FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ITHACA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1385842
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(State of incorporation or organization) (IRS Employer Identification No.)
Highway 268 West, P.O. Box 620, Wilkesboro, North Carolina 28697
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(Address of principal executive offices)
If this Form relates to the registration of a class of debt securities
and is effective upon filing pursuant to General Instruction A.(c)(1), please
check the following box. [ ] [Added in Release No. 34-34922 (P. 85,450),
effective December 7, 1994, 59 F.R. 55342.]
If this Form relates to the registration of a class of debt securities
and is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. [ ] [Added in Release
No.34-34922 (P. 85,450), effective December 7, 1994, 59 F.R. 55342.]
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ------------------- ------------------------------
None N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Series A Preferred Stock Purchase Rights
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(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered
On July 10, 1998, effective as of July 13, 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.
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
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3
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 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
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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 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
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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 is being filed as an Exhibit to this
Registration Statement. 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.
Item 2. Exhibits.
1. Rights Agreement dated July 10, 1998, effective as of July 13,
1998 between Ithaca Industries, Inc. and American Stock Transfer &
Trust Company, as Rights Agent, which includes as Exhibit A the
Certificate of Designations setting forth the terms for the Series
A Preferred Stock, as Exhibit B the form of Right Certificate and
as Exhibit C the Summary of Rights to Purchase Series A Preferred
Stock. Pursuant to the Rights Agreement, Right Certificates will
not be mailed until as soon as practicable after the earlier of the
tenth business day after public announcement that a person or group
has acquired beneficial ownership of 15% or more of the Common
Stock or the fifteenth business day after a person commences, or
announces an intention to commence, a tender or exchange offer the
consummation of which would result in a person beneficially owning
15% or more of the Common Stock.
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6
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
ITHACA INDUSTRIES, INC.
By: /s/ Jim D. Waller
---------------------
Jim D. Waller
Chairman of the Board and
Chief Executive Officer
Date: July 17, 1998
EXHIBIT 1
================================================================================
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
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Page
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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>
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 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
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2
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 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
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3
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 "beneficially own" any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" means the Board of Directors of the Company.
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4
(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).
(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.
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5
(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).
(xiv) "Rules" -- Section 1(b).
(xv) "Separation Date" -- Section 3(a).
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(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 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-
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7
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
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
<PAGE>
8
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:
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-
<PAGE>
9
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 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
<PAGE>
10
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").
(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
<PAGE>
11
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 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
<PAGE>
12
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.
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.
<PAGE>
13
(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 (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
<PAGE>
14
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.
(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.
<PAGE>
15
(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 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
<PAGE>
16
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").
(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
<PAGE>
17
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 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
<PAGE>
18
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 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,
<PAGE>
19
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 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.
<PAGE>
18
(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 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.
<PAGE>
21
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.
(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
<PAGE>
22
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 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
<PAGE>
23
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 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 speci fically intended that the provisions of Section 11 hereof shall
apply only to such
<PAGE>
24
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
(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
<PAGE>
25
(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 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
<PAGE>
26
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 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:
<PAGE>
27
(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 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.
<PAGE>
28
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 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.
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29
(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:
(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
<PAGE>
30
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
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.
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31
(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.
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.
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32
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 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).
<PAGE>
33
(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 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
<PAGE>
34
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 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
<PAGE>
35
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, 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. Barry Rosenthal
<PAGE>
36
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the 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.
<PAGE>
37
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 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
<PAGE>
38
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 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
<PAGE>
39
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.
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
-------------------------
Herbert J. Lemmer
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, participating, optional or other rights of such
series, and the qualifications, limitations or restrictions thereof, as follows:
<PAGE>
A-2
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
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
<PAGE>
A-3
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 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.
<PAGE>
A-4
(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" 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.
<PAGE>
A-5
(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 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
<PAGE>
A-6
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.
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
<PAGE>
A-7
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.
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,
<PAGE>
A-8
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 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.
<PAGE>
A-9
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
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
<PAGE>
A-10
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.
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.
<PAGE>
A-11
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
and Accounting Officer
<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 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
<PAGE>
B-2
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 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.
<PAGE>
B-3
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 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
<PAGE>
B-4
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)
Countersigned
[NAME OF RIGHTS AGENT]
as Rights Agent
By___________________
<PAGE>
B-5
[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-6
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-7
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-8
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-9
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>
C-1
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.
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
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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 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
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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 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
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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
slonger 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.
