SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 10, 1998
ITHACA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 000-22385 56-1385842
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Highway 268 West, P.O. Box 620, Wilkesboro, North Carolina 28697
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 667-5231
----------------------------
<PAGE>
2
ITEM 5. OTHER EVENTS
On July 10, 1998, the Board of Directors of Ithaca Industries, Inc.
(the "Company") declared a dividend distribution of one right (a "Right") for
each outstanding share of common stock, par value $0.01 per share, of the
Company to stockholders of record at the close of business on July 23, 1998,
pursuant to the terms of a Rights Agreement, dated July 10, 1998, between the
Company and American Stock Transfer & Trust Company (the "Rights Agreement").
The Rights are in all respects subject to and governed by the Rights Agreement,
a copy of which (including all exhibits thereto) is filed as Exhibit 4 hereto
and incorporated herein by this reference. A summary description of the Rights
is set forth in Exhibit C to the Rights Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
Exhibit Number Description
-------------- -----------
4 Rights Agreement, dated July 10,
1998, between Ithaca Industries,
Inc. and American Stock Transfer &
Trust Company (including as Exhibit
A thereto the Form of Certificate of
Designations in respect of Series A
Preferred Stock, as Exhibit B
thereto the Form of Right
Certificate, and as Exhibit C
thereto Summary of Rights to
Purchase Series A Preferred Stock).
<PAGE>
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITHACA INDUSTRIES, INC.
-----------------------
Date: July 20, 1998 By: /s/ Richard P. Thrush
-----------------------
Richard P. Thrush
Senior Vice President - Finance
and Administration, Chief Accounting
and Principal Financial Officer
<PAGE>
4
EXHIBIT INDEX
-------------
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
4 Rights Agreement, dated July 10, 1998,
between Ithaca Industries, Inc. and
American Stock Transfer & Trust
Company (including as Exhibit A
thereto the Form of Certificate of
Designations in respect of Series A
Preferred Stock, as Exhibit B thereto
the Form of Right Certificate, and as
Exhibit C thereto Summary of Rights to
Purchase Series A Preferred Stock).
<PAGE>
================================================================================
RIGHTS AGREEMENT
between
ITHACA INDUSTRIES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Dated: July 10, 1998, effective July 13, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1. Certain Definitions................................................1
Section 2. Appointment of Rights Agent........................................6
Section 3. Issue of Right Certificates........................................6
Section 4. Form of Right Certificates.........................................8
Section 5. Countersignature and Registration..................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates............9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....10
Section 8. Cancellation and Destruction of Right Certificates................12
Section 9. Reservation and Availability of Series A Shares; Registration.....13
Section 10. Series A Shares Record Date.......................................14
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........23
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power...........................................23
Section 14. Fractional Rights and Fractional Shares...........................25
Section 15. Rights of Action..................................................27
Section 16. Agreement of Right Holders........................................27
Section 17. Right Certificate Holder Not Deemed a Shareholder.................28
Section 18. Concerning the Rights Agent.......................................28
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........29
i
<PAGE>
Page
----
Section 20. Duties of Rights Agent............................................29
Section 21. Change of Rights Agent............................................32
Section 22. Issuance of New Right Certificates................................32
Section 23. Redemption........................................................33
Section 24. Exchange..........................................................34
Section 25. Notice of Certain Events..........................................35
Section 26. Notices...........................................................36
Section 27. Supplements and Amendments........................................37
Section 28. Successors........................................................37
Section 29. Determinations and Actions by the Board of Directors..............37
Section 30. Benefits of this Agreement........................................39
Section 31. Severability......................................................39
Section 32. Governing Law.....................................................39
Section 33. Consequential Damages.............................................39
Section 34. Counterparts......................................................40
Section 35. Descriptive Headings..............................................40
EXHIBIT A Certificate of Designations
EXHIBIT B Form of Right Certificate
EXHIBIT C Summary of Rights to Purchase Series A Preferred Stock
ii
<PAGE>
1
RIGHTS AGREEMENT
----------------
Rights Agreement, dated July 10, 1998, effective as of the opening of
business on July 13, 1998, between ITHACA INDUSTRIES, INC., a Delaware
corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New
York corporation (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding at the close of business on
July 23, 1998 (the "Record Date"), each Right representing the right to purchase
one one-hundredth (1/100) of a share of Series A Preferred Stock, par value
$0.01 per share, of the Company ("Series A Preferred Stock") having the rights
and preferences set forth in the form of Certificate of Designations in respect
of Series A Preferred Stock, a copy of which is attached hereto as Exhibit A.
The Board of Directors has further authorized the issuance of one Right with
respect to each Common Share that shall become outstanding (whether originally
issued or delivered from the Company's treasury) after the Record Date and on or
prior to the earliest of the Separation Date, the Redemption Date and the Final
Expiration Date (each as hereinafter defined).
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, together with
all Affiliates and Associates of such Person, shall hereafter become the Bene
ficial Owner of fifteen percent (15%) or more of the Common Shares then out
standing, but shall not include the Company, any wholly owned Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan; provided, however, that any Person that on the date of this Rights
Agreement is the Beneficial Owner of fifteen percent (15%) or more of the
outstanding Common Shares shall not be, or be deemed to be, an Acquiring Person
unless and until such Person becomes the Beneficial Owner of an additional one
percent (1%) or more of the outstanding Common Shares. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as a result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to fifteen percent (15%) or more of the Common Shares of
the Company then outstanding; provided, however, that if a Person shall become
the beneficial owner of fifteen percent (15%) or more of the Common Shares of
the Company then
<PAGE>
2
outstanding by reason of share combinations or share purchases by the Company
and shall, after such share combinations or purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provision, has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions, then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations (the "Rules") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the Record Date.
(c) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed to be 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; and provided further, that a
Person shall not be deemed to be the Beneficial Owner of, or to beneficially
own, securities that such Person has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) upon the exercise of
conversion rights conferred in any class or series of Preferred Stock, par value
$0.01 per share, of the Company issued prior to the Separation Date if the
resolutions of the Board providing for the issuance of such class or series of
Preferred Stock shall specifically refer to this Rights Agreement and provide
that the right to acquire securities upon the exercise of conversion rights so
conferred shall not be deemed to constitute beneficial ownership of such
securities;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of, or of
which any of them, directly or indirectly, has "beneficial ownership" (as
determined pursuant to Rule 13d-3 of the Rules, as in effect on the Record
<PAGE>
3
Date) (including pursuant to any agreement, arrangement or understanding,
whether or not in writing); provided, however, that a Person shall not be deemed
to be the Beneficial Owner of, or to beneficially own, any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or under standing arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the Rules, unless such agreement, arrangement or understanding is also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report);
(iii) that are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of, or
with respect to, acquiring, holding, voting (except as described in the proviso
to subparagraph (ii) of this paragraph (c)) or disposing of any voting
securities of the Company; or
(iv) that are, pursuant to the foregoing subparagraphs of
this paragraph (c), or otherwise (except as set forth in the proviso to
subparagraph (ii) of this paragraph (c)), deemed to be beneficially owned by a
voting trust, voting agent, recipient of a proxy that is not immediately
revocable (a "Non-revocable Proxy") or any other Person to whom such Person (the
"Grantor Person") has contributed, conveyed, delegated, given, granted,
tendered, transferred or otherwise assigned or conferred (collectively, "given")
some or all of the voting rights attributable to the Common Shares of which the
Grantor Person (alone or in conjunction with any other Person) is also deemed to
be a Beneficial Owner. Solely for purposes of this Agreement, the Grantor Person
shall be deemed to be the Beneficial Owner of all Common Shares that such voting
trust, voting Agent, proxy holder or other Person has the right, by
Non-revocable Proxy, agreement, assignment, tender, grant or otherwise, to
exercise some or all of the voting rights attributable thereto, whether or not
the Grantor Person shall have contributed or given voting rights that constitute
all or less (even substantially less) than all of the voting rights held by the
voting trust, voting Agent, proxy holder or other Person to whom or to which the
Grantor Person has given some or all of the voting rights attributable to Common
Shares otherwise beneficially owned by the Grantor Person;
provided, however, that nothing in this paragraph (c) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of or to "benefi cially own" any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
<PAGE>
4
(d) "Board" means the Board of Directors of the Company.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in Wilkesboro, North Carolina or
New York, New York are authorized or obligated by law or executive order to
close.
(f) "Close of business" on any given date shall mean 5:00 P.M.,
eastern time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., eastern time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Company
shall mean shares of Common Stock, par value $0.01 per share, of the Company.
"Common Shares" or "common shares," when used with reference to any Person other
than the Company, shall mean the capital stock of such Person with the greatest
voting power or the equity securities or other equity interest having power to
control or direct the management of such Person.
(h) "Independent Director" shall mean (i) any member of the
Board who is not an officer or employee of the Company or of any Subsidiary of
the Company and who is not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or a nominee or representative of an Acquiring Person or of
any such Affiliate or Associate, and who was a member of the Board prior to the
time any Person became an Acquiring Person and (ii) any successor to a member of
the Board who was a member of the Board prior to the time any Person became an
Acquiring Person, but only if such successor (x) is not an officer or employee
of the Company or any Subsidiary of the Company and is not an Acquiring Person
or an Affiliate or Associate of an Acquiring Person or a nominee or
representative of an Acquiring Person or any such Affiliate or Associate and (y)
was recommended for election or elected to succeed such member of the Board with
the concurrence of a majority of the Independent Directors then on the Board.
(i) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity and shall include any
successor (by merger or otherwise) of such entity.
(j) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C).
(k) "Section 13(a) Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a).
<PAGE>
5
(l) "Series A Shares" shall mean shares of Series A Preferred
Stock, par value $0.01 a share, of the Company, including any authorized
fraction of a Series A Share, unless the context otherwise requires.
(m) "Shares Acquisition Date" shall mean the first date of
public announcement (including, without limitation, a report filed pursuant to
Section 13(d) or 14(d) under the Exchange Act) by the Company or an Acquiring
Person indicating that an Acquiring Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of the
voting securities or voting interests is owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event or
Section 13(a) Event.
The following additional terms have the meanings provided in the
Sections of this Agreement specified after such terms, respectively:
(i) "Act" -- Section 9(c).
(ii) "Adjustment Shares" -- Section 11(a)(ii).
(iii) "Common Share equivalent" -- Section 11(a)(iii).
(iv) "Current Value" -- Section 11(a)(iii).
(v) "equivalent preferred shares" -- Section 11(b).
(vi) "Exchange Act" -- Section 1(b).
(vii) "Extension Date" -- Section 27.
(viii) "Final Expiration Date" -- Section 7(a).
(ix) "Principal Party" -- Section 13(b).
(x) "Purchase Price" -- Sections 4(a), 11(a)(ii) and
13(a).
(xi) "Record Date" -- Preamble.
(xii) "Redemption Date" -- Section 7(a).
(xiii) "Redemption Price" -- Section 23(a)(i).
<PAGE>
6
(xiv) "Rules" -- Section 1(b).
(xv) "Separation Date" -- Section 3(a).
(xvi) "Series ___ Preferred Stock" -- Preamble.
(xvii) "Spread" -- Section 11(a)(iii).
(xviii) "Springing Right of Redemption" -- Section 23(a)(i).
(xix) "Substitution Period" -- Section 11(a)(iii).
(xx) "Summary of Rights" -- Section 3(b).
(xxi) "Trading Day" -- Section 11(d)(i).
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Separation Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and agrees to act
as Rights Agent under this Agreement. The Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the close of business on the tenth
(10th) Business Day following the Shares Acquisition Date or (ii) the close of
business on the fifteenth (15th) Business Day after the date on which a tender
or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first commenced within
the meaning of Rule 14d-2(a) of the Rules, if upon consummation thereof, such
Person would be the Beneficial Owner of fifteen percent (15%) or more of the
Common Shares then outstanding (the earlier of (i) and (ii) being herein
referred to as the "Separation Date"), (x) the Rights will be evidenced (subject
to the provisions of paragraph (b) of this Section 3) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Separation Date, the Rights Agent will send, by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Separation Date, at the address of
such holder shown on the records of the Company, one or more Right Certificates,
in
<PAGE>
7
substantially the form of Exhibit B hereto, evidencing one Right for each Common
Share so held. In the event that an adjustment in the number of Rights per
Common Share has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Right Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Right Certifi cates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Separation Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As soon as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Series A Preferred
Stock, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Separation Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof and the registered holders of the Common Shares shall also be
the registered holders of the associated Rights. Until the earliest of the
Separation Date, the Redemption Date or the Final Expiration Date, the surrender
for transfer of any certificate for Common Shares outstanding on the Record Date
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.
(c) Certificates for Common Shares issued after the Record Date
but prior to the earliest of the Separation Date, the Redemption Date or the
Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN ITHACA
INDUSTRIES, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, DATED
JULY 10, 1998, EFFECTIVE AS OF THE OPENING OF BUSINESS ON JULY 13, 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 ITHACA INDUSTRIES, INC. 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. ITHACA INDUSTRIES, INC. WILL MAIL TO THE HOLDER OF
THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY
FOLLOWING RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
<PAGE>
8
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR
HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to
purchase Series A Shares, exercise notice and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange 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, whenever
distributed, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-hundredths of a
share of Series A Preferred Stock as shall be set forth therein at the price per
one one-hundredth of a Series A Share set forth therein (the "Purchase Price"),
but the amount and type of the securities purchasable (or other consideration to
be made available) 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 beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such (other than a bona fide purchaser for
value who has no knowledge that the transferor was an Acquiring Person or an
Associate or Affiliate of an Acquiring Person) or (iii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that the Board has determined is part of a plan, arrangement or understanding
that has as a primary purpose or effect avoidance of Section 7(e) hereof, 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:
<PAGE>
9
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). ACCORD INGLY, THIS RIGHT CERTIFICATE
AND THE RIGHTS REPRE SENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board or its President, Chief Executive Officer
or any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal, attested by the Secretary, the Treasurer or
any Assistant Secretary or Assistant Treasurer of the Company, or shall bear a
facsimile thereof. The Right Certificates shall not be valid for any purpose
unless countersigned by the Rights Agent. In case any officer of the Company who
shall have signed any of the Right Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Separation Date, the Rights Agent will keep or
cause to be kept, at its office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued or to be 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, the certificate number of each of the Right
Certificates 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 Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14
hereof, at any time after the close of business on the Separation 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
<PAGE>
10
the registered holder to purchase a like number of Series A Shares (or,
following a Section 11(a)(ii) Event or Section 13(a) Event, Common Shares, other
securities or property, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Right Certificate 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 Company shall reasonably request. Thereupon the Rights
Agent shall countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Separation Date upon
surrender of the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the principal office
of the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-hundredth of a Series A Share as to which the
Rights are exercised, at or prior to the close of business on the earlier of (i)
July 10, 2008 (the "Final Expiration Date") or (ii) the date on which the Rights
are redeemed as provided in Section 23 hereof (the "Redemption Date").
<PAGE>
11
(b) The Purchase Price for each one one-hundredth of a Series A
Share pursuant to the exercise of a Right shall initially be Thirty Dollars
($30), shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Series A Shares (or other shares,
securities or property, as the case may be) to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash, or by certified check
or cashier's check payable to the order of the Company, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) either (A) requisition
from any transfer agent of the Series A Shares (or make available, if the Rights
Agent is the transfer agent for such shares) certificates for the number of
Series A Shares (or fractions thereof) to be pur chased (and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests) or
(B) if the Company shall have elected to deposit the Series A Shares issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one
one-hundredths of a Series A Share as are to be purchased (in which case
certificates for the Series A Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue other securities (including Common
Shares) or assets pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities or assets are avail able
for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee from an Acquiring Person (or of any such Associate or
<PAGE>
12
Affiliate) who becomes a transferee after the Acquiring Person becomes such
(other than a bona fide purchaser for value who has no knowledge that the
transferor was an Acquiring Person or an Associate or Affiliate of an Acquiring
Person) or (iii) a transferee of an Acquiring Person (or such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board has determined
is part of a plan, arrangement or understanding that has as a primary purpose or
effect the avoidance of this Sec tion 7(e), shall become null and void without
any further action, and any holder of such Rights shall thereupon have no rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Right Certificates or other
Person as a result of its 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 Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the 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 Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
<PAGE>
13
Section 9. Reservation and Availability of Series A Shares;
Registration.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series A Shares
the number of Series A Shares that will be sufficient to permit the exercise in
full of all outstanding Rights. Prior to the occurrence of a Triggering Event,
the Company shall not be obliged to cause to be reserved and kept available out
of its authorized and unissued Common Shares or shares of preferred stock (other
than Series A Shares), any such Common Shares or any shares of preferred stock
(other than the Series A Shares) to permit exercise of outstanding Rights.
(b) If the Series A Shares issuable upon the exercise of Rights
are listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) If then required by applicable law, the Company shall use
its best efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Triggering Event as to which the consideration to be
delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement, or as soon as is required by law following the
Separation Date, as the case may be, a registration statement under the
Securities Act of 1933 (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 effec tive (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
Final Expiration Date. If then required by applicable law, the Company will also
take such action as may be appropriate under the securities or "blue sky" laws
of the various states. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set forth in clause (i) of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Series A Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares
<PAGE>
14
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
(e) The Company covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Series A Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax that may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Series A 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
deliver any certificates for Series A Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Series A Shares Record Date. Each person in whose name any
certificate for Series A 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 Series A 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 transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Series A Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Series A Shares (or Common Shares and/or other
securities, as the case may be) transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled (in such holder's capacity as such) to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote any shares, to
receive dividends or other distributions with respect to any shares or to
exercise any preemptive rights with respect to any shares, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right, and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
<PAGE>
15
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Series A Shares payable
in Series A Shares, (B) subdivide the outstanding Series A Shares, (C) combine
the outstanding Series A Shares into a smaller number of Series A Shares or (D)
issue any shares of its capital stock in a reclassification of the Series A
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of 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 that, if such Right had been exercised immediately prior to such
date and at a time when the Series A Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification.
(ii) In the event that:
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date of this
Agreement, directly or indirectly, (1) shall merge into the Company or
other wise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and
the Common Shares of the Company shall remain outstanding and
unchanged, (2) shall, in one or more transactions, transfer any assets
to the Company or to any of its Subsidiaries (including, in the case of
Subsidiaries, by way of a merger or consolidation of any such
Subsidiary) in exchange (in whole or in part) for shares of any class
of capital stock of the Company or any of its Subsidiaries or for
securities exercisable for or convertible into shares of any class of
capital stock of the Company or any of its Subsidiaries or otherwise
obtain from the Company or any of its Subsidiaries, with or without
consideration, any additional shares of any class of capital stock of
the Company or any of its Subsidiaries or securities exercisable for or
convertible into shares of any class of capital stock of the Company or
any of its Subsidiaries (other than as part of a pro rata distribution
to all holders of such shares of any class of capital stock of the
Company), (3) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of assets (in one or more transactions),
to, from, with or of, as the case may be, the Company or any of its
Subsidiaries (including, in the case of Subsidiaries, by way of a
merger or consolidation of any Subsidiary), on terms and conditions
less favorable to the Company than the Company would be able to obtain
in arm's-length negotia tion with an unaffiliated third party, other
than pursuant to a transaction set forth in Section 13(a) hereof, (4)
shall receive any compensation from the
<PAGE>
16
Company or any of its Subsidiaries other than compensation for full
time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices or (5) shall receive
the benefit, directly or indirectly (except proportionately as a
shareholder and except if resulting from a requirement of law or
governmental regulation), of any loans, assumptions of loans, advances,
guarantees, pledges or other financial assistance, or any tax credits
or other tax advantage, provided by the Company or any of its
Subsidiaries;
(B) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company, or any entity organized, appointed or
estab lished by the Company for or pursuant to the terms of any such
plan), alone or together with its Affiliates and Associates, shall
become the Beneficial Owner of twenty (20%) or more of the Common
Shares then outstanding, other than pursuant to any transaction set
forth in Section 13(a) hereof; or
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities (including
any reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries or
any other transaction or series of transactions involving the Company
or any of its Subsidiaries, other than a transaction to which Section
13(a) applies (whether or not with or into or otherwise involving an
Acquiring Person), that has the effect, directly or indirectly, of
increasing by more than one percent (1%) the proportionate share of the
outstanding shares of any class of equity securities or of securities
exercisable for or convertible into equity securities of the Company or
any of its Subsidiaries, that is directly or indirectly owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person;
then, and in each such case, proper provision shall be made so that each holder
of a Right, except as provided below and in Section 7(e) hereof, shall
thereafter have a right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of Series
A Shares, and subject to the provisions of Section 11(a)(iii) below, such number
of Common Shares as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Series A
Share for which a Right was exercisable immediately prior to the first
occurrence of an event set forth in Sec tion 11(a)(ii)(A), (B) or (C) above, and
dividing that product (which, following such first occurrence, shall be referred
to as the "Purchase Price" for all purposes of this Agreement) by (y) fifty
percent (50%) of the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof), but not less than the par value
thereof, on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
<PAGE>
17
(iii) In the event that (x) the total of the Common Shares
that are issued but not outstanding and authorized but unissued (excluding
Common Shares reserved for issuance pursuant to the specific terms of any
indenture, option plan or other agreement) is not sufficient to permit the
exercise in full of the Rights in accordance with Section 11(a)(ii) hereof, and
subject to such limitations as are necessary to prevent a default under any
agreement for money borrowed to which the Company is a party and to comply with
applicable law, then the Board shall: (A) determine the excess of (1) the value,
based upon the current per share market price of the Common Shares (determined
pursuant to Section 11(d) hereof), of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the Purchase Price (such
excess, the "Spread") and (B) with respect to each Right, make adequate
provision to substitute for, or provide an election to acquire in lieu of, the
Adjustment Shares, upon payment of the applicable Purchase Price (which term
shall include any reduced Purchase Price) any combination of the following
having an aggregate value equal to the Current Value (such aggregate value to be
determined by the Board based upon the advice of a nationally recognized
investment banking firm selected by the Board): (1) a reduction in the Purchase
Price, (2) Common Shares and/or other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
preferred stock that the Board, upon approval by a majority of the Continuing
Directors, has deemed to have the same value of Common Stock (such shares or
units of share of preferred stock hereinafter referred to as "Common Share
equivalents")) and/or (3) debt securities of the Company and/or cash and other
assets; provided, however, that if the Company shall not have made ade quate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the first occurrence of a Triggering Event, then the Company shall be
obli gated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, cash, which securities and/or cash in the aggregate are
equal to the Spread. If the Board shall determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
following the first occurrence of a Triggering Event, in order that the Company
may seek shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To the extent
that the Company determines that some action needs to be taken pursuant to the
first and/or second sentences of this Sec tion 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common
<PAGE>
18
Shares shall be the current per share market price (as determined pursuant to
Section 11(d) hereof) of the Common Shares on the date of the first occurrence
of a Triggering Event.
The provisions of this Section 11(a)(iii) shall apply only to Common
Shares of the Company and shall not apply to the securities of any other Person.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Series A Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Series A Shares (or shares having the same rights,
privileges and preferences as the Series A Shares ("equivalent preferred
shares")) or securities con vertible into Series A Shares or equivalent
preferred shares at a price per Series A Shares or equivalent preferred share
(or having a conversion price per share, if a security convertible into Series A
Shares or equivalent preferred shares) less than the current per share market
price of the Series A Shares (as defined in 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 Series
A Shares outstanding on such record date plus the number of Series A Shares that
the aggregate offering price of the total number of Series A Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Series A Shares outstanding on such record date plus the number of additional
Series A Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such sub scription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the holders of the Rights. Series A Shares owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the
distribution to all holders of the Series A Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of any debt securities, cash or assets
(other than a regular quarterly cash dividend or a dividend payable in Series A
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
<PAGE>
19
shall be the current per share market price of the Series A Shares (as defined
in Section 11(d) hereof) on such record date, less the fair market value (as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and binding on the holders of Rights) of
the portion of the assets or debt securities so to be distributed or of such
subscription rights or warrants applicable to one Series A Share and the
denominator of which shall be such current per share market price of the Series
A Shares (as determined pursuant to Section 11(d) hereof). Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price that would then be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of the Common Shares on any date shall be
deemed to be the lesser of (x) the average of the daily closing prices per
Common Share for the 30 consecutive Trading Days immediately prior to such date
or (y) the average of the daily closing prices per Common Share for the 30
consecutive Trading Days immediately following such date; provided, however,
that in the event that the current per share market price of the Common Shares
is determined during a period following the announcement by the issuer of such
Common Shares of a dividend or distribution on such Common Shares payable in
such Common Shares or securities convertible into such Common Shares (other than
the Rights), or any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or distribution, then, and in each such case, the current
market price shall be appropriately adjusted to reflect the current market price
per Common Share equivalent. 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 on the principal national securities exchange, if any, on
which the Common Shares are then listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by The
NASDAQ Stock Market ("NASDAQ") or such other system then in use, or, if on any
such date the Common Shares are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Shares selected by the Board. The term "Trading
Day" shall mean a day on which the principal national securities exchange or
NASDAQ on which the Common Shares are listed or traded or are admitted to
trading is open for the transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities exchange or NASDAQ, a
Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Series A Shares shall be determined in
the
<PAGE>
20
same manner as set forth above for Common Shares in clause (i) of this Sec tion
11(d). If the current per share market price of the Series A Shares cannot be
determined in the manner provided above, the "current per share market price" of
the Series A Shares shall be conclusively deemed to be the current per share
market price of the Common Shares (appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares nor the Series A Shares
are publicly 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, whose
determination shall be described in a statement filed with the Rights Agent and
binding on the holders of Rights.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any adjustments that by
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or the nearest
one-hundredth of a Common Share or other share or one ten- thousandth of a
Series A Share, as the case may be. Notwith standing the first sentence of this
Section 11(e), any adjustment provided for in this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction that
requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any property, other securities (other than
shares of capital stock of the Company) or shares of capital stock of the
Company other than Series A Shares, thereafter the amount of such property,
other securities (other than shares of capital stock of the Company) and the
number of such other shares of capital stock so receivable upon exercise of any
Right (as well as any consideration to be paid therefor) 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 Series A Shares (and the
Purchase Price) contained in this Section 11, and the provisions of Sections 7,
9, 10 and 13 with respect to the Series A Shares shall apply on like terms to
any such property, other securities and other shares of capital stock.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Series A Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately
<PAGE>
21
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Series A Share (calculated to the nearest one one ten-thousandth of a Series A
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of Series A Shares 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-hundredths of a
Series A 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 the number of Rights (calculated to the nearest one 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 Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and 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 Series A Shares issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-hundredth of a share and the number of shares
that were expressed in the initial Right Certificates issued hereunder.
<PAGE>
22
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then stated value, if
any, of the Series A Shares issuable upon exercise of the Rights, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Series A Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series A Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Series A Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Series A
Shares, (ii) issuance wholly for cash of any of the Series A Shares at less than
the current market price, (iii) issuance wholly for cash of Series A Shares or
securities that by their terms are convertible into or exchangeable for Series A
Shares, (iv) dividends on Series A Shares payable in Series A Shares or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Series A Shares shall not be
taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, and
shall not permit any Subsidiary, at any time after the Separation Date, to (i)
consolidate with, (ii) merge with or into or (iii) sell or transfer, in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person if at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the Separation
Date, it will not, except as permitted by Section 23, Section 24, Section 27 or
Section 31 hereof, take (or permit any Subsidiary to take) any action that at
the time it is reasonably foreseeable will diminish substantially or otherwise
eliminate the
<PAGE>
23
benefits intended to be afforded by the Rights; provided, however, that the
issuance of additional Rights pursuant hereto, including by action of the Board
under Section 22 hereof, shall not be deemed to violate this Section 11(o).
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Record Date (i)
declare a dividend on the outstanding Common Shares payable in Common Shares,
(ii) subdivide the outstanding Common Shares or (iii) combine the outstanding
Common Shares into a smaller number of shares, the number of Rights associated
with each Common Share then outstanding, or issued or delivered thereafter,
shall be proportionately adjusted so that the number of Rights thereafter
associated (whether before or after the Separation Date) with each Common Share
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each Common Share 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 event and the
denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. For purposes of this Section
11(p), any Common Shares issued after the Separation Date that were not issued
together with a Right (pursuant to the Preamble hereto or by action of the Board
pursuant to Section 22 hereof) shall not be counted as outstanding.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Series A Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (or, if prior to the Separation
Date, to each holder of a certificate representing Common Shares) in accordance
with Section 25 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company) and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company)
shall consolidate with, or merge with or into, the Company and the Company shall
be the continuing or surviving cor poration of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property or (z) the
<PAGE>
24
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in a single transaction or a series of
related transactions, assets or earning power aggregating more than fifty
percent (50%) of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company), then, and in each such case, proper provision shall
be made so that (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, nonassessable and
freely tradeable Common Shares of the Principal Party, not subject to any rights
of first refusal, redemption or repurchase, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-hundredths of a Series A Share for which a Right is exercisable immediately
prior to the first occurrence of a Section 13(a) Event (or, if any event set
forth in Sec tions 11(a)(ii)(A), (B) and (C) has occurred prior to the Section
13(a) Event, multiply ing the number of such fractional shares for which a Right
was exercisable immedi ately prior to the first occurrence of an event set forth
in Sections 11(a)(ii)(A), (B) and (C) hereof by the Purchase Price immediately
prior to such first occurrence), and dividing that product (which, following the
Section 13(a) Event, shall thereafter be referred to as the "Purchase Price" for
all purposes of this Agreement) by (2) fifty percent (50%) of the current per
share market price (determined pursuant to Section 11(d) hereof) per Common
Share (or other securities or property as provided for herein) of such Principal
Party on the date of consummation of such consolidation, merger, sale or
transfer; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obliga tions and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall apply
only to such Principal Party following the first occurrence of a Section 13(a)
Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Sections 11(a)(ii) and
11(a)(iii) hereof shall thereafter be of no effect following the first
occurrence of a Section 13(a) Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is the issuer of
any securi ties into which Common Shares of the Company are converted in such
merger or consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation; and
<PAGE>
25
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any such case, (1) if
the Common Shares of such Person are not at such time and have not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares, which have not been issued or reserved for
issuance, to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act. The provisions of this Section 13 shall similarly apply to successive
mergers or consoli dations or sales or other transfers. In the event that one of
the transactions described in Section 13(a) hereof shall occur at any time after
the occurrence of a transaction described in Section 11(a)(ii) hereof, the
Rights that have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Separation Date as provided in Section 11(p) hereof,
or to distribute Right Certificates that evidence fractional Rights. In lieu of
such fractional
<PAGE>
26
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 on the principal national securities exchange, if any, on which the
Rights are then 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. If on any such
date the Rights are not publicly held or so listed or traded, the current market
value of a whole Right shall mean the fair value of a whole Right as determined
in good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and binding on the holders of Rights.
(b) The Company shall not be required to issue fractions of
Series A Shares (other than fractions that are integral multiples of one
one-hundredth of a Series A Share) upon exercise of the Rights or to distribute
certificates that evidence fractional Series A Shares (other than fractions that
are integral multiples of one one-hundredth of a Series A Share). Fractions of
Series A Shares in integral multiples of one-hundredth of a Series A Share may,
at the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Series A Shares. In lieu of fractional
Series A Shares that are not integral multiples of one one-hundredth of a Series
A Share, the Company 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 Series A Share. For
purposes of this Section 14(b), the current market value of a Series A Share
shall be the closing price of a Series A 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 a Triggering Event, the Company
shall not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates that evidence fractional Common Shares. In
lieu of fractional Common Shares, the Company may pay to the registered holders
of
<PAGE>
27
Right Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
Common Share. For purposes of this Section 14(c), the current market value of
one Common Share shall be the closing price of one Common Share (as determined
pursuant to Sec tion 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right, by the acceptance of the Rights,
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as otherwise set forth herein.
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 Separation Date, the registered holders of any
certificate representing Common Shares); and any registered holder of any Right
Certificate (or, prior to the Separation Date, of any other certificate
representing Common Shares), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Separation Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Separation Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Separation Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with appropriate
forms and certificates fully executed; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Separation Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and
<PAGE>
28
of the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated Common Shares certificates
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Series A Shares, or any
other securities of the Company, that may at any time be issuable on the
exercise of the Rights repre sented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of direc tors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be fully indemnified against, shall
be protected from, and shall incur no liability or expense (including without
limitation
<PAGE>
29
attorneys' fees and expenses) for, or in respect of, any action taken, suffered
or omitted by it in connection with, its administration of this Agreement in
reliance upon any Right Certificate or certificate for the Series A Shares or
Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, instruction, consent, certifi cate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
<PAGE>
30
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any 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 actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Series A Shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any Series
A Shares will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
<PAGE>
31
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2 on such
certificate attached to the form of assignment or form of election to purchase,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
<PAGE>
32
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Series A Shares by registered or certified mail. In
such event, the Company shall give written notice of such resignation to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares and Series A Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a cor poration organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, that is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and that has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $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
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and Series A 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.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, the Company may,
if deemed necessary or
<PAGE>
33
appropriate by the Board, issue Right Certificates in connection with the
issuance or sale of Common Shares following the Separation Date.
Section 23. Redemption.
(a) (i) The Board may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth Business Day following any
Shares Acquisition Date or (B) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of One Cent
($0.01) per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"); provided,
however, that if, following the occurrence of a Shares Acquisition Date and
following the expiration of the right of redemption hereunder (other than a
Springing Right of Redemption, as defined below) but prior to any Triggering
Event, each of the following shall have occurred and remain in effect: (x) a
Person who is an Acquiring Person shall have transferred or otherwise disposed
of a number of Common Shares in a transaction, or series of transactions, that
did not result in the occurrence of a Triggering Event, such that such Person is
thereafter a Beneficial Owner of ten percent (10%) or less of the outstanding
Common Shares; (y) there are no other Persons, immediately following the
occurrence of the event described in clause (x) above, who are Acquiring
Persons; and (z) the transfer or other disposition described in clause (x) above
was other than pursuant to a transaction, or series of transactions, that
directly or indirectly involved the Company or any of its Subsidiaries, then the
right of redemption shall be reinstated and thereafter be subject to the
provisions of this Section 23. The reinstated right of redemption referred to in
the preceding sentence and the reinstated rights of redemption referred to in
Sections 27 and 31 hereof is herein called the "Springing Right of Redemption."
Notwithstanding anything contained in this Agree ment to the contrary, the
Rights shall not be exercisable pursuant to Section 11(a)(ii) at a time when the
Rights are then redeemable hereunder.
(ii) Following the occurrence of a Shares Acquisition Date
but prior to any event described in Section 13(a), the Board may also redeem all
but not less than all of the then outstanding Rights at the Redemption Price in
connection with any event of the type specified in Section 11(a)(ii)(A)(1) or
13(a) not involving an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (other than as a holder of Common Shares being treated like
other such holders generally).
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. In the case of a redemption permitted
only under
<PAGE>
34
Section 23(a)(ii), evidence of which shall have been filed with the Rights
Agent, the right to exercise the Rights will terminate and represent only the
right to receive the Redemption Price only after ten business days following the
giving of notice of such redemption to the holders of such Rights if no event
set forth in Section 11(a)(ii) shall have occurred, and, if such event shall
have occurred, 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. Within ten days after the action of the Board
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Separation Date, on the registry
books of the Transfer Agent for the Common Shares. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board may, at its option, at any time after the right of
the Company to redeem the Rights has expired or terminated (although such right
may be subject to restoration as a Springing Right of Redemption or pursuant to
Section 23(a)(ii) hereof), exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provi sions of Section 7(e) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary or the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of fifty percent (50%) or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give notice to the Rights Agent and public notice of any such exchange;
provided, however, that failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
that is mailed in the manner herein provided shall be
<PAGE>
35
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of Common Shares for Rights
will be effected and, in the event of any partial exchange, the number of Rights
that will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights that have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Series A Shares for Common Shares at the rate of
one-hundredth of a Series A Share for each Right.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates that evidence fractional Series A
Shares (except as hereinafter provided) or fractional Common Shares, but if the
exchange is for Series A Shares, the Company shall be obligated to issue
fractional shares so long as any fraction of a Series A Share so to be issued is
at least equal to one one-hundredth of a Series A Share. In lieu of such
fractional shares, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share. For the purposes of this Section 24(d), (i) the current
market value of a whole Common Share shall be the per share market price
determined as of the day immediately following the day of the public
announcement by the Company that an exchange is to be effected pursuant to this
Section 24 and (ii) the current market value of a Series A Share or fraction of
a Series A Share shall be the current market value on such day of a Series A
Share (or fraction of a Series A Share) as determined in accordance with Section
11(d)(ii) hereof.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Separation Date, (i) to pay any dividend payable in stock of any class to the
holders of Series A Shares or to make any other distribution to the holders of
Series A Shares (other than a regular quarterly cash dividend), (ii) to offer to
the holders of its Series A Shares rights or warrants to subscribe for or to
purchase any additional Series A Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
Series A Shares (other than a reclassification involving only the subdivision of
outstanding Series A Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of more than fifty percent (50%) of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action,
<PAGE>
36
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 Common
Shares and/or Series A Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least 20 days prior to the record date for determining holders of the Series
A Shares for purposes of such action, and in the case of any such other action,
at least 20 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or Series
A Shares, whichever shall be the earlier.
(b) In case of the occurrence of a Section 11(a)(ii) Event,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii), and (ii) all references in the preceding
paragraph to Series A Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Ithaca Industries, Inc.
Highway 268 West, P.O. Box 620
Wilkesboro, North Carolina 28697
Attention: Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
62-01 15th Avenue
Brooklyn, N.Y. 11219
Attention: Mr. Lou Tinto
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to
<PAGE>
37
such holder at the address of such holder as shown on the registry books of the
Rights Agent.
Section 27. Supplements and Amendments. Prior to the Separation Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing Common Shares unless such approval is required by
Section 29(b), except for a supplement or amendment that would reduce the Redemp
tion Price, accelerate the Final Expiration Date to a date earlier than the
third anniversary of the effective date of this Agreement, increase the Purchase
Price, or change the number of fractional Series A Shares for which a Right is
then exercis able. From and after the Separation Date (and at any time after the
occurrence of a Shares Acquisition Date subsequent to the occurrence of a
Springing Right of Redemption), the Company and the Rights Agent shall, if the
Company shall so direct, 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 that may be defective or
inconsistent with any other provisions herein, (iii) to extend the period of
redemption provided in Section 23 hereof (which amendment shall set forth a date
after which the Rights are no longer redeemable ("Extension Date") unless the
Rights Agreement is further amended prior to the Extension Date to further
extend the time during which the Rights are redeemable, and which amendment may
provide for the termination of the right of redemption prior to any Extension
Date or (iv) to change or supplement the provisions hereunder in any manner that
the Company may deem necessary or desirable and that shall not adversely affect
the interests of the holders of Right Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); provided further,
that this Agreement may not be supplemented or amended in any way after the
period for redemption of the Rights pursuant to Section 23 hereof shall have
expired unless there shall thereafter arise and be in effect a Springing Right
of Redemption. Upon the delivery of a certificate from an appropriate officer of
the Company, which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Separation Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Shares.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors.
(a) For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time and any determination
of the particular percentage of such outstanding Common Shares of which any
Person is the Beneficial Owner shall be made in accordance with the
<PAGE>
38
provisions of Rule 13d-3(d)(1)(i) of the Rules as in effect as of the date
hereof. Subject to the provisions of paragraph (b) of this Section 29, the Board
(where speci fically provided for, with the concurrence of the Independent
Directors) 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 Company (where specifically provided for, with the concurrence of
the Independent Directors), or as may be neces sary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, all omissions with
respect to the foregoing) that are done or made by the Board (where specifically
provided for, with the concurrence of the Independent Directors), in good faith,
shall (i) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Right Certificates and all other parties and (ii) not subject the
Board or the Independent Directors to any liability to the holders of the Right
Certificates.
(b) Notwithstanding anything in this Agreement to the contrary,
any actions by the Board pursuant to Section 11(a)(iii), Section 23(a), Section
24, Section 27 or Section 31, and any determinations concerning the occurrence
of any Triggering Event, shall require the concurrence of such number of
Independent Directors as shall constitute a majority of the Independent
Directors then in office; provided, however, that any such action approved by
the Board without such required concurrence of Independent Directors (whether or
not there shall then be Independent Directors in office) shall nevertheless be,
and be deemed to be, duly approved if such action is approved (at a meeting of
stockholders duly called and held upon at least thirty days prior written notice
to the stockholders) by the affirmative votes of the holders of two-thirds of
all outstanding Common Shares including the affirmative votes of the holders of
at least two-thirds of all outstanding Common Shares held as of the record date
for such meeting by persons other than an Acquiring Person or any Affiliate or
Associate of such Acquiring Person.
(c) The Board may at any time and from time to time (and upon
the occurrence of a Triggering Event shall forthwith) establish and set aside
one or more funds (in such amount or amounts, but no less than One Million
Dollars ($1,000,000) in the aggregate, as the Board shall deem necessary or
desirable), whether in trust, escrow or other segregated accounts (regardless of
whether any such fund is combined for administrative purposes with any other
fund or funds established by the Company, for the purpose of assuring that
adequate resources are available to the Independent Directors to enable them to
carry out their prescribed functions, and to maintain their authority and
powers, under this Agreement, or to fulfill their fiduciary obligations to the
stockholders of the Company. Without limiting the generality of the statement of
purposes contained in the next preceding sentence, the fund or funds so
established shall, on demand of a majority of the Independent
<PAGE>
39
Directors, be made available to the Independent Directors for the purposes of
(i) seeking affirmatively to establish, or to defend, the validity of this
Agreement, including, without limitation, this Section 29, and (ii) seeking
affirmatively to establish, or to defend, the validity and/or propriety of any
action taken (or omitted to be taken) by the Independent Directors pursuant to
this Agreement, the Certificate of Incorporation or the Bylaws or applicable
provisions of the General Corporation Law of Delaware. The establishment by the
Board, and utilization by the Independent Directors, of any fund or funds
established pursuant to this subparagraph (c) shall be separate and apart from,
and shall not detract from, diminish or otherwise affect adversely, any rights
or protections afforded, conferred or given to the Company's Directors
(including the Independent Directors) pursuant to the Certificate of
Incorporation of the Company or its Bylaws.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Separation Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Separation Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date of
such determination by the Board.
Section 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts made and to be
performed entirely within such State; and any provision of this Agreement and
each such Right Certificate relating to the internal corporate governance or
other affairs of the Company shall be governed by and construed in accordance
with the laws of the State of Delaware.
Section 33. Consequential Damages. Neither party to this Agreement
shall be liable to the other party for consequential damages.
<PAGE>
40
Section 34. 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 35. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience of reference only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agree ment to
be duly executed as of the day and year first above written.
ITHACA INDUSTRIES, INC.
By: /s/ Jim D. Waller
-----------------
Jim D. Waller
Chairman of the Board and
Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ Herbert J. Lemmer
---------------------
Name: Herbert J. Lemmer
Title: Vice President
<PAGE>
EXHIBIT A
ITHACA INDUSTRIES, INC.
CERTIFICATE OF DESIGNATIONS
in respect of
SERIES A PREFERRED STOCK
--------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------------
The undersigned, being the Chairman and Chief Executive Officer of
ITHACA INDUSTRIES, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation duly adopted the following resolution at a meeting of said Board of
Directors duly called and held on July 10, 1998, effective as of July 13, 1998,
which resolution remains in full force and effect as of the date hereof:
RESOLVED, that the Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Corporation's Certificate of
Incorporation, as amended (the "Charter"), hereby establishes a series of the
Preferred Stock, par value $0.01 per share, of the Corporation and fixes the
number of shares of such series and the powers, designations, preferences and
relative,
<PAGE>
A-2
participating, optional or other rights of such series, and the qualifications,
limitations or restrictions thereof, as follows:
The first series of Preferred Stock, par value $0.01 per
share, of the Corporation shall be, and hereby is, designated "Series A
Preferred Stock" (the "Series A Shares"), and the number of shares constituting
such series shall be two hundred thousand (200,000). The relative rights and
preferences of the Series A Shares shall be as follows:
Section A. Dividends and Distributions.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series A Shares
with respect to dividends, the holders of Series A Shares, in preference to the
holders of Common Stock, par value $0.01 per share, of the Corporation (the
"Common Stock") and of any other junior stock, shall be entitled to receive,
when and as declared by the Board of Directors, out of any funds lawfully
available therefor, cash dividends thereon, payable quarterly, from the date of
issuance thereof, upon the last days of March, June, September and December 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 Series A Share, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.25 or (b) subject to the provisions
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend or
<PAGE>
A-3
distribution 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 since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any Series A Share. In the event the Corporation shall at any
time after July 23, 1998 (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amounts to which holders of Series A Shares were entitled
immediately prior to such event under clause (a) and clause (b) of the preceding
sentence shall be adjusted by multiplying each such amount by a fraction the
numerator of which is the number of shares of Common Shares 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.
(2) The Corporation shall declare a dividend or distribution on the
Series A Shares as provided in paragraph (1) of this Section A immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend or distribution payable in shares of Common Stock); provided that, 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 $0.25 per share of the
Series A Shares shall nevertheless be payable on such subsequent Quarterly
Dividend Payment
<PAGE>
A-4
Date; and provided further that nothing contained in this paragraph (2) shall be
construed so as to conflict with any provision relating to the declaration of
dividends contained in the Charter.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series A Shares from the Quarterly Dividend Payment Date next preceding the date
of issue of such Series A Shares, unless (a) 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 (b) 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
Series A Shares entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
Series A Shares in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of Series A
Shares entitled to receive payment of a dividend or distribution declared
thereon.
Section B. Redemption. The Series A Shares are not redeemable.
Section C. Liquidation, Dissolution or Winding Up. In the event of the
voluntary or involuntary liquidation of the Corporation the "preferential
amount"
<PAGE>
A-5
which the holders of the Series A Shares shall be entitled to receive out of the
assets of the Corporation shall be $100.00 per share plus all accrued and unpaid
dividends thereon.
(1) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made to the holders of shares of stock ranking junior
(upon liquidation, dissolution or winding up) to the Series A Shares unless,
prior thereto, the holders of Series A Shares shall have received $100.00 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment (the "Series A
Liquidation Preference"). Following the payment of the full amount of the Series
A Liquidation Preference, no additional distributions shall be made to the
holders of Series A Shares unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in paragraph (3)
of this Section C to reflect such events as stock splits, stock dividends and
recapitalization with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
Series A Shares and Common Stock, respectively, holders of Series A Shares and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the
<PAGE>
A-6
Adjustment Number to one with respect to the Series A Shares and Common Stock,
on a per share basis, respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Shares, then all such available assets
shall be distributed ratably to the holders of the Series A Shares and the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then any such
remaining assets shall be distributed ratably to the holders of Common Stock.
(3) In the event the Corporation shall at any time after July 23, 1998
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number 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.
Section D. Sinking Fund. The Series A Shares shall not be entitled to
the benefit of any sinking fund for the redemption or purchase of such shares.
<PAGE>
A-7
Section E. Conversion.
(1) Subject to paragraph (2) of this Section E, the Series A Shares
shall not be convertible.
(2) 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 the Series A Shares shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 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 declare or pay any
dividend on 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) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of Series A Shares
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.
<PAGE>
A-8
Section F. Voting Rights.
(1) The holders of Series A Shares shall have no voting rights except
as provided by Delaware statutes or by paragraph (2) of this Section F.
(2) So long as any Series A Shares shall be outstanding, and in
addition to any other approvals or consents required by law, without the consent
of the holders of 66-2/3% of the Series A Shares outstanding as of a record date
fixed by the Board of Directors, given either by their affirmative vote at a
special meeting called for that purpose, or, if permitted by law, in writing
without a meeting:
(i) The Corporation shall not sell, transfer or lease all or
substantially all the properties and assets of the Corporation; provided,
however, that nothing herein shall require the consent of the holders of
Series A Shares for or in respect of the creation of any mortgage, pledge,
or other lien upon all or any part of the assets of the Corporation.
(ii) The Corporation shall not effect a merger or consolidation
with any other corporation or corporations unless as a result of such
merger or consolidation and after giving effect thereto holders of Series A
Shares are entitled to receive a per share amount and type of consideration
equal to 100 times the per share amount and type of consideration received
by holders of shares of Common Stock, or (1) either (A) the Corporation
shall be the surviving corporation or (B) if the Corporation is not the
surviving corporation, the successor corporation shall be a corporation
duly organized and existing under the laws of any state of the
<PAGE>
A-9
United States of America or the District of Columbia, and all obligations
of the Corporation with respect to the Series A Shares shall be assumed by
successor corporation, (2) the Series A Shares then outstanding shall
continue to be outstanding, and (3) there shall be no alteration or change
in the designation or the preferences, relative rights or limitations
applicable to outstanding Series A Shares prejudicial to the holders
thereof.
(iii) The Corporation shall not amend, alter or repeal any of the
provisions of its Certificate of Incorporation in any manner which
adversely affects the relative rights, preferences or limitations of the
Series A Shares or the holders thereof.
Section G. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Shares as provided in Section A are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on Series A Shares outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (as to dividends) to the Series A Shares;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (as to dividends) with the Series A
Shares, except dividends paid ratably on the Series A Shares and
<PAGE>
A-10
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (as to dividends) to the Series A
Shares, 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) to the
Series A Shares; and
(iv) purchase or otherwise acquire for consideration any Series A
Shares, or any shares of stock ranking on a parity (as to dividends) with
the Series A Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors ) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and the relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (1) of this Section G,
purchase or otherwise acquire such shares at such time and in such manner.
<PAGE>
A-11
Section H. Fractional Shares. The Corporation may issue fractions and
certificates representing fractions of Series A Shares in integral multiples of
1/100th of a Series A Share, or in lieu thereof, at the election of the Board of
Directors of the Corporation at the time of the first issue of any Series A
Shares, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depository selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all rights, privileges and preferences to which they would
be entitled as beneficial owners of Series A Shares. In the event that
fractional Series A Shares are issued, the holders thereof shall have all the
rights provided herein of holders of full Series A Shares in the proportion
which such fraction bears to a full share. IN TESTIMONY WHEREOF, ITHACA
INDUSTRIES, INC. has caused this Statement to be signed under its corporate seal
by its Chairman and Chief Executive Officer and its Secretary as of the 13th day
of July, 1998.
ITHACA INDUSTRIES, INC.
By:
---------------------------------
Jim D. Waller
Chairman, Chief Executive Officer
and President
ATTEST:
- --------------------------------
Richard P. Thrush
Secretary and Chief Financial
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER JULY 10, 2008 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY OR THE FINAL EXPIRATION DATE IS ACCELERATED. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT (AS HEREINAFTER DEFINED)) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE AGREEMENT.]
Right Certificate
ITHACA INDUSTRIES, INC.
This certifies that , or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated July 10, 1998, effective as of July 13, 1998 (the "Rights
Agreement"), between ITHACA INDUSTRIES, INC., a Delaware corporation (the
"Company"), and AMERICAN STOCK TRANSFER COMPANY, a [ ] corporation (the "Rights
Agent"), to purchase from the Company at any time after the Separation Date (as
such term is defined in the Rights Agreement) and prior to the close of business
(5:00 PM eastern time) on July 10, 2008 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share of Series A Preferred Stock,
par
<PAGE>
B-2
value $0.01 per share ("Series A Share") of the Company, at a purchase price of
Thirty Dollars ($30.00) per one one-hundredth of a Series A Share (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase and related Certificate duly executed. The number of
rights evidenced by this Right Certificate (and the number of shares that may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of July 23, 1998
based on the Series A Shares as constituted as of such date.
Upon the occurrence of a Triggering Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (a) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(b) a transferee of any such Acquiring Person, Associate or Affiliate (other
than a bona fide purchaser for value who has no knowledge that the transferor
was an Acquiring Person or an Associate or Affiliate of an Acquiring Person) or
(c) under certain circumstances specified in the Rights Agreement, a transferee
of a person or entity who, after such transfer, became an Acquiring Person, 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 any such Triggering
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Series A Shares or other securities or other property that may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
The Board may, at its option, at any time after the right of the
Company to redeem the Rights has expired or terminated (with certain exceptions)
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares (as such term is defined in the Rights
Agreement) at an exchange ratio of one Common Share per Right, as adjusted.
Immediately upon the action of the Board ordering an exchange of the Rights, the
Rights affected by such order will no longer be exercisable and thereafter the
only right of the holders of such Rights will be to receive the Common Shares
issuable by the Company in exchange for such Rights.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the
<PAGE>
B-3
Company and the holders of the Right Certificates, which limitations of rights
include the temporary suspension of the exercisability of such Rights for not
more than ninety (90) days at the election of the Company and under certain
circumstances specified in such Rights Agreement. Copies of the Rights Agreement
are on file at the above-mentioned office of the Rights Agent and are also
available upon written request to the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Series A Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If the Rights evidenced by 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 at a redemption price of One Cent ($0.01)
per Right at any time prior to the close of business 10 Business Days (as such
term in defined in the Rights Agreement) after the Shares Acquisition Date (as
such term is defined in the Rights Agreement) unless the period for redemption
is extended as permitted in the Rights Agreement. Thereafter, the Board of
Directors of the Company ("Board") may only redeem the Rights in certain
specified circumstances including in connection with certain events not
involving an Acquiring Person or an Affiliate or Associate of an Acquiring
Person. In addition, the Company's right of redemption may be reinstated if,
among other things, an Acquiring Person reduces his beneficial ownership to [a
level below fifteen percent (15%)] or less of the outstanding Common Shares of
the Company in a transaction or series of transactions not involving the
Company. Immediately upon the action of the Board ordering redemption of the
Rights, the Rights will no longer be exercisable, except where the redemption is
made in connection with an event not involving an Acquiring Person or Affiliate
or Associate of an Acquiring Person (in which circumstance the effective time of
the redemption may be deferred); and, in general, thereafter the only right of
the holders of the Rights evidenced hereby will be to receive the Redemption
Price.
The terms of the Rights evidenced by this Certificate may be
supplemented or amended without the approval of any holder of the Rights (or the
Common Shares) as set forth in the Rights Agreement.
No fractional Series A Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions that are integral
multiples of
<PAGE>
B-4
one one-hundredth of a Series A Share, which may, at the election of the
Company, 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, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Series A Shares
or of any other securities of the Company that may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the 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 signatures of the proper officers of the Company.
Dated: ___________, ____
ITHACA INDUSTRIES, INC.
By_______________________
Name:
Title:
Attest___________________
Name:
Title:
(Corporate Seal)
<PAGE>
B-5
Countersigned
[NAME OF RIGHTS AGENT]
as Rights Agent
By___________________
<PAGE>
B-6
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________________________ hereby sells,
assigns and transfers unto __________________________
___________________________________________________________________________
(Please print name and address of Transferee)
____________________________________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _______________, ____
---------------------
Signature
Signature Guaranteed:
<PAGE>
B-7
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(i) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);
(ii) to the best knowledge of the undersigned, it [ ] did [ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _____________, ____ _________________________
Signature
NOTICE
------
The signature(s) to the foregoing Assignment and Certificate must
correspond to the name(s) as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
B-8
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: ITHACA INDUSTRIES, INC.
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the Series A Shares (or
fractions thereof) issuable upon the exercise of such Rights (or such other
securities of the Company or of any other entity that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares 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 of such Rights shall
be registered in the name of and delivered to:
<PAGE>
B-9
Please insert social security
or other identifying number: ______________________________
__________________________________________________________________
(Please print name and address)
__________________________________________________________________
__________________________________________________________________
Dated: __________________, ____
-------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: ________________, ____
-------------------------
Signature
<PAGE>
B-10
NOTICE
------
The signature(s) to the foregoing Election to Purchase and Certificate
must correspond to the name(s) as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT C
ITHACA INDUSTRIES, INC.
Summary of Rights to Purchase Series A Preferred Stock
On July 10, 1998, the Board of Directors of Ithaca Industries, Inc.
(the "Company") declared a dividend distribution of one Right for each
outstanding share of Common Stock, par value $0.01 per share (a "Common Share"),
of the Company to stockholders of record at the close of business on July 23,
1998 (the "Record Date"). Except as set forth below, each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Preferred Stock, par value $0.01 per share ("Series A Shares"), at a
price of $30.00 (the "Purchase Price"), subject to adjustment. The Purchase
Price shall be paid in cash. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent.
Initially, no separate Right Certificates will be distributed. Until
the earlier to occur of (a) 10 business days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding Common Shares or (b) 15 business days following
the commencement of a tender offer or exchange offer if, upon consummation
hereof, such person or group would be the beneficial owner of 15% or more of
such outstanding Common Shares (the earlier of such dates being called the
"Separation Date"), the Rights will be evidenced, with respect to any Common
Shares outstanding as of the Record Date, by the certificates representing such
Common Shares. The Rights Agreement provides that, until the Separation Date,
the Rights will be transferred with, and only with, Common Share certificates.
From as soon as practicable after the Record Date and until the Separation 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 Separation 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 will also constitute the transfer of the
Rights associated with the Common Shares represented by such certificates. As
soon as practicable following the Separation 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 Separation Date and,
thereafter, such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Separation Date and will
expire on July 10, 2008, unless earlier redeemed by the Company as described
below.
<PAGE>
C-2
In the event that, at any time following the Separation Date, (a) the
Company is the surviving corporation in a merger with an Acquiring Person and
the Company's Common Shares are not changed or exchanged, (b) a person (other
than the Company and its affiliates) becomes an Acquiring Person and also
becomes the beneficial owner of 20% or more of the then outstanding Common
Shares in any manner, (c) an Acquiring Person engages in one or more
"self-dealing" transactions as set forth in the Rights Agreement or (d) during
such time as there is an Acquiring Person, an event occurs that results in such
Acquiring Person's ownership interest being increased by more than one percent
(e.g., a reverse stock split), the Rights Agreement provides that proper
provision shall be made so that each holder of a Right will thereafter be
entitled to receive, upon exercise, Common Shares (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Right.
In the event that, at any time following the first date of public
announcement by the Company or an Acquiring Person indicating that an Acquiring
Person has become such (the "Shares Acquisition Date"), (a) the Company engages
in a merger or other business combination transaction in which the Company is
not the surviving corporation, (b) the Company engages in a merger or other
business combination transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed or exchanged
or (c) 50% or more of the Company's assets or earning power is sold or
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right.
The Board may, at its option, at any time after the right of the Board
to redeem the Rights has expired or terminated (with certain exceptions),
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares at a ratio of one Common Share per Right, as
adjusted; provided, however, that such Right cannot be exercised once a Person,
together with such Person's Affiliates and Associates, becomes the owner of 50%
or more of the Outstanding Common Shares. If the Board authorizes such an
exchange, the Rights will immediately cease to be exercisable.
Notwithstanding any of the foregoing, following the occurrence of any
of the events set forth in the fourth and fifth paragraphs of this Summary, any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person shall immediately
become null and void. The Rights Agreement contains provisions intended to
prevent the utilization of voting
<PAGE>
C-3
trusts or similar arrangements that could have the effect of rendering
ineffective or circumventing the beneficial ownership rules set forth in the
Rights Agreement.
The Purchase Price payable, and the number of Series A Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (a) in the event of a dividend
of Series A Shares on, or a subdivision, combination or reclassification of, the
Series A Shares, (b) upon the grant to holders of the Series A Shares of certain
rights or warrants to subscribe for Series A Shares or securities convertible
into Series A Shares at less than the current market price of the Series A
Shares or (c) upon the distribution to holders of the Series A Shares of debt
securities or assets (excluding regular quarterly cash dividends and dividends
payable in Series A Shares) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares that are not integral multiples of one
one-hundredth of a Series A Share will be issued and, in lieu thereof, an
adjustment in cash will be made based on the closing price of the Series A
Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until 10 Business
Days (a period that can be extended) following the Shares Acquisition Date, the
Board of Directors of the Company (the "Board"), may redeem the Rights in whole,
but not in part, at a price of $0.01 per Right, subject to adjustment (the
"Redemption Price"). Thereafter, the Board may only redeem the Rights in certain
specified circumstances including in connection with certain events not
involving an Acquiring Person or an Affiliate or Associate of an Acquiring
Person. In addition, the Company's right of redemption may be reinstated if (a)
an Acquiring Person reduces its beneficial ownership to 10% or less of the
outstanding Common Shares in a transaction or series of transactions not
involving the Company and (b) there is at such time no other Acquiring Person.
The Rights Agreement may also be amended, as described below, to extend the
period of redemption. Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will no longer be exercisable, except upon
the occurrence of certain events that have the effect of deferring the effective
time of the redemption. In general, thereafter the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the
<PAGE>
C-4
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common shares of the Acquiring Person as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights or imposing limitations on the right to amend the Agreement, any of
the provisions of the Rights Agreement may be amended by the Board. Thereafter,
the period during which the Rights may be redeemed may be extended (by action of
the Board), and other provisions of the Rights Agreement may be amended by
action of the Board; provided, however, that (a) such amendment will not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person) and (b) no amendment shall be made at such time as the
Rights are no longer redeemable (except for the possibility of the right of
redemption being reinstated as described above).
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
