Person (other than pursuant to any Section 13 Event occurring on or after
the Distribution Date or within 15 days prior thereto), proper provision
shall be made so that each holder of a Right, subject to Section 11(a)(3),
shall thereafter have a right to receive, upon exercise thereof by payment
of the amount equal to the product of the number of 1/400ths of a
Preferred Share that would otherwise be issuable upon exercise of a Right
and the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (A) multiplying the
then-current Purchase Price by the number of 1/400ths of a Preferred Share
for which a Right is exercisable immediately before the occurrence of the
Section 11(a)(2) Event and (B) dividing that product by 50% of the
then-current per-share market price of the Company's Common Shares
(determined pursuant to Section 11(d)) on the date of such occurrence.
From and after the first occurrence of a Section 11(a)(2) Event or a
Section 13 Event, any Rights that are beneficially owned by any Acquiring
Person (or any Associate or Affiliate thereof) or were beneficially owned
by any Acquiring Person (or any Associate or Affiliate thereof) after the
Acquiring Person became an Acquiring Person shall become void without any
further action and no holder of such Rights shall thereafter have any
rights to exercise such Rights or any other rights whatsoever with respect
to such Rights, whether under this Agreement or otherwise. No Right
Certificate shall be issued pursuant to Section 3 that represents Rights
that would be void pursuant to the preceding sentence; no Right
Certificate shall be issued at any time upon the transfer of any Rights to
an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate of such an Acquiring Person or to
any nominee of such Acquiring Person, Associate or Affiliate; and any
Right Certificate delivered to the Rights Agent for transfer to an
Acquiring Person or any Associate or Affiliate of such Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be
canceled. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(2) are complied with, but shall have no
liability to any holder of a Right Certificate or other Person as a result
of its failure in good faith to make any determinations with respect to an
Acquiring Person or its Affiliates or Associates.
(3) If, on the date of the occurrence of a Section 11(a)(2) Event
(the "Adjustment Date"), the Company does not have sufficient authorized,
unissued and unreserved Common Shares, available to permit the exercise in
full of all Rights that are exercisable on the Adjustment Date for the
number of Common Shares per Right provided for in Section 11(a)(2), then
the Exercise Price (as defined below) and the number of Common Shares to
be delivered by the Company upon exercise of a Right shall be further
adjusted as provided in this subparagraph (3).
(A) Definitions:
(i) The "Aggregate Market Value" is the product of
the number of Available Shares times the current
per-share market price of the Common Shares on the
Adjustment Date, determined as provided in Section
11(d).
(ii) The "Available Shares" are all unreserved
Common Shares which are authorized and unissued
immediately before the Adjustment Date.
(iii) The "Exercise Price" is the amount of the
payment that must be made by the holder of a Right in
connection with the exercise of one Right immediately
before the Adjustment Date.
(iv) The "Deficiency" is the amount by which two
times the Exercise Price exceeds the quotient obtained
by dividing the Aggregate Market Value by the number of
Rights remaining outstanding immediately before the
Adjustment Date (the "Remaining Rights") (which number
shall not include the Rights that are beneficially owned
by any Acquiring Person (or any Associate or Affiliate
thereof) or were beneficially owned by any Acquiring
Person (or any Associate or Affiliate thereof) after the
Acquiring Person became an Acquiring Person that shall
have become void pursuant to Section 11(a)(2)).
(B) If the Deficiency is less than or equal to the Exercise
Price, then
(i) the number of Common Shares to be delivered by
the Company upon exercise of a Right shall be adjusted
to equal the number of Available Shares divided by the
number of Remaining Rights; and
(ii) the amount of cash required to be delivered
by the holder of a Right upon the exercise thereof shall
be adjusted (the "New Exercise Price") to equal the
Exercise Price minus the Deficiency; provided, however,
that in no event will the New Exercise Price be less
than the aggregate par value of the Common Shares
required to be delivered upon the exercise of one Right
pursuant to subparagraph (B)(i) above.
(C) If the Deficiency is greater than the Exercise
Price, then
(i) the number of Common Shares to be delivered by
the Company upon exercise of a Right shall be adjusted
to equal the quotient obtained by dividing the Exercise
Price by the per-share market price of the Common Shares
on the Adjustment Date;
(ii) the New Exercise Price shall equal the
aggregate par value of the Common Shares required to be
delivered upon the exercise of one Right pursuant to
subparagraph (C)(i) above; and
(iii) In lieu of issuing Common Shares (in whole
or in part upon the exercise of Rights) the Company may
issue, upon the exercise of Rights at the New Exercise
Price, other equity securities of the Company
(including, without limitation, shares, or units or
fractions of shares, of preferred stock, which may
include Preferred Shares) that the Board of Directors of
the Company has determined to have substantially the
same value, voting rights, dividend rights and other
rights as the Common Shares (such equity securities are
herein called "common share equivalents"). To the extent
that such common share equivalents (or fractions
thereof) are substituted for Common Shares upon exercise
of the Rights following the occurrence of a Section
11(a)(2) Event, they shall be substituted on a pro-rata
basis with respect to all Rights (other than Rights that
are beneficially owned by any Acquiring Person (or any
Associate or Affiliate thereof) or were beneficially
owned by any Acquiring Person (or any Associate or
Affiliate thereof) after the Acquiring Person became an
Acquiring Person that shall have become void pursuant to
Section 11(a)(2)). Such common shares equivalents shall
not be included in Available Shares, and all of the
Available Shares shall be reserved, as of the Adjustment
Date, for issuance, on a pro-rata basis, upon exercise
of the Rights and may not be substituted for with common
share equivalents upon the exercise of any Right except
to the extent that the number of Common Shares required
to be delivered under subparagraph (C)(i) upon the
exercise of such Right exceeds the quotient of the
number of Available Shares divided by the number of
Remaining Rights.
(D) If, at the time any adjustment is required pursuant to
this Section 11(a)(3), the Common Shares shall have no par value,
then for the purpose of this Section 11(a)(3), the par value of the
Common Shares shall be deemed to be $1.00 per share.
(E) If there shall not be sufficient authorized but unissued
and unreserved Common Shares (or common share equivalents the
issuance of which is permitted under Section 11(a)(3)(C)(iii)), to
permit the exercise in full of the Rights in accordance with this
subparagraph (3), the Company shall use its best efforts to cause
the authorization of sufficient additional Common Shares or common
share equivalents to permit such exercise and, if the Board of
Directors of the Company shall determine in good faith that it is
likely that sufficient additional Common Shares or common stock
equivalents could be authorized to permit such exercise, the Company
may suspend the exercisability of the Rights for a period not to
exceed 90 days (and not beyond the Final Expiration Date) in order
to seek any authorization of additional Common Shares or common
share equivalents. 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.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling
them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the
same rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares)
less than the current per-share market price of the Preferred Shares (as
determined pursuant to Section 11(d)) 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 before such record
date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date, plus the number of
Preferred Shares that the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase, at such current per-share
market price, and the denominator of which shall be the number of
Preferred Shares outstanding on such record date, plus the number of
additional Preferred Shares and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of
the Rights. Preferred Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall again be adjusted to
be the Purchase Price that would then be in effect if such record date had
not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation or in a statutory
share exchange) of evidences of indebtedness or cash or non-cash assets
(other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately before such record date by a fraction, the numerator of
which shall be the current per-share market price of the Preferred Shares
(as determined pursuant to Section 11(d)) 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 and shall be binding on the Rights Agent and
the holders of the Rights) of the portion of the evidences of indebtedness
or cash or non-cash assets so to be distributed on, or of such
subscription rights or warrants applicable to, one Preferred Share, and
the denominator of which shall be such current per-share market price of
the Preferred Shares. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase
Price that would then be in effect if such record date had not been fixed.
(d) (1) For the purpose of any computation hereunder, the "current
per-share market price" of any security (a "Security" for the purpose of
this Section 11(d)(1)) on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the 30 consecutive
Trading Days (as defined below) immediately before such date; provided,
however, that if the current per-share market price of the Security is
determined during a period following the announcement by the issuer of
such Security of (A) a dividend or distribution on such Security payable
in such Security or securities convertible into such Security (other
than the Rights) or (B) any subdivision, combination or reclassification
of such Security, and before the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such
case, the current per-share market price shall be appropriately adjusted
to reflect the current market price per share equivalent of such Security.
The closing price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange
or, if the Security is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Security is listed or admitted
to trading or, if the Security is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported on the Nasdaq National Market, the Nasdaq SmallCap
Market or any similar system then in use, or, if on any such date the
Security is not quoted or reported by any such organization, the average
of the closing bid and asked prices as furnished by a professional market
maker making a market in the Security selected by the Board of Directors
of the Company. Except as provided in Section 11(d)(2) with respect
to Preferred Shares, if on any such day no market maker is making a market
in the Security, the fair value of such Security on such day 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 Rights Agent and the holders of the
Rights) shall be used in lieu of the closing price for such day. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open
for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(2) If the Preferred Shares are not publicly held or listed or
traded in a manner described in Section 11(d)(1), then, notwithstanding
anything to the contrary provided in Section 11(d)(1), the "current per-
share market price" of the Preferred Shares shall be conclusively deemed
to be the current per-share market price of the Common Shares as
determined pursuant to Section 11(d)(1) multiplied by 400 (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof). If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, the "current
per-share market price" of the Preferred Shares 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 binding on the Rights Agent and the
holders of the Rights.
(e) Anything herein to the contrary notwithstanding, except as
provided in the third sentence of this Section 11(e), no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments that by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest one-millionth of a Preferred
Share or 1/10,000th of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11, but for the first sentence of this Section
11(e), shall be made no later than the earlier of (1) three years from the
date of the transaction that requires such adjustment or (2) the Final
Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Company
other than Preferred Shares, thereafter the number of such other shares so
receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the shares contained in Section 11(a)
through (c) inclusive and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Shares shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the 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 1/400ths of a
Preferred Share (or other securities) purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(b) and (c), each Right outstanding
immediately before the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of
1/400ths of a Preferred Share (calculated to the nearest one-millionth of
a Preferred Share) obtained by (1) multiplying (A) the number of 1/400ths
of a share covered by a Right immediately before such adjustment by (B)
the Purchase Price in effect immediately before such adjustment of the
Purchase Price and (2) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of 1/400ths of a Preferred Share purchasable upon
the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of
1/400ths of a Preferred Share for which a Right was exercisable
immediately before such adjustment. Each Right held of record before such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest 1/10,000th) obtained by dividing the Purchase
Price in effect immediately before 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 Right Certificates have been
issued on or after the Distribution Date, shall be at least 10 days later
than the date of the public announcement. If Right Certificates have been
issued on or after the Distribution Date, 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
Right Certificates on such record date Right Certificates evidencing,
subject to Section 14, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such
holders before the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights
to which such holders shall be entitled after such adjustment. Right
Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein, may bear, at the option
of the Company, the adjusted Purchase Price, and shall be registered in
the names of the holders of record of Right Certificates on the record
date specified in the public announcement.
(j) Regardless of any adjustment or change in the Purchase Price or
the number of 1/400ths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price per 1/400th of a Preferred Share
and the number of 1/400ths of a Preferred Share that were expressed in the
initial Right Certificates issued hereunder.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the
Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in
effect before such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(l) 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 the Board of Directors of the Company in its sole
discretion shall determine to be advisable in order that any (1)
consolidation or subdivision of the Preferred Shares, (2) issuance wholly
for cash of any of the Preferred Shares at less than the current per-share
market price, (3) issuance wholly for cash of Preferred Shares or
securities that by their terms are convertible into or exchangeable for
Preferred Shares, (4) dividends on Preferred Shares payable in Preferred
Shares or (5) issuance of rights, options or warrants referred to in
paragraph (b) of this Section 11, hereafter made by the Company to holders
of its Preferred Shares shall not be taxable to such shareholders.
(m) Anything in this Agreement or the Rights to the contrary
notwithstanding, if at any time after the date of this Agreement and
before the Distribution Date, the Company shall (1) declare or pay any
dividend on the Common Shares payable in Common Shares or (2) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common
Shares, then in any such case (A) the number of 1/400ths of a Preferred
Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of 1/400ths of a Preferred
Share so purchasable immediately before such event by a fraction, the
numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common
Shares outstanding immediately after such event and (B) each Common Share
outstanding immediately after such event shall have issued with respect to
it that number of Rights that each Common Share outstanding immediately
before such event had issued with respect to it. The adjustments provided
for in this Section 11(m) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected. If an event occurs that would require an
adjustment under Section 11(a)(2) and this Section 11(m), the adjustments
provided for in this Section 11(m) shall be in addition to, and prior to,
any adjustment required pursuant to Section 11(a)(2).
(n) If any adjustment in the Purchase Price pursuant to paragraph
(b) or (c) of this Section 11 would not be permitted by law, under the
Company's Articles of Incorporation or under the Certificate of
Designation, Preferences and Rights establishing the Preferred Shares, as
amended, no such issuance of securities or distribution of evidences of
indebtedness or other assets or subscription rights or warrants, as the
case may be, that would require such an adjustment but for the limitations
established by law, the Company's Articles of Incorporation or such
Certificate of Designation, Preferences and Rights, as amended, shall be
made by the Company.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Sections 11 and 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) if such adjustment is
made after the Distribution Date, mail a brief summary thereof to each holder of
record of a Right Certificate in accordance with Section 25. The Rights Agent
shall be fully protected in relying on such certificate and on any adjustment
therein contained.
Section 13. Consolidation, Merger, Share Exchange or Sale or Transfer of
-------------------------------------------------------------
Assets or Earning Power.
- ------------------------
(a) If, on or after the Distribution Date or within 15 days
prior thereto, directly or indirectly,
(1) the Company shall consolidate with, or merge with and
into, any other Person, and the Company shall not be the continuing
or surviving corporation of such consolidation or merger,
(2) any Person shall consolidate with the Company, or merge
with and 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 Common Shares of the Company shall be changed into or
exchanged for stock or other securities of any other Person (or the
Company) or money or any other property (except as a result of the
exercise of statutory dissenters' rights),
(3) the company shall effect a statutory share exchange with
outstanding Common Shares of the Company being exchanged for stock
or other securities of any other Person, money or any other
property, or
(4) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one
or a series of related transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company or one or more of its wholly
owned Subsidiaries),
then, and in each such case, proper provision shall be made so that (A)
each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof by payment
of the amount equal to the product of the number of 1/400ths of a
Preferred Share that would otherwise be issuable upon exercise of a Right
and the then-current Purchase Price in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable
Common Shares of the Principal Party (as defined below), not subject to
any liens, encumbrances, rights of first refusal or adverse claims, as
shall be equal to the result obtained by (i) multiplying the then-current
Purchase Price by the number of 1/400ths of a Preferred Share for which a
Right is, immediately before the occurrence of the Section 13 Event,
exercisable and (ii) dividing that product by 50% of the then-current
per-share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d)) on the date of consummation of such
Section 13 Event; (B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such merger, consolidation, statutory share
exchange, sale or transfer, all the obligations and duties of the Company
pursuant to this Agreement; (C) the term "Company" shall thereafter be
deemed to refer to such Principal Party; and (D) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares to permit the exercise of all
outstanding Rights) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to
its Common Shares thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means:
(1) in the case of any transaction described in clauses (1),
(2) or (3) of the first sentence of Section 13(a), the Person
(including, without limitation, the Company as successor thereto or
as the surviving corporation) that is the issuer of any securities
into which Common Shares of the Company are converted in such
merger, consolidation or exchange, or if no securities are so
issued, the Person that is the other party to such merger,
consolidation or exchange; or
(2) in the case of any transaction described in clause (4) 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, (A) if the Common Shares of such
Person are not at such time and have not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person, the
Common Shares of which are and have been so registered, "Principal Party"
shall refer to such other Person, and (B) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Shares of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized, unissued and
unreserved Common Shares 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 Section 13 Event, the Principal Party
will:
(1) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon
exercise of the Rights, on an appropriate form, and use its best
efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act)
until the earlier of (i) the date as of which the Rights are no
longer exercisable for such securities or (ii) the Final Expiration
Date;
(2) 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; and
(3) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
(d) The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there
are any rights, warrants, instruments or securities outstanding or any
agreements or arrangements that, as a result of the consummation of such
transaction, would eliminate or substantially diminish or eliminate the
benefits intended to be afforded by the Rights.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, exchanges or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates that evidence fractional Rights. In
lieu of such fractional Rights, there may be paid to the registered
holders of the Right Certificates with regard to which such fractional
Rights would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately before the
date on which such fractional Rights would have been otherwise issuable.
The closing price for any day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported on the Nasdaq National Market or the Nasdaq SmallCap
Market or any similar system then in use or, if on any such date the
Rights are not so quoted or reported, 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 in lieu of the closing price for
such day.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of
1/400th of a Preferred Share, or, if a Right shall then be exercisable for
a fraction other than 1/400th of a Preferred Share, integral multiples of
that fraction) upon exercise of the Rights or to issue certificates which
evidence fractions of Preferred Shares (other than fractions that are
integral multiples of 1/400th of a Preferred Share, or if a Right shall be
then exercisable for a fraction other than 1/400th of a Preferred Share,
integral multiples of that fraction). Fractions of Preferred Shares in
integral multiples of 1/400th of a Preferred Share or, if a Right shall
then be exercisable for a fraction other than 1/400th of a Preferred
Share, integral multiples of that fraction may, at the election of the
Company, be evidenced by depositary receipts pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided
that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which
they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that
are not integral multiples of 1/400th of a Preferred Share, or, if a Right
shall then be exercisable for a fraction other than 1/400th of a Preferred
Share, integral multiples of that fraction, the Company may pay to the
registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction
of the current market value of one Preferred Share. For purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(1)) for the Trading Day immediately before the
date of such exercise or if the closing price is not determinable pursuant
to the second sentence of Section 11(d)(1), the current market value of a
Preferred Share shall be determined pursuant to Section 11(d)(2).
(c) The holder of a Right by the acceptance of the Rights expressly
waives such holder's right to receive any fractional Rights or any
fractional shares (except as provided above) upon exercise of a Right.
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement, except the rights of
action given to the Rights Agent under Section 18, are vested in the respective
registered holders of the Right Certificates (and, before the Distribution Date,
the registered holders of the Common Shares); and any registered holder of any
Right Certificate (or, before the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, before the Distribution Date, of the Common Shares), may, in
such holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder's right to exercise the
Rights evidenced by such Right Certificate (or, before the Distribution Date,
the associated Common Shares certificate) in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders.
--------------------------
Every holder of a Right, by accepting the same, agrees with the Company and
the Rights Agent and with every other holder of a Right that:
(a) before the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or offices of the Rights Agent designated for such purposes,
duly endorsed or accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, before the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificate or the associated Common
Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary;
(d) the Company may issue Rights on or after the Record Date but
before the Distribution Date, and in certain instances after the
Distribution Date, as provided in this Agreement; and
(e) notwithstanding anything in this Agreement or the Rights to the
contrary, the Company, the Rights Agent and the Board of Directors shall
not have any liability to any holder of a Right or other Person as a
result of the inability of the Company or the Rights Agent 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.
Section 17. Right Certificate Holder Not Deemed a Shareholder.
-------------------------------------------------
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company that may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution
of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability or expense (including the
costs and expenses of defending against any claim of liability), 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.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares
or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20.
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 or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer 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 Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
(b) If at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under
its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates
either in its prior name or in its changed name; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Right Certificates (or, before the Distribution Date, the
Common Shares 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 the "current per-share market price") be
proved or established by the Company before taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by any one of the Chairman, the
Chief Executive Officer, the President, or the Vice President, General
Counsel and 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 to the Company and
any other Person 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
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect
of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in
any Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 11(a)(2)) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections
3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that
would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice
that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to
be issued pursuant to this Agreement or any Right Certificate or as to
whether any Preferred Shares or Common Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman, the Chief Executive Officer, the President or the
Vice President, General Counsel and Secretary 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 or
for delay in acting while waiting for those instructions.
(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 or its Subsidiaries may be interested, or
contract with or lend money to the Company or its Subsidiaries 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 its Subsidiaries 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 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 or powers if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the form of assignment or form of
election to purchase, as the case may be, has either not been duly
completed and executed or indicates an affirmative response to enumerated
clause 1 and/or 2 on the reverse side of the applicable Right Certificate,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days' notice in writing mailed to
the Company and to each transfer agent of the Common Shares and Preferred Shares
by registered or certified mail, and, if such notice is mailed after the
Distribution Date, to the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing mailed to the Rights Agent or successor Rights Agent, as
the case may be, and to each transfer agent of the Common Shares and Preferred
Shares by registered or certified mail, and, if such notice is mailed after the
Distribution Date, to the holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit such
holder's Right Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the State
of Minnesota or New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of Minnesota or New York), in good standing, having an office in the State
of Minnesota or New York that is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (b) an affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
and Preferred Shares, and, if such notice is filed after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, at any
time before the earlier of (1) such time as a Person becomes an Acquiring
Person or (2) the Close of Business on the Final Expiration Date, redeem
all but not less than all of the then-outstanding Rights at a redemption
price of $.001 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date of
this Agreement (such redemption price being referred to as the "Redemption
Price"). The Redemption Price shall be payable in cash by the Company. The
redemption of the Rights by the Board of Directors of the Company may be
made effective at such time, on such basis and with such conditions as the
Board of Directors of the Company in its sole discretion may establish.
Except for the obligation of the Company to pay the Redemption Price, the
Board of Directors and the Company shall not have any liability to any
Person as a result of the redemption of Rights pursuant to the terms of
this Section 23.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of
this Section 23, 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 of the Company 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 their last addresses as they appear upon the registry books of
the Rights Agent or, before the Distribution Date, on the registry books
of the transfer agent for the Common Shares; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Any notice that is mailed in the manner
herein provided shall be deemed given whether or not the holder receives
the notice. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner except as specifically set
forth in this Section 23 or in Section 24 or other than in connection with
the purchase of Common Shares before the Distribution Date.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any
time after any person becomes an Acquiring Person, exchange all or part of
the then-outstanding and exercisable Rights (which shall not include
Rights that shall have become void pursuant to the provisions of Section
11(a)(2)) for Common Shares with each Right to be exchanged for such
number of Common Shares as shall equal the result obtained by dividing (1)
the Exercise Price (as defined in Section 11(a)(3)) by (2) the current
per-share market price of the Common Shares (determined pursuant to
Section 11(d)) on the date the Rights first become exercisable for Common
Shares pursuant to Section 11(a)(2) (such number of shares being referred
to as the "Exchange Ratio"). The Exchange Ratio shall be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
affecting the Common Shares that occurs after the date the Rights first
become exercisable for Common Shares pursuant to Section 11(a)(2).
Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than
an Exempt Person), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24 and without any further action and without any notice, the
right to exercise such Rights shall terminate, and the only right
thereafter of a holder of such Rights shall be to receive that number of
Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the
method by which the exchange of Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will
be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which shall have become void pursuant
to the provisions of Section 11(a)(2)) held by each holder of Rights.
(c) If that there shall not be sufficient Common Shares authorized,
unreserved and unissued to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company, at its option, may
substitute Preferred Shares (or equivalent preferred shares, as defined in
Section 11(b), or common share equivalents, as defined in Section
11(a)(3)(C)(iii)), for Common Shares exchangeable for Rights, at the
initial rate of 1/400th of a Preferred Share (or equivalent preferred
share) or one common share equivalent for each Common Share, as
appropriately adjusted to reflect stock splits, stock dividends or similar
transactions affecting the Common Shares that occur after the date of this
Agreement.
(d) If there shall not be sufficient Common Shares, Preferred
Shares, equivalent preferred shares, as defined in Section 11(b), or
common share equivalents, as defined in Section 11(a)(3)(C)(iii),
authorized, unreserved and unissued to permit the exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take
all such action as may be necessary to authorized additional Common Shares
or Preferred Shares, equivalent preferred shares or common share
equivalents for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates that evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company may pay to
the registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common
Share. For the purposes of this paragraph (e), the current market value of
a whole Common Share shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section 11(d)(1)) for the
Trading Day immediately before the date of exchange pursuant to this
Section 24. The Board of Directors and the Company shall not have any
liability to any Person as a result of the exchange of Rights pursuant to
the terms of this Section.
Section 25. Notice of Certain Events.
------------------------
(a) If the Company shall propose, at any time after the Distribution
Date, (1) to pay any dividend payable in stock of any class to the holders
of its Preferred Shares or to make any other distribution to the holders
of its Preferred Shares (other than a regular quarterly cash dividend),
(2) to offer to the holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of
stock of any class or any other securities, rights or options, (3) to
effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), (4) to effect any consolidation or merger into or with any other
Person, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or a
series of related transactions, of 50% or more 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 wholly owned
Subsidiaries), (5) to effect any statutory share exchange with outstanding
Common Shares of the Company being exchanged for stock or other securities
of any other corporation or money or other property, (6) to effect the
liquidation, dissolution or winding up of the Company, or (7) to declare
or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the Common Shares
(by reclassification or otherwise), then, in each such case, the Company
shall give to each holder of a Right Certificate, to the extent feasible
and in accordance with Section 26, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend or
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, exchange,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given
in the case of any action covered by clause (1) or (2) above at least 10
days before the record date for determining holders of the Preferred
Shares for purposes of such action, and in the case of any such other
action, at least 10 days before the date of the taking of such proposed
action or the date of participation therein by the holders of the Common
Shares and/or Preferred Shares, whichever shall be the earlier.
(b) If any Section 11(a)(2) Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26, 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)(2).
Section 26. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail,
postage-prepaid, or delivered by hand or express courier service or faxed,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Graco Inc.
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422-5332
Attention: 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 Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage-prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Norwest Bank Minnesota, National Association
161 North Concord Exchange Street
South St. Paul, Minnesota 55075-1139
Attention: Manager--Shareowner Services
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage-prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments.
--------------------------
The Company may and the Rights Agent shall, if so directed by the Company,
from time to time supplement or amend this Agreement without the approval of any
holders of Common Shares or Right Certificates in order (a) to extend the Final
Expiration Date, (b) to cure any ambiguity, or to correct or supplement any
provision contained in this Agreement that may be defective or inconsistent with
any other provisions in this Agreement, (c) before the Distribution Date, to
otherwise change or supplement any provision in this Agreement in any manner
that the Company may deem necessary or desirable or (d) following the
Distribution Date, to otherwise change or supplement any provision in this
Agreement in any manner that the Company may deem necessary or desirable and
that shall not adversely affect the interests of the holders of Right
Certificates (other than Right Certificates evidencing Rights that shall have
become void pursuant to Section 11(a)(2)). Without limiting the foregoing, the
Company may at any time before such time as any Person becomes an Acquiring
Person amend this Agreement to lower the thresholds set forth in Sections 1(a)
and 3(a) from 15% to not less than the greater of (1) the sum of .001% and the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than an Exempt Person) or (2) 10%.
Section 28. Successors.
----------
All the provisions of this Agreement by or for the benefit of the Company
or the Rights Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 29. Benefits of this Agreement.
--------------------------
(a) Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Right Certificates (and, before the Distribution Date, the registered
holders of Common Shares) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, before the Distribution Date, the
registered holders of Common Shares).
(b) The Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights
and powers specifically granted to the Board of Directors or the Company or
necessary or advisable in the administration of this Agreement, including
without limitation the right and power to interpret this Agreement and to
make all determinations deemed necessary or advisable for the
administration of this Agreement. All such acts, calculations,
interpretations and determinations (including, for purposes of clause (2)
below, all omissions with respect to the foregoing) that are done or made
by the Board of Directors in good faith shall (1) be final, conclusive and
binding on the Company, the Rights Agent and the holders of the Rights and
all other parties and (2) not subject the Board of Directors to any
liability to the holders of the Rights or any other party.
Section 30. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 31. Governing Law.
--------------
This Agreement and each Right Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of Minnesota and for all
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and performed entirely within such
State.
Section 32. 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 33. Descriptive Headings.
---------------------
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed as of the date first written above.
GRACO INC.
By /s/ Robert M. Mattison
-----------------------------------
Its Vice President, General Counsel
and Secretary
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Susan J. Roeder
-----------------------------------
Its Vice President
<PAGE>
EXHIBIT A
FORM OF
ARTICLES OF AMENDMENT OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
OF
GRACO INC.
I, Robert M. Mattison, Secretary of Graco Inc. (the "Company"), a
corporation organized and existing under the Minnesota Business Corporation Act
(the "MBCA"), in accordance with Section 302A.401 thereof, do hereby certify:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Company and Section 302A.133 of
the MBCA, the Board of Directors on February 25, 2000, amended in its entirety,
effective at 5:00 p.m., Minneapolis, Minnesota time, on March 29, 2000, the
Certificate of Designation, Preferences and Rights of the Company creating a
series of 200,000 Preferred Shares, $1.00 par value, designated as Series A
Junior Participating Preferred Shares, to read in its entirety as follows:
1. Designation and Amount.
-------------------------
The shares of such series shall be designated as "Series A Junior
Participating Preferred Shares," $1.00 par value (the "Series A Preferred
Stock"), and the number of shares constituting such series shall be
200,000. Such number of shares may, unless prohibited by the Restated
Articles of Incorporation or by the MBCA, be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares
issuable upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Series A Preferred Stock.
2. Dividends and Distributions.
---------------------------
(a) Subject to the rights of the holders of any Preferred Stock (or
any similar stock) ranking prior and superior to the Series A Preferred
Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Shares and of any
other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 10th day of February, May,
August and November in each year (each such date being referred to as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (1) $4.00 or (2) subject to the
provision for adjustment set forth below, 400 times the aggregate
per-share amount of all cash dividends, and 400 times the aggregate
per-share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in Common Shares or a
subdivision of the outstanding Common Shares (by reclassification or
otherwise), declared on the Common Shares since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction
of a share of Series A Preferred Stock, and no more. If the Company shall
at any time after March 29, 2000 declare or pay any dividend on Common
Shares payable in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in each
such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately before such event under clause (2) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is
the number of Common Shares that were outstanding immediately before such
event.
(b) The Company shall declare a dividend or distribution on the
Series A Preferred Stock as provided in subparagraph (a) of this paragraph
2 simultaneously with its declaration of a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares or a
subdivision of the outstanding Common Shares); provided that, if no
dividend or distribution shall have been declared on the Common Shares
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $4.00 per share
on the Series A Preferred Stock shall nevertheless be payable, out of
funds legally available for such purpose, on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date immediately preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is before the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not
more than 60 days before the date fixed for the payment thereof.
3. Voting Rights.
-------------
The holders of shares of Series A Preferred Stock shall have the
following voting rights:
(a) Subject to the provision for adjustment set forth below, each
share of Series A Preferred Stock shall entitle the holder thereof to 400
votes on all matters submitted to a vote of the shareholders of the
Company. If the Company shall at any time after March 29, 2000 declare or
pay any dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise) into a greater or lesser number
of Common Shares, then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled
immediately before such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is
the number of Common Shares that were outstanding immediately before such
event.
(b) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, the
Restated Articles of Incorporation or by law, the holders of shares of
Series A Preferred Stock and the holders of Common Shares and any other
capital stock of the Company having the right to vote generally on matters
submitted to shareholders, shall vote together as one class on all matters
submitted to a vote of the shareholders of the Company.
(c) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Shares and any other capital stock
of the Company having general voting rights as set forth herein) for
taking any corporate action.
4. Certain Restrictions.
--------------------
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in paragraph 2 hereof
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Company shall not:
(1) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(2) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(3) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the
Series A Preferred Stock; or
(4) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or, unless
prohibited by the Restated Articles of Incorporation of the Company,
by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under subparagraph (a) of this paragraph
4, purchase or otherwise acquire such shares at such time and in such
manner.
5. Reacquired Shares.
------------------
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Company in any manner whatsoever shall constitute authorized but
unissued shares of Preferred Stock which may be reissued as part of a new
series of Preferred Stock, subject to the conditions and restrictions on
issuance set forth herein, in the Restated Articles of Incorporation, or
in any other Certificate of Designation creating a series of Preferred
Stock or any similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding-Up.
------------------------------------------
Upon any liquidation, dissolution or winding up of the Company, no
distribution shall be made (a) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless, prior thereto, the holders of
shares of Series A Preferred Stock shall have received the greater of (1)
$400 per share plus all accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, or (2) an
aggregate amount per share, subject to the provision for adjustment set
forth below, equal to 400 times the aggregate amount to be distributed per
share to holders of Common Shares, or (b) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up. If the Company shall at any time after March 29, 2000 declare
or pay any dividend on the Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise) into a greater or lesser
number of Common Shares, then the aggregate amount determined pursuant to
clause (a)(2) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of Common
Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately
before such event.
7. Consolidation, Merger, Exchange, etc.
---------------------------------------
If the Company shall enter into any consolidation, merger,
combination, statutory share exchange or other transaction in which the
Common Shares are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series
A Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share (subject to the provision for adjustment set
forth below) equal to 400 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each Common Share is changed or exchanged. If the
Company shall at any time after March 29, 2000 declare or pay any dividend
on Common Shares payable in Common Shares, or effect a subdivision
or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common
Shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of Common Shares out-
standing immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately before such
event.
8. No Redemption.
-------------
The shares of Series A Preferred Stock shall not be redeemable.
9. Rank.
----
The Series A Preferred Stock shall rank junior with respect to payment
of dividends and distribution of assets upon liquidation, dissolution or
winding up to (a) all other series of the Company's Preferred Shares
hereafter issued that expressly provide that they shall rank senior to the
Series A Preferred Stock and (b) the Company's Cumulative Preferred Shares.
10. Fractional Shares.
------------------
Series A Preferred Stock may be issued in fractions of a share that
shall entitle the holder, in proportion to such holder's fractional shares,
to exercise voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series A
Preferred Stock.
These Articles of Amendment to the Certificate of Designation,
Preferences and Rights of Series A Junior Participating Preferred Shares
shall be effective at 5:00 p.m., Minneapolis, Minnesota time, on March 29,
2000.
In Witness Whereof, these Articles of Amendment of the Certificate of
Designation, Preferences and Rights of Series A Junior Participating Preferred
Shares have been executed on behalf of the Company by its Secretary this 9th day
of March, 2000.
/s/Robert M. Mattison
--------------------------------------------
Robert M. Mattison, Secretary
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. R-__ _____ Rights
Not exercisable after March 29, 2010 or such earlier date as the Board of
Directors orders redemption or exchange. The Rights are subject to redemption,
at the option of the Company, at $.001 per Right (subject to adjustment), and to
exchange on the terms set forth in the Rights Agreement. Under certain
circumstances set forth in the Rights Agreement, Rights that are or were
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as those terms are defined in the Rights Agreement) may become
void.
Right Certificate
Graco Inc.
This certifies that ____________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms of the Rights Agreement dated
as of February 25, 2000 (the "Rights Agreement") between Graco Inc., a Minnesota
corporation (the "Company"), and Norwest Bank Minnesota, National Association, a
national banking association (the "Rights Agent"), to purchase from the Company
at any time after the Distribution Date (as defined in the Rights Agreement) and
before 5:00 p.m. (Minneapolis, Minnesota time) on March 29, 2010 at the office
or offices of the Rights Agent designated for such purpose, or of its successor
as Rights Agent, 1/400th of a fully paid, nonassessable Series A Junior
Participating Preferred Share, $1.00 par value (the "Preferred Shares"), of the
Company, at a purchase price of $180 per 1/400th of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly completed and executed. The number of
Rights evidenced by this Right Certificate (and the number of 1/400ths of a
Preferred Share that may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are, except for adjustments required
pursuant to the Rights Agreement, the number and Purchase Price as of March 29,
2000, based on the Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number of
1/400ths of a Preferred Share that may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms of the Rights
Agreement, which terms are hereby incorporated herein by reference and made a
part hereof and which Rights Agreement contains a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates (which
limitations of rights include the voiding of the Rights under certain
circumstances specified in the Rights Agreement). Copies of the Rights Agreement
are on file with the Secretary at the principal executive office of the Company
and will be mailed without charge by the Company to the holder of this
certificate promptly following receipt by the Company of a written request
therefor.
Upon the occurrence of a "Section 11(a)(2) Event" (as defined in the
Rights Agreement), any Rights evidenced by this Right Certificate that are
beneficially owned by an Acquiring Person or an Associate or Affiliate of such
Acquiring Person (as such terms are defined in the Rights Agreement) or were
beneficially owned by any Acquiring Person or an Associate or Affiliate of such
Acquiring Person after the Acquiring Person becomes an Acquiring Person, shall
be void from and after the occurrence of such Section 11(a)(2) Event.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of 1/400ths of a Preferred Share as the Rights evidenced by the
Right Certificate or Right Certificates surrendered then entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (a) may, but are not required to, be redeemed by the Company at
a redemption price of $.001 per Right, subject to adjustment as provided in the
Rights Agreement, payable in cash, and (b) may, but are not required to, be
exchanged by the Company in whole or in part for Common Shares (as such term is
defined in the Rights Agreement) or other shares of capital stock of the
Company. The Board of Directors of the Company and the Company shall not have
any liability to any person as a result of the redemption or exchange of the
Rights pursuant to the provisions of the Rights Agreement.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractional shares which are
integral multiples of 1/400th of a Preferred Share, or, if a Right shall then be
exercisable for a fraction other than 1/400th of a Preferred Share, integral
multiples of that fraction, which may, at the election of the Company, be
evidenced by depositary receipts), if in lieu thereof a cash payment is made, as
provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned, manually or by facsimile signature, by
the Rights Agent.
WITNESS the manual or facsimile signatures of the proper officers of the
Company.
Dated as of _________________, 20__.
GRACO INC.
By
Title:
Countersigned:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
Title:
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Right Certificate.)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and
transfers unto ______________________________ (please print name and address of
transferee) this Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
______________________ Attorney, to transfer the within Right Certificate on the
books of the within-named Company, with full power of substitution.
Dated: ___________________, 20__
--------------------------------
Signature
Signature Medallion Guaranteed:
Signatures must be medallion guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States or by an eligible guarantor institution
(bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guaranty medallion program), pursuant to Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.
<PAGE>
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of its
knowledge) by checking the appropriate boxes that:
(1) The Rights evidenced by this Right Certificate
[ ] are
or
[ ] are not
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who, at
any time that such Person beneficially owned such Rights, is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
------------------------------------
Signature
NOTICE
The signature of the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To GRACO INC:
The undersigned hereby irrevocably elects to exercise ___ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights (or such other securities of the Company or of
any other person that may be issuable upon exercise of the Rights) and requests
that certificates for such shares (or other securities, if any) be issued in the
name of:
Please insert social security
or other identifying number
-----------------------------------------
-----------------------------------------
-----------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
-----------------------------------------
-----------------------------------------
-----------------------------------------
(Please print name and address)
Dated: ______________, 20__
--------------------------------
Signature
Signature Medallion Guaranteed:
Signatures must be medallion guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States or by an eligible guarantor institution bank
(bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.
<PAGE>
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of its
knowledge) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
[ ] are
or
[ ] are not
being exercised by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who, at
any time that such Person beneficially owned such Rights, is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
---------------------------------
Signature
NOTICE
The signature of the foregoing Election to Exercise and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
OF
GRACO INC.
On February 25, 2000, the Board of Directors of Graco Inc. (the
"Company"), declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, $1.00 par value (the
"Common Shares"), of the Company. The dividend is payable on March 29, 2000 (the
"Record Date") to shareholders of record at the close of business on that date.
Each Right entitles the registered holder to purchase from the Company
1/400th of a Series A Junior Participating Preferred Share, $1.00 par value (the
"Preferred Shares"), of the Company at a price of $180 per 1/400th of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement"), dated as of February 25, 2000, between the Company and Norwest Bank
Minnesota, National Association, as Rights Agent (the "Rights Agent").
Initially, the Rights will attach to all certificates representing Common
Shares then outstanding and no separate Right Certificates will be distributed.
The Rights will separate from the Common Shares and a Distribution Date for the
Rights will occur upon the earlier of:
(1) the close of business on the 15th day following a public
announcement that a person or group of affiliated or associated persons
has become an "Acquiring Person" (i.e., has, subject to certain
exceptions, become the beneficial owner of 15% or more of the outstanding
Common Shares), or
(2) the close of business on the 15th day following the first public
announcement of a tender offer or exchange offer the consummation of which
would result in a person or group of affiliated or associated persons
becoming, subject to certain exceptions, the beneficial owner of 15% or
more of the outstanding Common Shares (or such later date as may be
determined by the Board of Directors of the Company before a person or
group of affiliated or associated persons becomes an Acquiring Person).
Until the Distribution Date,
(a) the Rights will be evidenced by the Common Share certificates
and will be transferred with and only with the Common Shares,
(b) new Common Share certificates issued after the Record Date
upon transfer or new issuance of the Common Shares will contain a
notation incorporating the Rights Agreement by reference, and
(c) the surrender for transfer of any Common Share certificate,
even without such notation or a copy of this Summary of Rights
attached to it, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.
As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on March 29, 2010, unless extended or
earlier redeemed or exchanged by the Company as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution:
(A) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Shares,
(B) upon the grant to holders of the Preferred Shares of certain
rights, options or warrants to subscribe for or purchase Preferred Shares
or convertible securities at less than the then current market price of
the Preferred Shares, or
(C) upon the distribution to holders of the Preferred Shares of
evidences of indebtedness or assets (excluding regular periodic cash
dividends or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those described in clause (B) above).
The number of Preferred Shares issuable upon the exercise of a Right is
also subject to adjustment in the event of a dividend on Common Shares payable
in Common Shares, or a subdivision, combination or consolidation of the Common
Shares.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Preferred Shares will be issued (other than
fractional shares that are integral multiples of 1/400th (subject to adjustment)
of a Preferred Share, which may, at the election of the Company, be evidenced by
depositary receipts) if in lieu of such issuance, a payment in cash is made
based on the closing price (pro-rated for the fraction) of the Preferred Shares
on the last trading date before the date of exercise.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights that are or were beneficially owned by the Acquiring Person
(which will thereafter be void), will have the right to receive upon exercise of
the Right at the then-current exercise price of the Right that number of Common
Shares having a market value of two times the exercise price of the Right,
subject to certain possible adjustments.
If, on or after the Distribution Date or within 15 days prior thereto, the
Company is acquired in certain mergers or other business combination
transactions or 50% or more of the assets or earning power of the Company and
its subsidiaries (taken as a whole) are sold on or after the Distribution Date
or within 15 days before the Distribution Date in one or a series of related
transactions, each holder of a Right (other than Rights that have become void
under the terms of the Rights Agreement) will have the right to receive, upon
exercise of the Right at the then current exercise price of the Right, that
number of Common Shares of the acquiring company (or, in certain cases, one of
its affiliates) having a market value of two times the exercise price of the
Right.
In certain events specified in the Rights Agreement, the Company is
permitted temporarily to suspend the exercisability of the Rights.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and before the acquisition by a person or group of
affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights that have become void under the terms of the Rights Agreement), in
whole or in part, for Common Shares or equivalent securities at an exchange
ratio per Right equal to the result obtained by dividing the exercise price of a
Right by the current per share market price of the Common Shares, subject to
adjustment.
At any time before the time that a person or group of affiliated or
associated persons has become an Acquiring Person, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right, subject to adjustment (the "Redemption Price"), payable in cash. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The Board of Directors and the Company shall not have any liability
to any person as a result of the redemption or exchange of the Rights pursuant
to the provisions of the Rights Agreement.
The terms of the Rights may be amended by the Board of Directors of the
Company, subject to certain limitations after the Distribution Date, without the
consent of the holders of the Rights, including an amendment before the date a
person or group of affiliated or associated persons becomes an Acquiring Person
to lower the threshold for exercisability of the Rights from 15% to not less
than the greater of (a) the sum of .001% and the largest percentage of the
outstanding Common Shares then known by the Company to be beneficially owned by
any person or group of affiliated or associated persons, or (b) 10% (subject to
certain exceptions).
Until a Right is exercised, the holder of the Right, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
March 10, 2000. A copy of the Rights Agreement is available free of charge from
the Company by contacting the Secretary at Graco Inc., 4050 Olson Memorial
Highway, Golden Valley, Minnesota 55422-5332. 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.
