<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
NORTHROP GRUMMAN CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-1055798
- - ---------------------------------------- ---------------------------------------
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
1840 Century Park East
Los Angeles, California 90067
- - ---------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
to be so registered on which each class
- - ------------------- is to be registered
-------------------
Preferred Stock Purchase Rights New York Stock Exchange
If this Form relates to the registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A.(c)(1), please check
the following box. [_]
If this Form relates to the registration of a class of debt securities and
is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. [_]
Securities to be registered pursuant to Section 12(g) of the Act:
None
- - --------------------------------------------------------------------------------
(Title of Class)
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Item 1. Description of Securities to be Registered.
------------------------------------------
On September 16, 1998, the Board of Directors of Northrop Grumman
Corporation (the "Corporation") declared a dividend distribution of one
-----------
preferred share purchase right (a "Right") for each outstanding share of Common
-----
Stock, par value $1.00 per share (the "Common Shares"), of the Corporation. The
-------------
dividend is payable to the stockholders of record on October 2, 1998 (the
"Record Date"), and with respect to Common Shares issued thereafter until the
-----------
Distribution Date (as defined below) and, in certain circumstances, with
respect to Common Shares issued after the Distribution Date. Except as set
forth below, each Right, when it becomes exercisable, entitles the registered
holder to purchase from the Corporation one one-thousandth of a share of Series
A Junior Participating Preferred Stock, $1.00 par value per share (the
"Preferred Shares"), of the Corporation at a price of $250.00 per one
----------------
one-thousandth 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") between the Corporation and ChaseMellon
----------------
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), dated as of
------------
September 23, 1998.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares upon the
earliest to occur of (i) a person or group of affiliated or associated persons
having acquired beneficial ownership of 15% or more of the outstanding Common
Shares (except pursuant to a Permitted Offer, as hereinafter defined); or (ii)
10 days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (as hereinafter defined) (the earliest of such
dates being called the "Distribution Date"). A person or group whose acquisition
-----------------
of Common Shares causes a Distribution Date pursuant to clause (i) above is an
"Acquiring Person." The date that a person or group becomes an Acquiring Person
----------------
is the "Shares Acquisition Date."
-----------------------
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new Common
Share certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such
Page 2 of 8 Pages
<PAGE>
notation or a copy of this Summary of Rights being attached thereto, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
-----
Certificates") will be mailed to holders of record of the Common Shares as of
- - ------------
the close of business on the Distribution Date (and to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
----------------------------------------------------------
expire at the close of business on October 31, 2008, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a tender or exchange offer which is for all outstanding Common
Shares at a price and on terms which a majority of certain members of the Board
of Directors determines to be adequate and in the best interests of the
Corporation, its stockholders and other relevant constituencies, other than such
Acquiring Person, its affiliates and associates (a "Permitted Offer")), each
---------------
holder of a Right will thereafter have the right (the "Flip-In Right") to
-------------
receive upon exercise the number of Common Shares or of one one-thousandth of a
share of Preferred Shares (or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such triggering event) equal
to two times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or any affiliate or associate
thereof will be null and void.
In the event that, at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, any other person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
---------------
acquiring company having a value equal to two times the exercise price of the
Right. The holder of a Right will continue to have the Flip-Over Right whether
or not such holder exercises or surrenders the Flip-In Right.
Page 3 of 8 Pages
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The Purchase Price payable, and the number of Preferred Shares, Common
Shares or other securities issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $10.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 1,000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to a minimum preferential liquidation payment of $1,000 per
share, provided that the holders will be entitled to an aggregate payment per
share of at least 1,000 times the aggregate payment made per Common Share. These
rights are protected by customary antidilution provisions. In the event that the
amount of accrued and unpaid dividends on the Preferred Shares is equivalent to
six full quarterly dividends or more, the holders of the Preferred Shares shall
have the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of the Common Shares until all cumulative
dividends on the Preferred Shares have been paid through the last quarterly
dividend payment date or until non-cumulative dividends have been paid regularly
for at least one year.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are one one-thousandth or integral multiples of one
one-thousandth of a Preferred Share, which may, at the election of the
Corporation, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
Page 4 of 8 Pages
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circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price") which redemption shall be
effective upon the action of the Board of Directors. Additionally, following the
Shares Acquisition Date, the Corporation may redeem the then outstanding Rights
in whole, but not in part, at the Redemption Price, provided that such
--------
redemption is in connection with a merger or other business combination
transaction or series of transactions involving the Corporation in which all
holders of Common Shares are treated alike but not involving an Acquiring Person
or its affiliates or associates.
All of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
Attached hereto as Exhibit 1 and incorporated herein by reference is a
form of the Rights Agreement, dated as of September 23, 1998 between Northrop
Grumman Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, specifying the terms of the Rights, including the exhibits thereto, as
follows: Exhibit A --The Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock of Northrop Grumman Corporation;
Exhibit B -- The Form of Right Certificate; and Exhibit C -- The Summary of
Rights to Purchase Preferred Shares. The foregoing description of the Rights is
qualified by reference to the Rights Agreement and exhibits thereto.
Item 2. Exhibits.
--------
1. Rights Agreement, dated as of September 23, 1998
between Northrop Grumman Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent,
which includes, as Exhibit A thereto, the
Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
of Northrop Grumman Corporation, as Exhibit B
thereto, the Form of Right Certificate and as
Page 5 of 8 Pages
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Exhibit C thereto, the Summary of Rights to Purchase Preferred
Shares.
2. Press Release dated September 22, 1998 announcing the adoption of
the Rights Plan.
Page 6 of 8 Pages
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
NORTHROP GRUMMAN
CORPORATION
By: /s/ ALBERT F. MYERS
-------------------------------
Name: Albert F. Myers
Title: Corporate Vice President
and Treasurer
Dated: September 23, 1998
Page 7 of 8 Pages
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EXHIBIT INDEX
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Exhibit Description Page
- - ------- ----------- ----
1. Rights Agreement, dated as of September 23, 1998
between Northrop Grumman Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, which
includes, as Exhibit A thereto, the Certificate of
Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock of Northrop Grumman
Corporation, as Exhibit B thereto, the Form of Right
Certificate and as Exhibit C thereto, the Summary of
Rights to Purchase Preferred Shares.
2. Press Release dated September 22, 1998 announcing the
adoption of the Rights Plan.
Page 8 of 8 Pages
<PAGE>
EXHIBIT 1
----------------------------------
NORTHROP GRUMMAN CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
==================================
Rights Agreement
==================================
Dated as of September 23, 1998
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S>
Section 1. Certain Definitions..............................................1
Section 2. Appointment of Rights Agent......................................5
Section 3. Issuance of Right Certificates...................................5
Section 4. Form of Right Certificate........................................7
Section 5. Countersignature and Registration................................7
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificate................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....9
Section 8. Cancellation and Destruction of Right Certificates..............12
Section 9. Reservation and Availability of Preferred Shares................12
Section 10. Preferred Shares Record Date....................................13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights................................................14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power...................................................22
Section 14. Fractional Rights and Fractional Shares.........................24
Section 15. Rights of Action................................................26
Section 16. Agreement of Right Holders......................................26
Section 17. Right Certificate Holder Not Deemed a Stockholder...............27
Section 18. Concerning the Rights Agent.....................................28
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......28
Section 20. Duties of Rights Agent..........................................29
Section 21. Change of Rights Agent..........................................31
Section 22. Issuance of New Right Certificates..............................32
Section 23. Redemption and Termination......................................33
Section 24. Exchange........................................................34
Section 25. Notice of Certain Events........................................35
Section 26. Notices.........................................................36
Section 27. Supplements and Amendments......................................37
Section 28. Determination and Actions by the Board of Directors, etc........37
Section 29. Successors......................................................38
Section 30. Benefits of this Agreement......................................38
Section 31. Severability....................................................38
Section 32. Governing Law...................................................39
Section 33. Counterparts....................................................39
Section 34. Descriptive Headings............................................39
</TABLE>
i
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Signatures...................................................................38
Exhibit A - Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Northrop Grumman Corporation
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
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Defined Term Cross Reference Sheet
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<TABLE>
<CAPTION>
TERM LOCATION
- - ---- --------
<S> <C>
Acquiring Person........................................... Section 1(a)
Act........................................................ Section 1(b)
Adjustment Shares.......................................... Section 11(a)(ii)
Adjusted Number of Shares.................................. Section 11(a)(iii)
Adjusted Purchase Price.................................... Section 11(a)(iii)
Affiliate.................................................. Section 1(c)
Agreement.................................................. Preface
Appointment of Rights Agent................................ Section 2
Associate.................................................. Section 1(c)
Beneficial Owner........................................... Section 1(d)
Beneficially Own........................................... Section 1(i)
Business Day............................................... Section 1(e)
Capital Stock Equivalent................................... Section 11(a)(iii)
Close of Business.......................................... Section 1(f)
Common Shares.............................................. Section 1(g)
Corporation................................................ Preface
Current Per Market Price................................... Section 11(d)
Current Per Share Market Price............................. Section 11(d)(i)
Distribution Date.......................................... Section 3(a)
Equivalent Preferred Shares................................ Section 11(b)
Exchange Act............................................... Section 1(c)
Exchange Ratio............................................. Section 24(a)
Final Expiration Date...................................... Section 7(a)
Interested Stockholder..................................... Section 1(j)
Permitted Offer............................................ Section 1(k)
Person..................................................... Section 1(l)
Preferred Shares........................................... Section 1(m)
Principal Party............................................ Section 13(b)
Proration Factor........................................... Section 11(a)(iii)
Purchase Price............................................. Section 4(a)
Record Date................................................ Preface
Redemption Date............................................ Section 7(a)
Redemption Price........................................... Section 23(a)(i)
Right...................................................... Preface
Right Certificate.......................................... Section 3(a)
Rights Agent............................................... Preface
Rights Agreement........................................... Section 3(c)
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 11(a)(ii) Event.................................... Section 11(a)(ii)
Section 13 Event........................................... Section 13(a)
Security................................................... Section 11(d)(i)
Shares Acquisition Date.................................... Section 1(q)
Subsidiary................................................. Section 1(r)
Summary of Rights.......................................... Section 3(b)
Then Outstanding........................................... Section 1(d)(iii)
Trading Day................................................ Section 11(d)(i)
Triggering Event........................................... Section 1(s)
Voting Securities.......................................... Section 13(a)
</TABLE>
iv
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of September 23, 1998 (the "Agreement"),
---------
between Northrop Grumman Corporation, a Delaware corporation (the
"Corporation"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey
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limited liability company (the "Rights Agent").
------------
The Board of Directors of the Corporation has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each Common
-----
Share (as hereinafter defined) of the Corporation outstanding at the close of
business on October 2, 1998 (the "Record Date"), each Right representing the
-----------
right to purchase one one-thousandth of a Preferred Share (as hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date (as such terms are hereinafter defined); provided, however, that Rights may
-------- -------
be issued with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
----------------
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the then outstanding Common Shares (other
than as a result of a Permitted Offer (as hereinafter defined)) or was such a
Beneficial Owner at any time after the date hereof, whether or not such person
continues to be the Beneficial Owner of 15% or more of the then outstanding
Common Shares. Notwithstanding the foregoing, (A) the term "Acquiring Person"
shall not include (i) the Corporation, (ii) any Subsidiary of the Corporation,
(iii) any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation, (iv) any Person or entity organized, appointed or established by
the Corporation for or pursuant to the terms of any such plan, or (v) any
Person, who or which together with all Affiliates and Associates of such Person
becomes the Beneficial Owner of 15% or more of the then outstanding Common
Shares as a result of the acquisition of Common Shares directly from the
Corporation, and (B) no Person shall be deemed to be an "Acquiring Person"
either (X) as a result of the acquisition of Common Shares by the Corporation
which, by reducing the number of Common Shares outstanding, increases the
proportional number of shares beneficially owned by such
<PAGE>
Person together with all Affiliates and Associates of such Person; except that
if (i) a Person would become an Acquiring Person (but for the operation of this
subclause X) as a result of the acquisition of Common Shares by the Corporation,
and (ii) after such share acquisition by the Corporation, such Person, or an
Affiliate or Associate of such Person, becomes the Beneficial Owner of any
additional Common Shares, then such Person shall be deemed an Acquiring Person,
or (Y) if a Person did so inadvertently, (i) promptly after such Person
discovers that such Person would otherwise have become an Acquiring Person (but
for the operation of this subclause Y), such Person notifies the Board of
Directors that such Person did so inadvertently and (ii) within 2 days after
such notification, such Person is the Beneficial Owner of less than 15% of the
outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended and as
---
in effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
------------
(d) A Person shall be deemed the "Beneficial Owner" of and shall
----------------
be deemed to "Beneficially Own" any securities:
----------------
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (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, or upon the exercise of conversion rights,
exchange rights, 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, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
-------- -------
deemed the Beneficial Owner of, or to Beneficially Own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
2
<PAGE>
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) relating to the acquisition, holding, voting (except to
the extent contemplated by the proviso to Section l(d)(ii)(B)) or disposing of
any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
----------------
Person's Beneficial Ownership of securities of the Corporation, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday,
------------
Sunday or U.S. federal holiday.
(f) "Close of Business" on any given date shall mean 5:00 P.M.,
-----------------
New York time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Corporation
-------------
shall mean the shares of Common Stock, par value $1.00 per share, of the
Corporation or, in the event of a subdivision, combination or consolidation with
respect to such shares of Common Stock, the shares of Common Stock resulting
from such subdivision, combination or consolidation. "Common Shares" when used
-------------
with reference to any Person other than the Corporation shall mean the 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 which ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in
-----------------
Section 3 hereof.
(i) "Final Expiration Date" shall have the meaning set forth in
---------------------
Section 7 hereof.
(j) "Interested Stockholder" shall mean any Acquiring Person or
----------------------
any Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
3
<PAGE>
(k) "Permitted Offer" shall mean a tender or exchange offer
---------------
which is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at least
a majority of the members of the Board of Directors who are not officers of the
Corporation and who are not Acquiring Persons or Persons who would become
Acquiring Persons as a result of the offer in question or Affiliates,
Associates, nominees or representatives of any such Person, to be adequate
(taking into account all factors that such Directors deem relevant including,
without limitation, prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation and its stockholders
(other than the Person or any Affiliate or Associate thereof on whose behalf the
offer is being made) taking into account all factors that such directors may
deem relevant.
(l) "Person" shall mean any individual, firm, partnership,
------
corporation, limited liability company, trust, association, joint venture or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(m) "Preferred Shares" shall mean shares of Series A Junior
----------------
Participating Preferred Stock, with a par value of $1.00 per share of the
Corporation having the relative rights, preferences and limitations set forth in
the Certificate of Designation, Preferences and Rights attached to this
Agreement as Exhibit A.
(n) "Redemption Date" shall have the meaning set forth in
---------------
Section 7 hereof.
(o) "Section 11(a)(ii) Event" shall mean any event described in
-----------------------
Section 11(a)(ii) hereof.
(p) "Section 13 Event" shall mean any event described in clause
----------------
(x), (y) or (z) of Section 13(a) hereof.
(q) "Shares Acquisition Date" shall mean the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
-------- ----
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a)(B)(Y) hereof, then no Shares Acquisition Date shall be deemed to
have occurred.
(r) "Subsidiary" of any Person shall mean any corporation or other
----------
Person of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(s) "Triggering Event" shall mean any Section 11(a)(ii) Event or
----------------
any Section 13 Event.
4
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Section 2. Appointment of Rights Agent. The Corporation hereby
---------------------------
appoints the Rights Agent to act as agent for the Corporation in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates. (a) Until the earlier of
------------------------------
(i) the Shares Acquisition Date or (ii) the Close of Business on the tenth day
(or such later date as may be determined by action of the Corporation's Board of
Directors) after the date of the commencement by any Person (other than the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation or any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan) of, or of the first public announcement of the intention
of any Person (other than the Corporation, any Subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan) to commence (which
intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer the consummation of which would result
in any Person becoming an Acquiring Person (including, in the case of both (i)
and (ii), any such date which is after the date of this Agreement and prior to
the issuance of the Rights), the earlier of such dates being herein referred to
as the "Distribution Date," (x) the Rights will be evidenced (subject to the
-----------------
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable only in connection
with the transfer of the underlying Common Shares (including a transfer to the
Corporation); provided, however, that if a tender offer is terminated prior to
-------- -------
the occurrence of a Distribution Date, then no Distribution Date shall occur as
a result of such tender offer. As soon as practicable after the Distribution
Date, the Corporation will prepare and execute, the Rights Agent will
countersign, and the Corporation will send or cause to be sent 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 Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right for each Common
-----------------
Share so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation 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 Corporation. With respect to certificates for Common
Shares outstanding as of the
5
<PAGE>
Record Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with a copy
of the Summary of Rights attached thereto. Until the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with such Common Shares. As a
result of the execution of this Agreement on September 23, 1998, each share of
Common Stock outstanding as of October 2, 1998, shall, subject to the terms and
conditions of this Agreement, also represent one Right and shall, subject to the
terms and conditions of this Agreement, represent the right to purchase one one-
thousandth of a share of Preferred Stock.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date,
shall be deemed also to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Northrop
Grumman Corporation and ChaseMellon Shareholder Services, L.L.C., dated
as of September 23, 1998 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Northrop Grumman
Corporation. 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. Northrop Grumman
Corporation will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and certain related persons, whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed cancelled and retired so that the Corporation
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding.
6
<PAGE>
Section 4. Form of Right Certificate. (a) The Right Certificates
-------------------------
(and the forms of election to purchase and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Corporation may deem
appropriate (which do not affect the duties or responsibilities of the Rights
Agent) and as are not inconsistent with the provisions of this Agreement, or as
may be required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a Preferred Share as shall be set forth therein at the price
per one one-thousandth of a Preferred Share set forth therein (the "Purchase
--------
Price"), but the amount and type of securities purchasable upon the exercise of
- - -----
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
Beneficially Owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate. The
Corporation shall notify the Rights Agent to the extent that this Section 4(b)
applies.
Section 5. Countersignature and Registration. The Right
---------------------------------
Certificates shall be executed on behalf of the Corporation by its Chairman of
the Board, its Chief Executive Officer, its President, any of its Vice
Presidents, or its Treasurer, either manually or by facsimile signature, shall
have affixed thereto the Corporation's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Corporation, either
manually or by facsimile signature. The Right Certificates shall be
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Corporation who shall have signed
any of the Right Certificates shall cease to be such officer of the Corporation
before countersignature by the Rights Agent and issuance and delivery by the
Corporation, such
7
<PAGE>
Right Certificates may nevertheless be countersigned by the Rights Agent and
issued and delivered by the Corporation with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Corporation; and any Right Certificate may be signed on behalf of the
Corporation by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Corporation to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.
Following the Distribution Date and receipt by the Rights Agent of a
list of record holders of Rights, the Rights Agent will keep or cause to be
kept, at its office designated pursuant to Section 26 hereof or offices
designated as the appropriate place for surrender of such Right Certificate 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 certificate number and the date of each
of the Right Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate. Subject
- - --------------------------------------------------------------------
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, as the case may be) 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 Right 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. Neither the Rights Agent nor the Corporation 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 completed and signed the
certificate contained in 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) or Affiliates or
Associates thereof as the Corporation or the Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e)
and Section 14 hereof, countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Corporation may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates. If the Corporation requires
the payment referred to in the immediately
8
<PAGE>
preceding sentence, then the Rights Agent shall not be required to process any
transaction until it receives notice from the Corporation that the Corporation
has received such payment.
Upon receipt by the Corporation and the Rights Agent of evidence
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 Corporation's request,
reimbursement to the Corporation 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 Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
- - ------
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price for the total number of
one one-thousandths of a Preferred Share (or other securities, as the case may
be) as to which such surrendered Rights are exercised, at or prior to the
earliest of (i) the Close of Business on October 31, 2008 (the "Final Expiration
----------------
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
- - ----
hereof (the "Redemption Date"); (iii) the time at which the Rights are exchanged
---------------
as provided in Section 24 hereof, or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred
Share pursuant to the exercise of a Right shall initially be $250.00, shall be
subject to adjustment from time to time as provided in the next sentence and in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below. Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Corporation shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case, each Common Share outstanding following such
subdivision, combination or consolidation shall continue to have one Right
associated therewith and the Purchase Price following any such event shall be
proportionately adjusted to equal the result obtained by multiplying the
Purchase Price immediately prior to such event by a fraction the numerator of
which shall be the total number of Common Shares outstanding immediately prior
to the occurrence of the
9
<PAGE>
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. The adjustment
provided for in the preceding sentence shall be made successively whenever such
a dividend is declared or paid or such a subdivision, combination or
consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
securities, as the case may be) to be purchased and an amount equal to any
applicable tax or governmental charge required to be paid by the holder of such
Right Certificate in accordance with Section 6 hereof by certified check,
cashier's check or money order payable to the order of the Corporation, the
Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Shares certificates for the number of Preferred Shares to
be purchased and the Corporation hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Corporation, in its sole
discretion, shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of one one-
thousandths 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 Corporation
will direct the depositary agent to comply with such requests, (ii) when
appropriate, requisition from the Corporation the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Corporation is obligated to issue other securities (including
Common Shares) of the Corporation pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when necessary to
comply with this Agreement.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
10
<PAGE>
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 6 and Section 14
hereof, or the Rights Agent shall place an appropriate notation on the Right
Certificate with respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
Beneficially Owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Corporation has determined is part of an agreement, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Corporation shall notify the Rights Agent when this Section 7(e) applies and
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but neither the Company nor the
Rights Agent shall have any liability to any holder of Right Certificates or
other Person as a result of the Corporation's failure to make any determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial owner) or Affiliates or
Associates thereof as the Corporation or the Rights Agent 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 Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights
11
<PAGE>
Agent, shall be cancelled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Corporation 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 Corporation otherwise
than upon the exercise thereof. The Rights Agent shall deliver all cancelled
Right Certificates to the Corporation, or shall, at the written request of the
Corporation, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Corporation.
Section 9. Reservation and Availability of Preferred Shares. The
------------------------------------------------
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights and,
after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a
Section 11(a)(ii) Event, Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities exchange,
the Corporation 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.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all U.S. federal and state taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any tax or other charge which 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 (or Common Shares and/or other securities, as the case may be) in a name
other than that of, the registered holder of the Right Certificate evidencing
Rights surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts
12
<PAGE>
for Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of any Rights, until any such tax or other charge shall
have been paid (any such tax or other charge being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to
the Corporation's reasonable satisfaction that no such tax or other charge is
due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate under the blue
sky laws of the various states.
Section 10. Preferred Shares Record Date. Each Person in whose name
----------------------------
any certificate for Preferred Shares (or Common Shares and/or other securities,
as the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) 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 taxes and governmental charges) was made; provided, however,
-------- -------
that, if the date of such surrender and payment is a date upon which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Corporation are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Corporation are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- - -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Corporation 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
or merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section
13
<PAGE>
11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Corporation were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however, that in no
-----------------
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Corporation
issuable upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall, for a period of 60 days after the later of
the occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Common
Shares (or, in the discretion of the Board of Directors, one one-thousandths of
a Preferred Share) as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths of a
Preferred Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and dividing that product by (y) 50% of
the then current per share market price of the Corporation's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to as the "Adjustment Shares");
-----------------
provided, however, that if the transaction that would otherwise give rise to the
- - -------- -------
foregoing adjustment is also subject to the provisions of Section 13 hereof,
then only the provisions of Section 13 hereof shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii);
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued (and unreserved) Common Shares to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable (and the Board has
determined to make the Rights exercisable into fractions of a Preferred Share),
notwithstanding any other provision of this Agreement, to the extent necessary
and permitted by applicable law, each Right shall thereafter represent the right
to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, (x) a number of (or fractions of)
14
<PAGE>
Common Shares (up to the maximum number of Common Shares which may permissibly
be issued) and (y) one-one thousandth of a Preferred Share or a number of, or
fractions of other equity securities of the Corporation (or, in the discretion
of the Board of Directors, debt) which the Board of Directors of the Corporation
has determined to have the same aggregate current market value (determined
pursuant to Section 11(d)(i) and (ii) hereof, to the extent applicable,) as one
Common Share (such number of, or fractions of, Preferred Shares, debt, or other
equity securities or debt of the Corporation) being referred to as a "capital
-------
stock equivalent", equal in the aggregate to the number of Adjustment Shares;
- - ----------------
provided, however, if sufficient Common Shares and/or capital stock equivalents
- - -------- -------
are unavailable, then the Corporation shall, to the extent permitted by
applicable law, take all such action as may be necessary to authorize additional
Common Shares or capital stock equivalents for issuance upon exercise of the
Rights, including the calling of a meeting of stockholders; and provided,
--------
further, that if the Corporation is unable to cause sufficient Common Shares
- - -------
and/or capital stock equivalents to be available for issuance upon exercise in
full of the Rights, then each Right shall thereafter represent the right to
receive the Adjusted Number of Shares upon exercise at the Adjusted Purchase
Price (as such terms are hereinafter defined). As used herein, the term
"Adjusted Number of Shares" shall be equal to that number of (or fractions of)
-------------------------
Common Shares (and/or capital stock equivalents) equal to the product of (x) the
number of Adjustment Shares and (y) a fraction, the numerator of which is the
number of Common Shares (and/or capital stock equivalents) available for
issuance upon exercise of the Rights and the denominator of which is the
aggregate number of Adjustment Shares otherwise issuable upon exercise in full
of all Rights (assuming there were a sufficient number of Common Shares
available) (such fraction being referred to as the "Proration Factor"). The
----------------
"Adjusted Purchase Price" shall mean the product of the Purchase Price and the
-----------------------
Proration Factor. The Board of Directors may, but shall not be required to,
establish procedures to allocate the right to receive Common Shares and capital
stock equivalents upon exercise of the Rights among holders of Rights.
(b) In case the Corporation shall fix a record date for the
issuance of rights (other than the 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 then current per share market price of the Preferred Shares (as
determined pursuant to Section 11(d) hereof) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares
15
<PAGE>
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); provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. 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 determined in good faith by the Board of
Directors of the Corporation, 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 Corporation 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 be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Corporation 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
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or 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) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price (as
determined pursuant to Section 11(d) hereof) of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, 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 assets or evidences of
indebtedness so to be distributed 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; provided, however, that
-------- -------
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Corporation to be issued upon exercise of one Right. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
16
<PAGE>
(d) (i) 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)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to and not
including such date; provided, however, that in the event that 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 shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or reclassification of such
Security and prior to the expiration of thirty (30) Trading Days after and not
including 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 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 by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use, or, if on any
------
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Corporation. If on any such date no such market maker is making a market in the
Security, the fair value of the Security on such date as determined in good
faith by the Board of Directors of the Corporation shall be used. 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.
(ii) For the purpose of any computation hereunder, the "current
-------
per share market price" of the Preferred Shares shall be determined in
- - ----------------------
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, 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)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand
(1,000). If neither the Common Shares nor the Preferred Shares are publicly
17
<PAGE>
held or so listed or traded, "current per share market price" shall mean the
fair value per share as determined in good faith by the Board of Directors of
the Corporation, 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, 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 which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-thousandth of a Preferred Share or one ten-
thousandth 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 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Shares, thereafter the number of 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 Preferred 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 Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share 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 so provided
in Section 11(i) hereof, upon adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and 11(c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the Adjusted Purchase Price, that number of one one-
thousandths of a Preferred Share calculated to the nearest one one-thousandth of
a Preferred Share) obtained by (i) multiplying (A) the number of Preferred
Shares covered by a Right immediately prior to this adjustment of the Purchase
Price by (B) the Purchase Price in effect immediately prior to such adjustment
of the Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
18
<PAGE>
(i) The Corporation may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-thousandths 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 one one-thousandths
of a Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one ten-
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Corporation 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, a copy of which public announcement shall promptly be
delivered to the Rights Agent. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right Certificates
have been issued, shall be at least ten (10) days later than the date of the
public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Corporation shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Corporation, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Corporation, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths 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 and the number of one one-thousandths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one one-
thousandths of a Preferred Share, Common Shares or other securities issuable
upon exercise of the Rights, the Corporation shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue such number of fully paid and non-
assessable one one-thousandths of a Preferred Share, Common Shares or other
securities at such adjusted Purchase Price.
19
<PAGE>
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares, Common Shares or other securities of the Corporation, if
any, issuable upon such exercise over and above the Preferred Shares, Common
Shares or other securities of the Corporation, if any, issuable upon exercise on
the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Corporation 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.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Corporation to holders of its Preferred
Shares shall not be taxable to such stockholders.
(n) The Corporation covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Corporation in a transaction which does not violate
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate this Section 11(n)), if (x) at
the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(n).
20
<PAGE>
(o) The Corporation covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) The exercise of Rights under Section 11(a)(ii) shall only result
in the loss of rights under Section 11(a)(ii) to the extent so exercised and
shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 or 13 hereof,
- - ------
the Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief reasonably detailed statement of the facts and
computations accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Common Shares and the Preferred Shares a copy
of such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained and shall have no duty with respect to and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. (a) In the event that, on or following the Shares Acquisition
- - -------------
Date, directly or indirectly, (x) the Corporation shall consolidate with, or
merge with and into, any Interested Stockholder or, if in such merger or
consolidation all holders of Common Stock are not treated alike, any other
Person, (y) the Corporation shall consolidate with, or merge with, any
Interested Stockholder or, if in such merger or consolidation all holders of
Common Stock are not treated alike, any other Person, and the Corporation shall
be the continuing or surviving corporation of such consolidation or merger
(other than, in a case of any transaction described in (x) or (y), a merger or
consolidation which would result in all of the securities generally entitled to
vote in the election of directors ("voting securities") of the Corporation
-----------------
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Corporation shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Corporation and its Subsidiaries (taken as a
whole) to any Interested
21
<PAGE>
Stockholder or Stockholders or, if in such transaction all holders of Common
Stock are not treated alike, any other Person (other than the Corporation or any
Subsidiary of the Corporation in one or more transactions each of which does not
violate Section 11(n) hereof), then, and in each such case (except as provided
in Section 13(d) hereof), proper provision shall be made so that (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of freely tradeable Common Shares of the Principal
Party (as hereinafter defined), not subject to any liens, encumbrances, rights
of first refusal or other adverse claims, as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one one-
thousandths of a Preferred Share for which a Right is then exercisable (without
taking into account any adjustment previously made pursuant to Section
11(a)(ii)) and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the
Corporation pursuant to this Agreement; (iii) the term "Corporation" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" shall mean
---------------
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Corporation are converted in such
merger or consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation (including, if applicable, the
Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any of the foregoing cases, (1) if the Common Shares
- - -------- -------
of such Person are not at such time and have not been continuously over the
preceding twelve
22
<PAGE>
(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; (2) in case such Person is a Subsidiary, directly or indirectly,
of more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value;
and (3) in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(c) The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized Common Shares which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
23
<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or a
wholly owned Subsidiary of any such Person or Persons); (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such Permitted Offer; and (iii) the form of consideration offered in such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a) The
---------------------------------------
Corporation shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Corporation. 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 Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are one one-thousandth or integral
multiples of one one-thousandth of a Preferred Share) upon exercise of the
Rights or to distribute certificates which evidence fractional Preferred Shares
(other than fractions which are one one-thousandth or integral multiples of one
one-thousandth of a Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-thousandth of a Preferred Share may, at the election of the
Corporation, be evidenced by depositary receipts,
24
<PAGE>
pursuant to an appropriate agreement between the Corporation and a depositary
selected by it; provided that such agreement shall provide that the holders of
--------
such depositary receipts shall have 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
one one-thousandth or integral multiples of one one-thousandth of a Preferred
Share, the Corporation shall 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 the
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
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Common Shares,
capital stock equivalents (other than Preferred Shares) or other securities upon
the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Shares, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Shares, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common Shares,
capital stock equivalents or other securities, the Corporation 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 a share or unit of such Common Shares, capital stock equivalents
or other securities. For purposes of this Section 14(c), the current market
value shall be determined in the manner set forth in Section 11(d) hereof for
the Trading Day immediately prior to the date of such exercise and, if such
capital stock equivalent is not traded, each such capital stock equivalent shall
have the value of one one-thousandth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional share upon
exercise of a Right (except as provided above). The Rights Agent shall not be
deemed to have knowledge of, and shall have no duty in respect of, the issuance
of fractional Rights or fractional shares until it shall have received
instructions from the Corporation concerning the issuance of the fractional
Rights or fractional shares upon which instructions the Rights Agent may
conclusively rely.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his
25
<PAGE>
own behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Corporation to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
(c) subject to Section 7(f) hereof, the Corporation and the Rights
Agent may deem and treat the Person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Shares certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling (whether interlocutory or final) issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Corporation must use
-------- -------
26
<PAGE>
its best efforts to have any such order, decree, judgment, or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. 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 Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or other distributions or to exercise any preemptive 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. The Corporation 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 preparation,
execution, delivery, amendment, administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The Corporation also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, damage, judgment, fine, penalty, claim, demand, settlement,
cost or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including without limitation the costs and expenses of
defending against any claim of liability in the premises. The indemnity provided
for herein shall survive the expiration of the Rights and the termination of
this Agreement.
The Rights Agent shall be authorized and protected and shall incur no
liability for, or in respect of, any action taken, suffered or omitted by it in
connection with, its acceptance and administration of this Agreement in reliance
upon any Right Certificate or certificate for Common Shares or for other
securities of the Corporation, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document (collectively, "Documents")
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons. The Rights Agent
shall not be deemed to have knowledge of, and shall have no duty in respect of,
any such Documents, until it receives notice or instructions in respect thereof.
In no case will the Rights Agent be liable for special, indirect, punitive,
incidental or consequential loss or damage of any
27
<PAGE>
kind whatsoever, even if the Rights Agent has been advised of the likelihood of
such loss or damage.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any Person into which the Rights Agent or any successor Rights Agent may
- - -----
be merged or with which it may be consolidated, or any Person resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any Person succeeding to the stock transfer or all or
substantially all of the shareholder services business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such 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 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. In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only
----------------------
those duties and obligations expressly imposed by this Agreement (and no implied
duties or obligations) upon the following terms and conditions, by all of which
the Corporation and the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability for or in respect of, to any action taken,
suffered or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination
28
<PAGE>
of the current market price of any Security) be proved or established by the
Corporation prior to taking, suffering or omitting 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 of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Corporation and delivered to the Rights Agent; and such certificate shall be
full authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability in respect of any action taken, suffered or omitted in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
liability in respect of, of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature on such
Right Certificates) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any liability or
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
Corporation of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7(e) hereof) or any adjustment required under the provisions
of Section 11 or Section 13 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of the certificate described in
Section 12 hereof); 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 non-assessable.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
29
<PAGE>
(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 of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and instructions shall be full authorization and protection to the Rights Agent
and the Rights Agent shall incur no liability for or in respect of any action
taken, suffered or omitted by it in good faith or lack of action in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions. Any application by the Rights Agent for written
instructions from the Corporation may, at the option of the Rights Agent, set
forth in writing any action proposed to be taken or omitted by the Rights Agent
under this Rights Agreement and the date on or after which such action shall be
taken or suffered or such omission shall be effective. The Rights Agent shall
not be liable or responsible for any action taken or suffered by, or omission
of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date any officer of the
Corporation actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instruction in response to such application
specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation 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 Corporation or for any other
Person or 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 Corporation or any other Person resulting from any
such act, default, neglect or misconduct, absent gross negligence, bad faith or
willful misconduct in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
30
<PAGE>
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights Agent
upon sixty (60) 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 or Preferred Shares by registered or certified mail, and to holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be remove d or shall otherwise become incapable of acting, the Corporation shall
appoint a successor to the Rights Agent. If the Corporation shall fail to make
such appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), 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
Corporation or by such a court, shall be a Person organized and doing business
under the laws of the United States or of the States of Delaware or New York (or
of any other state of the United States so long as such Person is authorized to
do business in the States of Delaware or New York), in good standing, having an
office in the States of Delaware or New York, which is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and 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.
31
<PAGE>
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Corporation 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.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Corporation (a) shall with respect to Common
Shares so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Corporation, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Corporation, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) the
-------- -------
Corporation shall not be obligated to issue any such Right Certificates if, and
to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Corporation or the Person to whom such Right Certificate would be issued,
and (ii) no Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
--------------------------
(a) (i) The Board of Directors of the Corporation may, at its option,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
----------
Price"), at any time prior to the earlier of (x) the occurrence of a Section
- - -----
11(a)(ii) Event, or (y) the Final Expiration Date.
(ii) In addition, the Board of Directors of the Corporation may, at
its option, at any time following the occurrence of a Section 11(a)(ii) Event
and the expiration of any period during which the holder of Rights may exercise
the rights under Section 11(a)(ii) but prior to any Section 13 Event redeem all
but not less than all of the then outstanding Rights at the Redemption Price (x)
in connection with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or earning power
aggregating 50% or more of the earning power of the Corporation and its
subsidiaries (taken as a whole) in which all holders of Common Shares are
treated alike and not involving (other than as a holder of Common Shares being
treated like all other such holders) an Interested Stockholder or (y)(aa) if and
for so long as the Acquiring Person is not thereafter the Beneficial Owner of
15% of the
32
<PAGE>
Common Shares, and (bb) at the time of redemption no other Persons are Acquiring
Persons.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified in) in a resolution of the Board of Directors of the Corporation
ordering the redemption of the Rights, 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. In the case of a redemption permitted only under
Section 23(a)(ii), the right to exercise the Rights will terminate and represent
only the right to receive the Redemption Price upon the later of ten Business
Days following the giving of such notice or the expiration of any period during
which the rights under Section 11(a)(ii) may be exercised. The Corporation
shall promptly give public notice and notify the Rights Agent of any such
redemption; provided, however, that the failure to give, or any defect in, any
-------- -------
such notice shall not affect the validity of such redemption. Within ten (10)
days after such date for redemption set forth in a resolution of the Board of
Directors ordering the redemption of the Rights, the Corporation shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Corporation nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
and other than in connection with the purchase of Common Shares prior to the
Distribution Date.
(c) The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent of the Common Shares, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Corporation.
Section 24. Exchange. (a) The Board of Directors of the Corporation
--------
may, at its option, at any time after the time that any Person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become null and void pursuant
to the provisions of Section 7(e) and Section 11(a)(ii) hereof) for Common
Shares of the Corporation at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any
33
<PAGE>
stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Corporation's Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than the Corporation, any Subsidiary of the Corporation, any employee
benefit plan of the Corporation or any such Subsidiary, any Person organized,
appointed or established by the Corporation for or pursuant to the terms of any
such plan or any trustee, administrator or fiduciary of such a plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such rights shall terminate and the only right thereafter of the
holders 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 Corporation shall promptly give public notice and notify the Rights Agent 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 Corporation
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 the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section 7(e) and Section 11(a)(ii) hereof) held by
each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at
its option, may substitute Preferred Shares (or equivalent preferred shares, as
such term is defined in Section 11(b) hereof) for some or all of the Common
Shares exchangeable for Rights, at the initial rate of one one-thousandth of a
Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) The Board shall not authorize any exchange transaction referred to
in Section 24(a) hereof unless at the time such exchange is authorized there
shall be sufficient Common Shares or Preferred Shares issued but not
outstanding, or authorized but unissued, to permit the exchange of Rights as
contemplated in accordance with this Section 24.
34
<PAGE>
Section 25. Notice of Certain Events. (a) In case the Corporation
------------------------
shall propose (i) 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 regularly quarterly cash dividend), (ii)
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, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(n) hereof), or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Corporation and/or any of its Subsidiaries in one or more transactions
each of which does not violate Section 11(n) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Corporation, then, in each such
case, the Corporation shall give to the Rights Agent and to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action and file a certificate with the Rights Agent to that effect,
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, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
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 (i) or (ii) above at least
twenty (20) days prior to 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 twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also to Common Shares and/or, if appropriate, other
securities of the Corporation.
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 Corporation shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Rights Agent) as follows:
35
<PAGE>
Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067-2199
Attention: Office of the Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation 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 Corporation) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660-2108
Attention: General Counsel
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares 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 Corporation.
Section 27. Supplements and Amendments. Except as set forth in the
--------------------------
penultimate sentence of this Section 27, prior to the Distribution Date, the
Corporation may and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares. From and after the
Distribution Date, the Corporation may and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
-----------------
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless any such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Corporation which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, and if requested by the Rights Agent an opinion of counsel, the Rights Agent
36
<PAGE>
shall execute such supplement or amendment, provided that such supplement or
amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Determination and Actions by the Board of Directors, etc.
---------------------------------------------------------
The Board of Directors of the Corporation shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates). For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith (and the Rights Agent shall be able to assume that the Board acted
in such good faith), shall (x) be final, conclusive and binding on the
Corporation, the Rights Agent, the holders of the Right Certificates and all
other Persons, and (y) not subject the Board to any liability to the holders of
the Right Certificates.
Section 29. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the
Corporation, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and
37
<PAGE>
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each
-------------
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware 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; except that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date and year first above written.
NORTHROP GRUMMAN
CORPORATION
Attest:
By: /s/ JOHN H. MULLAN By: /s/ ALBERT F. MYERS
------------------------------- -----------------------------------
John H. Mullan Albert F. Myers
Acting Secretary Corporate Vice President and Treasurer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
Attest:
By: /s/ DEREK LENINGTON By: /s/ JAMES KIRKLAND
-------------------------------- -----------------------------------
Derek Lenington James Kirkland
Vice President, Regional Manager Assistant Vice President
39
<PAGE>
Exhibit A
---------
NORTHROP GRUMMAN CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
(Pursuant to Section 151
of the General Corporation Law of the State of Delaware)
We, Albert F. Myers, Corporate Vice President and Treasurer and John
H. Mullan, Acting Secretary of Northrop Grumman Corporation, a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, do hereby certify:
That pursuant to the authority conferred upon the Board of Directors
by the Corporation's Restated Certificate of Incorporation (the "Certificate of
Incorporation"), the Board of Directors, by a unanimous written consent dated
September 16, 1998, adopted the following resolution creating a series of one
million (1,000,000) shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
WHEREAS, the Certificate of Incorporation provides that the
Corporation is authorized to issue 10,000,000 shares of preferred stock, none of
which are outstanding, now therefore it is.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article FOURTH of the Certificate of
Incorporation, a series of Preferred Stock of the Corporation be, and it hereby
is, created out of the authorized but unissued shares of the capital stock of
the Corporation, such series to be designated Series A Junior Participating
Preferred Stock (the "Participating Preferred Stock"), to consist of one million
(1,000,000) shares, of par value $1.00 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be as follows:
1. Future Increase or Decrease. Subject to paragraph 4(e) of this
---------------------------
resolution, the number of shares of said series may at any time or from time to
time be increased or decreased by the Board of Directors notwithstanding that
shares of such series may be outstanding at such time of increase or decrease.
A-1
<PAGE>
2. Dividend Rate.
-------------
(a) The holders of shares of Participating Preferred 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 first day of each November, February, May and August in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Participating Preferred Stock (the "First
Issuance"), in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $10.00 or (b) 1,000 times the aggregate per share amount of all
cash dividends and 1,000 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, of par
value $1.00 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Participating Preferred Stock. In the event the
Corporation shall at any time after the First Issuance declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Participating
Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) On or after the first issuance of any share or fractional share of
Participating Preferred Stock, no dividend on Common Stock shall be declared
unless concurrently therewith a dividend or distribution is declared on the
Participating Preferred Stock as provided in paragraph (a) above; and the
declaration of any such dividend on the Common Stock shall be expressly
conditioned upon payment or declaration of and provision for a dividend on the
Participating Preferred Stock as above provided. In the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Whenever quarterly dividends or other dividends payable on the
Participating Preferred Stock as provided in paragraph (a) above are in arrears,
A-2
<PAGE>
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Participating Preferred Stock outstanding shall
have been paid in full, the Corporation shall not 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
Participating Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior (as to
dividends and upon dissolution, liquidation or winding up) to the Participating
Preferred Stock.
(d) Dividends shall begin to accrue and be cumulative on outstanding
shares of Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Participating
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. The Board of Directors
may fix a record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive payment of a dividend
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. Dissolution, Liquidation and Winding Up. In the event of any
---------------------------------------
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation (hereinafter referred to as a "Liquidation"), the holders of
Participating Preferred Stock shall receive at least $1,000 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, provided that the holders of
shares of Participating Preferred Stock shall be entitled to receive at least an
aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock (the "Participating Preferred
Liquidation Preference"). In the event the Corporation shall at any time after
the First Issuance declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Participating Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-3
<PAGE>
4. Voting Rights. The holders of shares of Participating Preferred
-------------
Stock shall have the following voting rights:
(a) Each share of Participating Preferred Stock shall entitle the
holder thereof to one thousand (1,000) votes on all matters submitted to a vote
of the stockholders of the Corporation. In the event the Corporation shall at
any time after the First Issuance declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Participating Preferred Stock
were entitled immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, or by law, the Certificate of
Incorporation or the Restated By-laws of the Corporation (the "By-laws"), the
holders of shares of Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(c) If and whenever dividends on the Participating Preferred Stock
shall be in arrears in an amount equal to six quarterly dividend payments, then
and in such event the holders of the Participating Preferred Stock, voting
separately as a class (subject to the provisions of subparagraph (d) below),
shall be entitled at the next annual meeting of the stockholders or at any
special meeting to elect two (2) directors. Each share of Participating
Preferred Stock shall be entitled to one vote, and holders of fractional shares
shall have the right to a fractional vote. Upon election, such directors shall
become additional directors of the Corporation and the authorized number of
directors of the Corporation shall thereupon be automatically increased by such
number of directors. Such right of the holders of Participating Preferred Stock
to elect directors may be exercised until all dividends in default on the
Participating Preferred Stock shall have been paid in full, and dividends for
the current dividend period declared and funds therefor set apart, and when so
paid and set apart, the right of the holders of Participating Preferred Stock to
elect such number of directors shall cease, the term of such directors shall
thereupon terminate, and the authorized number of directors of the Corporation
shall thereupon return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the vesting of such
special voting rights in the case of any such future dividend default or
defaults. The fact that dividends have been paid and set apart as required by
the preceding sentence shall be evidenced by a certificate executed by the
President and the Chief Financial Officer of the Corporation and
A-4
<PAGE>
delivered to the Board of Directors. The directors so elected by holders of
Participating Preferred Stock shall serve until the certificate described in the
preceding sentence shall have been delivered to the Board of Directors or until
their respective successors shall be elected or appointed and qualify.
At any time when such special voting rights have been so vested in the
holders of the Participating Preferred Stock, the Secretary of the Corporation
may, and upon the written request of the holders of record of 10% or more of the
number of shares of the Participating Preferred Stock then outstanding addressed
to such Secretary at the principal office of the Corporation in the State of
Illinois, shall, call a special meeting of the holders of the Participating
Preferred Stock for the election of the directors to be elected by them as
hereinabove provided, to be held in the case of such written request within
forty (40) days after delivery of such request, and in either case to be held at
the place and upon the notice provided by law and in the By-laws of the
Corporation for the holding of meetings of stockholders; provided, however, that
-------- -------
the Secretary shall not be required to call such a special meeting (i) if any
such request is received less than ninety (90) days before the date fixed for
the next ensuing annual or special meeting of stockholders or (ii) if at the
time any such request is received, the holders of Participating Preferred Stock
are not entitled to elect such directors by reason of the occurrence of an event
specified in the third sentence of subparagraph (d) below.
(d) If, at any time when the holders of Participating Preferred Stock
are entitled to elect directors pursuant to the foregoing provisions of this
paragraph 4, the holders of any one or more additional series of Preferred Stock
are entitled to elect directors by reason of any default or event specified in
the Certificate of Incorporation, as in effect at the time of the certificate of
designation for such series, and if the terms for such other additional series
so permit, the voting rights of the two or more series then entitled to vote
shall be combined (with each series having a number of votes proportional to the
aggregate liquidation preference of its outstanding shares). In such case, the
holders of Participating Preferred Stock and of all such other series then
entitled so to vote, voting as a class, shall elect such directors. If the
holders of any such other series have elected such directors prior to the
happening of the default or event permitting the holders of Participating
Preferred Stock to elect directors, or prior to a written request for the
holding of a special meeting being received by the Secretary of the Corporation
from the holders of not less than 10% of the then outstanding shares of
Participating Preferred Stock, then such directors so previously elected will be
deemed to have been elected by and on behalf of the holders of Participating
Preferred Stock as well as such other series, without prejudice to the right of
the holders of Participating Preferred Stock to vote for directors if such
previously elected directors shall resign, cease to serve or fail to stand for
reelection while the holders of Participating Preferred Stock are entitled to
vote. If the holders of any such other series are entitled to elect in excess
of two (2) directors, the Participating Preferred Stock shall not participate in
the election of more than two (2) such directors, and those directors whose
terms first expire shall be deemed
A-5
<PAGE>
to be the directors elected by the holders of Participating Preferred Stock;
provided that, if at the expiration of such terms the holders of Participating
- - --------
Preferred Stock are entitled to vote in the election of directors pursuant to
the provisions of this paragraph 4, then the Secretary of the Corporation shall
call a meeting (which meeting may be the annual meeting or special meeting of
stockholders referred to in subparagraph (c)) of holders of Participating
Preferred Stock for the purpose of electing replacement directors (in accordance
with the provisions of this paragraph 4) to be held on or prior to the time of
expiration of the expiring terms referred to above.
(e) Except as otherwise set forth herein or required by law, the
Certificate of Incorporation or the By-laws, holders of Participating 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
Stock as set forth herein) for the taking of any corporate action. No consent
of the holders of outstanding shares of Participating Preferred Stock at any
time outstanding shall be required in order to permit the Board of Directors to:
(i) increase the number of authorized shares of Participating Preferred Stock or
to decrease such number to a number not below the sum of the number of shares of
Participating Preferred Stock then outstanding and the number of shares with
respect to which there are outstanding rights to purchase; or (ii) to issue
Preferred Stock which is senior to the Participating Preferred Stock, junior to
the Participating Preferred Stock or on a parity with the Participating
Preferred Stock.
5. Consolidation, Merger, etc. In case the Corporation shall enter
---------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each shares of
Participating Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the First Issuance declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise then by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
which respect to the exchange or change of shares of Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
6. Redemption. The shares of Participating Preferred Stock
----------
shall not be redeemable.
A-6
<PAGE>
7. Conversion Rights. The Participating Preferred Stock
-----------------
is not convertible into Common Stock or any other security of the Corporation.
A-7
<PAGE>
IN WITNESS WHEREOF, the undersigned Corporate Vice President and
Treasurer and Acting Secretary of the Corporation each declares under penalty or
perjury the truth, to the best of his or her knowledge, of this Certificate of
Designation, Preferences and Rights of Series A Junior Participating Preferred
Stock.
Executed this ____ day of September, 1998.
By: __________________________
Albert F. Myers
Corporate Vice President and Treasurer
Attest:
_____________________
John H. Mullan
Acting Secretary
A-8
<PAGE>
Preferred
Exhibit B
---------
Form of Right Certificate
Certificate No. R- ____ Rights
NOT EXERCISABLE AFTER OCTOBER 31, 2008, OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
Northrop Grumman Corporation
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of September 23, 1998 (the "Rights Agreement"), between
----------------
Northrop Grumman Corporation, a Delaware corporation (the "Corporation"), and
-----------
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company
(the "Rights Agent"), to purchase from the Corporation at any time after the
------------
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on October 31, 2008, unless the Rights evidenced
hereby shall have been previously redeemed by the Corporation, at the office or
offices of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-thousandth of a fully paid non-assessable
share of Series A Junior Participating Preferred Stock, without par value (the
"Preferred Shares"), of the Corporation, at a purchase price of $250.00 per one
- - -----------------
one-thousandth of Preferred Share (the "Purchase Price"), upon presentation and
--------------
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-thousandths of a Preferred Share which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of ____________, ____, based on the Preferred
Shares as constituted at such date.
B-1
<PAGE>
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are Beneficially Owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-thousandth of a Preferred Share or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Corporation and the office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, 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
Preferred Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Corporation at a redemption price of
$.01 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one one-
thousandth or integral
B-2
<PAGE>
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Corporation, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate 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 Corporation which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal. Dated as of __________, ____.
[SEAL]
ATTEST: NORTHROP GRUMMAN CORPORATION
________________________ By__________________________
Name: Name:
Title: Title:
Countersigned:
[ ]
By_________________________
Authorized Signatory
Name:
Title:
Form of Reverse Side of Right Certificate
B-3
<PAGE>
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 Corporation, with full power
of substitution.
Dated: ____________, ____
----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- - ----------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Right Agreement) and (2) after due inquiry and
to the best knowledge of the undersigned, the undersigned did not acquire the
Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement).
----------------------------
Signature
1
<PAGE>
- - -------------------------------
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the Preferred Shares,
Common Shares or other securities issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares, Common Shares or other
securities 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: _______________, ____
----------------------------
Signature
2
<PAGE>
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
Form of Reverse Side of Right Certificate -- continued.
- - ------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
----------------------------
Signature
- - ------------------------------------
NOTICE
------
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Corporation and the Rights Agent will deem the Beneficial Owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as such terms
3
<PAGE>
are defined in the Rights Agreement) and such Assignment or Election to Purchase
will not be honored.
4
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On September 16, 1998, the Board of Directors of Northrop Grumman
Corporation (the "Corporation") declared a dividend distribution of one
-----------
preferred share purchase right (a "Right") for each outstanding share of Common
-----
Stock, par value $1.00 per share (the "Common Shares"), of the Corporation. The
-------------
dividend is payable to the stockholders of record on October 2, 1998 (the
"Record Date"), and with respect to Common Shares issued thereafter until the
- - ------------
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Shares issued after the Distribution Date. Except as set forth below,
each Right, when it becomes exercisable, entitles the registered holder to
purchase from the Corporation one one-thousandth of a share of Series A Junior
Participating Preferred Stock, $1.00 par value per share (the "Preferred
---------
Shares"), of the Corporation at a price of $250.00 per one one-thousandth 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") between the Corporation and ChaseMellon Shareholder Services,
- - ---------
L.L.C., as Rights Agent (the "Rights Agent"), dated as of September 23, 1998.
------------
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earliest
to occur of (i) a person or group of affiliated or associated persons having
acquired beneficial ownership of 15% or more of the outstanding Common Shares
(except pursuant to a Permitted Offer, as hereinafter defined); or (ii) 10 days
(or such later date as the Board may determine) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (as hereinafter defined) (the earliest of such dates being called the
"Distribution Date"). A person or group whose acquisition of Common Shares
- - ------------------
causes a Distribution Date pursuant to clause (i) above is an "Acquiring
---------
Person." The date that a person or group becomes an Acquiring Person is the
"Shares Acquisition Date."
- - ------------------------
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new Common
Share certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or
C-1
<PAGE>
earlier redemption or expiration of the Rights), the surrender for transfer of
any certificates for Common Shares outstanding as of the Record Date, even
without such notation or a copy of this Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
-----
Certificates") will be mailed to holders of record of the Common Shares as of
- - ------------
the close of business on the Distribution Date (and to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
----------------------------------------------------------
expire at the close of business on October 31, 2008, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person or an
affiliate or associate thereof, (except pursuant to a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms which a
majority of certain members of the Board of Directors determines to be adequate
and in the best interests of the Corporation, its stockholders and other
relevant constituencies, other than such Acquiring Person, its affiliates and
associates (a "Permitted Offer")), each holder of a Right will thereafter have
---------------
the right (the "Flip-In Right") to receive upon exercise the number of Common
-------------
Shares or of one one-thousandth of a share of Preferred Shares (or, in certain
circumstances, other securities of the Corporation) having a value (immediately
prior to such triggering event) equal to two times the exercise price of the
Right. Notwithstanding the foregoing, following the occurrence of the event
described above, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void.
In the event that, at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, any other person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
---------------
acquiring company (or in certain circumstances, its parent) having a value equal
to two times the exercise price of the
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<PAGE>
Right. The holder of a Right will continue to have the Flip-Over Right whether
or not such holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of Preferred Shares, Common
Shares or other securities issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $10.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 1,000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to a minimum preferential liquidation payment of $1,000 per
share, provided that the holders will be entitled to an aggregate payment per
share of at least 1,000 times the aggregate payment made per Common Share.
These rights are protected by customary antidilution provisions. In the event
that the amount of accrued and unpaid dividends on the Preferred Shares is
equivalent to six full quarterly dividends or more, the holders of the Preferred
Shares shall have the right, voting as a class, to elect two directors in
addition to the directors elected by the holders of the Common Shares until all
cumulative dividends on the Preferred Shares have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are one one-thousandth or integral multiples of one one-
thousandth of a Preferred Share, which may, at the election of the Corporation,
be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Shares on the last
trading day prior to the date of exercise.
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<PAGE>
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price") which redemption shall be
effective upon the action of the Board of Directors. Additionally, following
the Shares Acquisition Date, the Corporation may redeem the then outstanding
Rights in whole, but not in part, at the Redemption Price, provided that such
--------
redemption is in connection with a merger or other business combination
transaction or series of transactions involving the Corporation in which all
holders of Common Shares are treated alike but not involving an Acquiring Person
or its affiliates or associates.
All of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable income should the Rights
become exercisable or upon the occurrence of certain events thereafter.
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
September 23, 1998. A copy of the Rights Agreement is available free of charge
from the Corporation. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.
C-4
<PAGE>
EXHIBIT 2
[LETTERHEAD OF NORTHROP GRUMMAN CORPORATION]
FOR IMMEDIATE RELEASE
---------------------
NORTHROP GRUMMAN ADOPTS
- - -----------------------
SHAREHOLDER RIGHTS PLAN
- - -----------------------
LOS ANGELES -- Sept. 22, 1998 -- Northrop Grumman Corporation today
announced that its Board of Directors has adopted a shareholder rights plan to
replace the company's current plan, which expires Oct. 2, 1998.
The terms of the new plan are substantially similar to those in the
company's existing plan. The exercise price for rights under the new plan is
$250, and the plan will expire on Oct. 31, 2008.
The distribution of rights will be made to common shareholders of record on
Oct. 2, 1998, and shares of common stock newly issued after that date also will
carry rights. The rights distribution is not taxable to shareholders.
As of Sept. 21, 1998, Northrop Grumman had 68,815,497 shares outstanding.
Northrop Grumman Corporation, headquartered in Los Angeles, is a leading
designer, systems integrator and manufacturer of military surveillance and
combat aircraft, defense electronics and systems, airspace management systems,
information systems, marine systems, precision weapons, space systems, and
commercial and military aerostructures.
# # #
Contact: Jim Hart (media) 098-89
(310) 201-3458
Gaston Kent (investors)
(310) 201-3423
