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SECURITIES AND EXCHANGE COMMISSION
Washingon, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
Date of Registration: June 28, 1995
KAYDON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3186040
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(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
19345 US 19 North, Suite 500
Clearwater, Florida 34624-3148
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class to on which each class
be so registered is to be registered
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Rights to Purchase Common Stock New York Stock Exchange
Pursuant to Shareholders Rights
Plan Agreement dated June 21, 1995
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Securities to be registered pursuant to Section 12(g) of the Act:
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Item 1. Description of Registrant's Securities to be Registered.
The Rights to be registered pursuant to this registration statement
were declared as a dividend to the shareholders of record as of July 7, 1995,
pursuant to a resolution of the Kaydon Board of Directors adopted on June 21,
1995 and the Shareholder Rights Plan Agreement dated June 21, 1995 ("Rights
Plan"). Each shareholder of record shall receive one right for each share of
outstanding common stock. Each Right entitles the holder, upon the occurrence
of certain events as provided in the Rights Plan, to purchase, in exchange for
the exercise price of $30.00, subject to adjustment as provided in the Rights
Plan, additional common stock in Kaydon having a value of twice the exercise
price. A holder of a Right, as such, shall have the right to vote, receive
dividends or be deemed for any purpose whatsoever the holder of any common
stock or any other share or security of Kaydon which may at any time be
issuable on the exercise of the Rights, nor shall anything contained in the
Rights Plan be construed or deemed to confer upon the holder of any Right, as
such, any of the rights, titles, benefits or privileges of a holder of common
stock.
Incorporated by reference herein is the Stock Purchase Rights Plan, a
copy of which is attached as Exhibit 1. Also incorporated by reference herein
is Kaydon's press release dated June 28, 1995 and a letter to Kaydon
Shareholders dated July 11, 1995, both regarding the adoption of a Stock
Purchase Rights Plan. Copies of these documents are included herein as
Exhibits 2 and 3 respectively.
Item 2. Exhibits
Exhibit 4 - Shareholders Rights Plan Agreement dated as of June 21, 1995,
including Exhibit A, "Form of Rights Certificate"; Exhibit B,
"Form of Assignment"; and Exhibit C, "Form of Election to
Exercise".
Exhibit 99.0 - A Press Release dated June 28, 1995 from Chairman and Chief
Executive Officer of Kaydon, Lawrence J. Cawley.
Exhibit 99.1 - Letter to Shareholders of Kaydon dated July 11, 1995, with
attached summary.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KAYDON CORPORATION
Date: June 28, 1995 /s/ Lawrence J. Cawley
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Lawrence J. Cawley,
Chairman of the Board
Chief Executive Officer
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EXHIBIT 4
SHAREHOLDER RIGHTS PLAN AGREEMENT
Dated as of
June 22, 1995
between
KAYDON CORPORATION
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Rights Agent
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SHAREHOLDER RIGHTS PLAN AGREEMENT
MEMORANDUM OF AGREEMENT, dated as of the 21 day of June, 1995, between Kaydon
Corporation, a Delaware corporation (the "Corporation"), and Continental Stock
Transfer & Trust Company, a trust company located at 2 Broadway, New York, NY
10004, (the "Rights Agent");
WHEREAS in order to implement the adoption of a shareholder rights plan as
established by this Agreement, the Board of Directors of the Corporation (the
"Board of Directors") has:
(a) authorized effective 5:00 p.m. (Eastern Standard time) on July 7,
1995 the issuance of one Right (as hereinafter defined) in respect of
each Common Share (as hereinafter defined) outstanding at the Record
Date (as hereinafter defined); and
(b) authorized the issuance of one Right in respect of each Common
Share issued after the Record Date and prior to the earlier of the
Stock Acquisition Date and the Expiration Date (as hereinafter
defined); and
WHEREAS each Right entitles the holder thereof to purchase securities or other
assets of the Corporation pursuant to the terms and subject to the conditions
set forth herein; and
WHEREAS the Corporation desires to appoint the Rights Agent to act on behalf of
the Corporation, and the Rights Agent is willing to so act, in connection with
the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and other matters referred to
herein;
NOW THEREFORE, in consideration of the promises and the respective covenants
and agreements set forth herein, subject to such covenants and agreements, the
parties hereby agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
"ACQUIRING PERSON" shall mean, subject to Section 1.4 hereof, any Person who,
at anytime after July 7, 1995 and prior to the Expiration Date, is the
Beneficial Owner of 20 per cent or more of the outstanding Voting Shares,
specifically excluding the following Persons:
(i) the Corporation or any Subsidiary of the Corporation, any employee
benefit plan or trust for the benefit of employee of the Corporation,
or any Person organized, appointed or established by the Corporation
for or pursuant to the terms of any such plan or trust and acting in
such capacity; and
(ii) any Person who becomes the Beneficial Owner of 20 per cent or
more of the outstanding Voting Shares as a result of one or any
combination of
(A) an acquisition or redemption by the Corporation of Voting
Shares which, by reducing the number of Voting Shares
outstanding, increases the proportionate number of Voting
Shares Beneficially Owned by such Person to 20 per cent or
more of the Voting Shares then outstanding,
SHAREHOLDERS RIGHTS AGREEMENT PAGE 1 OF 30
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(B) Permitted Bid Acquisitions, or
(C) Exempt Acquisitions;
provided, however, that if a Person becomes the Beneficial Owner of 20
per cent or more of the outstanding Voting Shares by reason of one or
any combination of the operation of parts (A), (B) or (C) above and,
after so becoming, becomes the Beneficial Owner of any additional
Voting Shares other than pursuant to Permitted Bid Acquisitions or
through Exempt Acquisitions or employee stock option or purchase
plans, or as a result of a stock dividend, a stock split or other
event pursuant to which such Person receives or acquires Voting Shares
on the same pro rata basis as all other holders of Voting Shares of
the same class ("Pro Rata Acquisitions"), then as of the date of such
additional Beneficial Ownership such Person shall become an "Acquiring
Person";
"AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended and in effect on the date of this Agreement;
"AGREEMENT" shall mean this shareholder rights plan agreement dated as of June
21, 1995, between the Corporation and the Rights Agent, as amended or
supplement from time to time; "hereof", "herein", "herein", "hereto" and similar
expressions mean and refer to this Agreement as a whole and not to any
particular part of this agreement;
"ANNUAL CASH DIVIDENDS" shall mean cash dividends paid in any fiscal year of
the Corporation on its Common Shares to the extent that such cash dividends do
not exceed, in the aggregate, the greatest of:
(i) 200 per cent of the aggregate amount of cash dividends declared
payable by the Corporation on its Common Shares in its immediately
preceding fiscal year;
(ii) 300 per cent of the arithmetic mean of the aggregate amounts of
the annual cash dividends declared payable by the Corporation on its
Common Shares in its three immediately preceding fiscal years; and
(iii) 100 per cent of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately preceding
fiscal year;
A Person shall be deemed the "BENEFICIAL OWNER" of, and to have "BENEFICIAL
OWNERSHIP" of, and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such Person's
Affiliates or Associates is the direct or indirect beneficial owner
and for this purpose a Person shall be deemed to be a beneficial owner
of all securities
(A) owned by a partnership of which the Person is a partner,
(B) owned by a trust of which the Person is a beneficiary,
(C) owned jointly or in common with others and
SHAREHOLDERS RIGHTS AGREEMENT PAGE 2 OF 30
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(D) of which the Person may be deemed to be the beneficial
owner (whether or not of record) pursuant to the provisions of
Rule 13d-3 or 13d-5 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (or pursuant to any comparable
or successor laws, regulations or rules or, if such laws,
regulations or rules shall be rescinded and there shall be no
comparable or successor laws, regulations or rules, pursuant
to the provisions of Rule 13d-3 or 13d-5 under the Exchange
Act as in effect on the date of this Agreement);
(ii) any securities as to which such Person or any of such Person's
Affiliates or Associates has either or both
(A) the right to acquire (whether such right is exercisable
immediately or after the lapse or passage of time and whether
or not on condition or the happening of any contingency or
otherwise) pursuant to any agreement, pledge or understanding
whether or not in writing (other than customary agreements
with and between underwriters and banking group or selling
group members with respect to a bona fide public offering of
securities and other than pledges of securities in the
ordinary course of business which meet all of the conditions
specified in Rule 13d-3 (d) (3) under the 1934 Exchange Act),
or upon the exercise of any conversion right, exchange right,
share purchase right (other than the Rights), warrant or
option, or otherwise
or
(B) the right to vote such security (whether such right is
exercisable immediately or after the lapse or passage of time
and whether or not conditioned on the happening of any
contingency or otherwise), pursuant to any proxy agreement,
arrangement or understanding (whether or not in writing) or
otherwise;
(iii) any Securities which are Beneficially Owned within the meaning
of clauses (i) or (ii) by any other Person with which a Person or any
of its Affiliates or Associates is acting in concert or jointly on has
any proxy agreement, arrangement or understanding (whether or not in
writing) with respect to or for the purpose of acquiring, holding,
voting or disposing of any Voting Shares or acquiring, holding or
disposing of a significant portion of the property or assets of the
Corporation or any Subsidiary of the Corporation, other than
(A) customary agreements with and between underwriters and
banking group or selling group members with respect to a bona
fide public offering of securities
or
(B) agreements between a Fiduciary, acting as such, and other
Person, where the Fiduciary has no investment authority
(including none of the rights of control or direction) and no
beneficial interest in the securities owned by the other
Person;
provided, however, that a Person shall not be deemed the "Beneficial
Owner" or to have "Beneficial Ownership" of, or to "Beneficially Own",
any security:
SHAREHOLDERS RIGHTS AGREEMENT PAGE 3 OF 30
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(A) solely because such security has been deposited or
tendered pursuant to any Take-over Bid made by such Person or
made by any of such Person's Affiliates or Associates until
such deposited or tendered security has been taken up or paid
for, whichever shall first occur; or
(B) solely because such Person or any of such Person's
Affiliates or Associates has or shares the power to vote or
direct the voting of such security pursuant to a revocable
proxy given in response to a public proxy solicitation made
pursuant to and in accordance with the applicable rules and
regulations under the Delaware Corporation Law or the
Securities Act; or
(C) solely because such Person or any of such Person's
Affiliates or Associates has or shares the power to vote or
direct the voting of such security in connection with or in
order to participate in a public proxy solicitation made or to
be made pursuant to and in accordance with the applicable
rules and regulations referred to in (B) above; or
(D) held for or pursuant to the terms of any employee stock
ownership or other employee benefit plan of the Corporation or
a wholly-owned Subsidiary of the Corporation.
For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is or is
deemed to be the Beneficial Owner, all Voting Shares as to which such
Person is deemed the Beneficial Owner shall be deemed outstanding;
"BOARD OF DIRECTORS" shall mean the board of directors of the Corporation or
any duly constituted and empowered committee thereof;
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions are authorized or obligated by law or executive
order to close;
"DELAWARE CORPORATION LAW" shall mean the Delaware Corporation Law, Del. Code
Ann. tit. 8, Section 101 et. seq., as amended, and the regulations made
thereunder and any comparable or successor laws or regulations thereto;
"CLOSE OF BUSINESS" on any given date shall mean the time on such date (or, if
such date is not a Business Day, the time on the next succeeding Business Day)
at which the principal transfer office of the transfer agent for the Common
Shares (or, after the Stock Acquisition Date, the principal transfer office of
the Rights Agent) closes to the public;
"COMMON SHARES" shall mean the common shares in the capital of the Corporation
(or of another corporation into which the corporation may have been merged) and
any other shares of the Corporation into which such shares may be subdivided,
consolidated, reclassified or changed, and so on from time to time;
"CO-RIGHTS AGENTS" shall have the meaning ascribed thereto in clause 4.1(a);
"ELECTION TO EXERCISE" shall have the meaning ascribed thereto in clause
2.2(d);
SHAREHOLDERS RIGHTS AGREEMENT PAGE 4 OF 30
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"EXEMPT ACQUISITIONS" shall mean share acquisitions in respect of which the
Board of Directors has waived the application of Section 3.1 pursuant to the
provisions of clause 5.1(b) or clause 5.1(c) or which were made on or prior to
the date of this Agreement;
"EXERCISE PRICE" shall mean, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right which, until
adjustment thereof in accordance with the terms hereof and in particular in
accordance with sections 2.3 and 3.1 hereof, shall be $30.00.
"EXPIRATION FACTOR" shall have the meaning ascribed thereto in clause 2.3(a);
"EXPIRATION DATE" shall mean the earlier of:
(i) the Termination Date; or
(ii) the close of business on July 7, 2000, unless extended by
resolution of the Board of Directors;
"FIDUCIARY" shall mean a trust company organized under the laws of any state in
the United States or an investment adviser registered under the United States
or any state of the United States;
"FLIP-IN EVENT" shall mean a transaction in or pursuant to which any Person
become an Acquiring Person;
"GRANDFATHERED PERSON", and "GRANDFATHERED BIDDER" shall have the respective
meanings ascribed thereto in Section 1.4;
"HOLDER" shall have the meaning ascribed thereto in Section 2.8;
"MARKET PRICE" per share of any securities on any date of determination shall
mean the average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date;
provided, however, that if an event of a type analogous to any of the events
described in Section 2.3 hereof shall have caused the closing prices used to
determine the Market Price on any Trading Days not to be fully comparable with
the closing price on such date of determination or, if the date of
determination is not a Trading Day, on the immediately preceding Trading Day,
each such closing price so used shall be approximately adjusted in manner
analogous to the applicable adjustment provided for in Section 2.3 hereof in
order to make it fully comparable with the closing price on such date of
determination or, if the date of determination is not a Trading Day, on the
immediately preceding Trading Day.
The closing price per share of any securities on any date shall be
(i) the closing board lot sale price or, if such price is not
available, the average of the closing bid and asked prices, for each
share as reported by the stock exchange on which the greater number of
shares has been traded on such day or if the shares are listed only on
one stock exchange at that time, that stock exchange, or
SHAREHOLDERS RIGHTS AGREEMENT PAGE 5 OF 30
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(ii) if for any reason none of such prices is available on such day or
the securities are not listed or admitted to trading on any stock
exchange the closing board lot sale price or, if such price is not
available, the average of the closing bid and asked prices, for each
share as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
securities exchange on which the Common Shares are primarily traded,
or
(iii) if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on the
securities exchange or on any consolidated reporting system, the last
quote price, or if no so quoted, the average of the high bid and low
asked prices for each share of such securities in the over-the-counter
market, as reported by NASDAQ or, if the securities are not quoted on
NASDAQ, as reported such other system then in use, or
(iv) if on any such date the securities are not quoted by any such
organizations the average of the closing and asked prices as furnished
by a professional market maker making a market in the securities
selected in good faith by the Board of Directors;
provided, however, that if on any such date the securities are not
traded in the over-the-counter market, the closing price per share of
such securities on such date shall mean the fair value per share of
securities on such date as determined in good faith by the Board of
Directors, after consultation with a nationally or internationally
recognized investment dealer or investment banker.
Notwithstanding the foregoing, where the Board of Directors is
satisfied that the Market Price of securities as determined herein was
affected by improper manipulation, the Board of Directors may, acting
in good faith, determine the Market Price of securities, such
determination to be based on a finding as to the price of which a
holder of securities of that class could reasonably have expected to
dispose of the securities immediately prior to the relevant date
excluding any change in price reasonably attributable to the improper
manipulation;
"NASDAQ" shall mean the National Association of Dealers, Inc. Automated
Quotation System;
"1933 SECURITIES ACT" shall mean the Securities Act of 1933 of the United
States, as amended, and the rules and regulations thereunder, and any successor
laws or regulations thereto;
"1934 EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 of the
United States, as amended, and the rules and regulations thereunder, add any
successor laws or regulations thereto;
"NOMINEE" shall have the meaning ascribed thereto in claus 2.2(c);
"OFFER TO ACQUIRE" shall include:
(i) an offer to purchase, or a solicitation of an offer to sell,
Voting Shares; and
(ii) an acceptance of an offer to sell Voting Shares, whether or not
such offer to sell has been solicited;
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an Offer to Acquire to the Person that
made the offer to sell;
SHAREHOLDERS RIGHTS AGREEMENT PAGE 6 OF 30
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"OFFEROR" shall mean a Person who has announced an intention to make or who has
made a Take-over Bid;
"OFFEROR'S SECURITIES" means Voting Shares Beneficially Owned by an Offeror;
"PERMITTED BID" means a Take-over Bid made in compliance with, and not on a
basis which is exempt from or otherwise not subject to, the provisions Section
203 of the Delaware Corporation Law and the regulations thereunder, and in
compliance with all other applicable securities laws and regulations, and which
also complies with the following additional provisions:
(i) the Take-over Bid is made for all Voting Shares to all holders of
record of Voting Shares wherever resident as registered on the books
of the Corporation and the expiry of the Take-over Bid does not occur
prior to a date which is not less than 90 days following the Take-over
Bid;
(ii) subject to clause 1.4(b) hereof, the Offeror does not at the
commencement of nor at any time during the currency of the Take-over
Bid Beneficially Own more than 10 per cent of the outstanding Voting
Shares;
(iii) the Take-over Bid contains, and the payment for securities
tendered is subject to, an irrevocable and unqualified provision that
no Voting Shares will be paid for pursuant to the Take-over Bid prior
to the close of business on a date which is not less than 90 days
following the date of the Take-over Bid;
(iv) the Take-over Bid contains irrevocable and unqualified provisions
that all Voting Shares may be tendered pursuant to the Take-over Bid
at any time prior to the close of business on the date referred to in
clause (iii) hereof and that all Voting Shares tendered pursuant to
the Take-over Bid may be withdrawn at any time prior to the close of
business on a date which is not less than 90 days following the date
of the Take-over Bid;
(v) the Take-over Bid contains an irrevocable and unqualified
condition, which for greater certainty may not be waived by the
Offeree, and which may not be extended without the prior written
approval of the Corporation, that not less than 66 2/3 per cent of the
then outstanding Voting Shares, other than Offeror's Securities, must
be tendered and not withdrawn at the close of business on the 80th day
following the date of the Take-over Bid, and the Offeror shall
publicly announce and advise the Corporation forthwith and in any
event not more than one Business Day thereafter whether or not such
condition has been satisfied;
(vi) the Offeror shall provide the Rights Agent, within two Business
Days of the announcement of the Take-over Bid, with a list of all the
Offeror's Securities together with the particulars of the registration
of all such securities and an undertaking to update such list on a
daily basis during the currency of the Take-over Bid to reflect any
changes occurring or to occur in such Beneficial Ownership, and shall
continually perform such obligation;
(vii) the Offeror, or any of its Affiliates, Associates, or any Person
acting jointly or in concert with the Offeror or any of its Affiliates
or Associates in connection with the Take-over Bid, shall not have
entered into either prior to the commencement of the Take-over Bid nor
at any time during the currency thereof any agreement, commitment or
understanding, whether formal or informal, with a Person who
Beneficially Owns 20 per cent or more of the outstanding Voting Shares
with respect to the Voting Shares Beneficially Owned by such Person;
and
SHAREHOLDERS RIGHTS AGREEMENT PAGE 7 OF 30
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(viii) the Take-over Bid is made on terms and conditions that comply
with, and which do not and will not, upon its completion, result in
the Corporation or any Subsidiary of the Corporation being in default
under, or in contravention of, any applicable laws;
provided that, for greater certainty, the Offeror shall be entitled to
withdraw its Take-over Bid at any time prior to the termination
thereof should it be otherwise entitled to do so under applicable law;
"PERMITTED BID ACQUISITIONS" shall mean share acquisitions made pursuant to a
Permitted Bid; "PERSON" shall mean an individual, body corporate, partnership,
syndicate or other form of unincorporated association, government, government
agency or instrumentality, entity or group whether or not having legal
personality and any of the foregoing acting in any derivative, representative
or fiduciary capacity
"PRO RATA ACQUISITIONS" shall have the meaning ascribed thereto in paragraph
(ii) of the definition of "Acquiring Person" in Section 1.1;
"RECORD DATE" shall mean the close of business on July 7, 1995;
"REDEMPTION PRICE" shall have the meaning ascribed thereto in clause 5.1(a);
"RIGHT" shall mean a right to purchase a Common Share, upon the terms and
subject to the conditions set forth in this Agreement;
"RIGHTS CERTIFICATE" shall have the meaning ascribed thereto and be in the form
provided in clause 2.2(b);
"RIGHTS REGISTER" shall have the meaning ascribed thereto in clause 2.6(a);
"RIGHTS REGISTRAR" shall have the meaning ascribed thereto in clause 2.6(a);
"STOCK ACQUISITION DATE" shall mean the close of business on the eighth Trading
Day following the date of public announcement by the Corporation that an
Acquiring Persons has become such;
"SUBSIDIARY" of any Person shall mean any corporation or other entity of which
a majority of the voting power or a majority of the equity interest is
Beneficially Owned by such Person;
"TAKE-OVER BID" means an Offer to Acquire Voting Shares where the Voting Shares
subject to the Offer to Acquire, together with the Offeror's Securities,
constitute in the aggregate 20 per cent or more of the outstanding Voting
Shares at the date of the Offer to Acquire;
"TERMINATION DATE" shall mean the time at which the right to exercise Rights
shall terminate pursuant to Section 3.2 or 5.1 hereof;
"TRADING DAY", when used with respect to any securities, shall mean a day on
which the principal securities exchange on which such securities are listed or
admitted is open for the transaction of business or, if the securities are not
listed or admitted to trading on any securities exchange, a Business Day;
SHAREHOLDERS RIGHTS AGREEMENT PAGE 8 OF 30
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"VOTING SHARES" shall mean the Common Shares and any other shares in the
capital of or voting interests of the Corporation entitled to vote generally in
the election of all directors; the percentage of Voting Shares Beneficially
Owned by an Person shall, for the purposes of this Agreement, deemed to be the
product determined by the formula:
100 X A/B where
A = the number of votes for the election of all directors
generally attaching to the Voting Shares Beneficially Owned by
such Person, and
B = the number of votes for the election of all directors
generally attaching to all outstanding Voting Shares;
provided that where any Person is deemed to Beneficially Own unissued
Voting Shares, such Voting Shares shall be deemed to be outstanding
for the purpose of calculating the percentage of Voting Shares
Beneficially Owned by such Person.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are expressed in
lawful money of the United States.
1.3 HEADINGS
The division of this Agreement into Articles, Sections, clauses and subclauses
and the insertion of headings, subheading and a table of contents are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.4 GRANDFATHER PROVISIONS
(a) A Person shall not be and shall not be deemed to be an Acquiring
Person if such Person (a "Grandfather Person") is the Beneficial Owner
of 20 per cent or more of the outstanding Voting Shares as of June 21,
1995;
provided, however, that the exception in this clause 1.4(a) shall
cease to be applicable to a Grandfathered Person who shall after June
21, 1995 become, pursuant to one or more transactions or events, the
Beneficial Owner of additional Voting Shares constituting in the
aggregate more than one per cent of the outstanding Voting Shares
determined as at July 7, 1995 other than pursuant to Permitted Bid
Acquisitions, Exempt Acquisitions or Pro Rata Acquisition.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 9 OF 30
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(b) For the purpose of determining whether a Person is entitled to
make a Permitted Bid, the provisions of paragraph (ii) of the
definition of "Permitted Bid" in Section 1.1 shall not apply to a
Person (a "Grandfathered Bidder") who is the Beneficial Owner of more
than 10 per cent but less than 20 per cent of the outstanding Voting
Shares who acquired all of such shares in a distribution directly or
indirectly from a Grandfathered Person (a "Grandfathered Person
Partial Transferee") at a date after June 21, 1995 (the "Transfer
Date") provided that the exemption in this clause 1.4(b) shall cease
to be applicable to a Grandfathered Bidder (and a Take-over Bid that
would otherwise constitute a Permitted Bid shall cease to be a
Permitted Bid) if such Grandfathered Bidder shall after the Record
Date (or, in the case of a Grandfathered Person Partial Transferee
only, after the Transfer Date) become, pursuant to one or more
transactions or events, the Beneficial Owner of additional Voting
Shares constituting in the aggregate more than 1 per cent of the
outstanding Voting Shares determined as at the Record Date, other than
pursuant to Permitted Bid Acquisition, Exempt Acquisitions or Pro Rata
Acquisitions.
(c) For greater certainty, for the purposes of this Section 1.4, a
Person shall be deemed to have become the Beneficial Owner of
additional Voting Shares if the Person becomes the Beneficial Owner of
such Voting Shares pursuant to a transaction or event and, as a
result, such Person is the Beneficial Owner of a greater number of
Voting Shares than the number of Voting Shares that such Person
Beneficially Owned immediately prior to such transaction or event.
ARTICLE 2 - THE RIGHTS
2.1 LEGEND ON COMMON SHARE CERTIFICATES
Certificates representing Common Shares which certificates are issued after the
Record Date but prior to the earlier of the Stock Acquisition Date and the
Expiration Date shall also evidence one Right for each Common Share represented
thereby and shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
"Until the Stock Acquisition Date (defined in the Rights Agreement
referred to below), this certificate also evidences and entitles the
holder thereof to certain rights described in a Shareholder Rights
Plan Agreement, dated June 21, 1995, as amended (the "Right
Agreement"), between Kaydon Corporation and Contiental Stock Transfer
& Trust Company, a copy of which is on file at the principal executive
offices of the Corporation the terms of which are incorporated herein
by reference. Under certain circumstances set out in the Rights
Agreement, the rights may be redeemed, may expire, may become null and
void (if, in certain cases, they are "Beneficially Owned" by an
"Acquiring Person") or may be evidenced by separate certificates and
no longer evidenced by this certificate. Upon written requests, copy
of the Rights Agreement will be mailed within five days to the holder
of this Certificate."
Certificates representing Common Shares that are issued and outstanding at the
Record Date shall also evidence one Right for each Common Share evidenced
thereby notwithstanding the absence of the foregoing legend until the Stock
Acquisition Date.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 10 OF 30
<PAGE> 12
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS
(a) Notwithstanding any other provision of this Agreement, any Rights
Beneficially Owned by the Corporation or any of its Subsidiaries shall
be void.
(b) Until the Stock Acquisition Date, (i) the Rights shall not be
exercisable and no Right may be exercised, and (ii) for administrative
purposes each Right will be evidenced by the certificates for Common
Shares registered in the names of the holder thereof (which
certificates shall also be deemed to be Rights Certificates) and will
be transferable only together with, and will be transferred by a
transfer of, such Common Shares.
(c) From and after the Stock Acquisition Date and prior to the
Expiration Date (i) the Rights shall be exercisable and (ii) the
registration and transfer of the Rights shall be separate from and
independent of Common Shares.
Promptly following the Stock Acquisition Date, the Corporation will
prepare and the rights Agent will mail to each holder of record of
Common Shares as of the Stock Acquisition Date (other than an
Acquiring Person and, in respect of any Rights Beneficially Owned by
such Acquiring Person which are not held of record by such Acquiring
Person, the holder of record of such Rights (a "Nominee"), at such
holder's address as shown by the records of the Corporation (the
Corporation hereby agreeing to furnish copies of such records to the
Rights Agent for this purpose),
(x) a Right Certificate in substantially the form of Exhibit A
hereto appropriately completed, representing the number of
Rights held by such holder at the Stock Acquisition Date and
having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the
Corporation may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required
to comply with any law, rule, regulation or judicial or
administrative order or with any rule or regulation made
pursuant thereto or with any rule or regulation of any
self-regulatory organization, stock exchange or quotation
system on which the Rights may from time to time be listed or
traded, or to conform to usage, and
(y) a disclosure statement describing the Rights,
provided that a Nominee shall be sent the materials provided for in
(x) and (y) in respect of all Common Shares held of record by it which
are not Beneficially Owned by an Acquiring Person.
(d) Rights may be exercised in whole or in part on any Business Day
after the Stock Acquisition Date and prior to the Expiration Date by
submitting to the Rights Agent, at its principal stock transfer
office, the Rights Certificate evidencing such Rights with an election
to exercise such Rights (an "Election to Exercise") substantially in
the form of Exhibit C hereto and attached to the Rights Certificate
duly completed, accompanied by payment by certified check, banker's
draft or money order payable to the order of the Corporation of a sum
equal to the Exercise Price multiplied by the number of Rights being
exercised and a sum sufficient to cover any transfer tax or charge
which may be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance or
delivery of certificates for Common Shares in a name other than that
of the holder of the Rights being exercised.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 11 OF 30
<PAGE> 13
(e) Upon receipt of a Rights Certificate, which is accompanied by
(x) a completed Election to Exercise that does not indicate
that such Right is null and void as provided by clause 2.2(a)
or 3.1(b) and
(y) payment as set forth in clause 2.2(d), the Rights Agent
(unless otherwise instructed by the Corporation as a result of
the Corporation being of the opinion that such Right in null
and void as provided in clause 2.2(b) or that it would be
inappropriate to issue such Right where the circumstances of
clause 3.2 shall apply) will thereupon promptly:
(i) requisition from a transfer agent for the Common
Shares certificates representing the number of such
Common Shares to be purchased (the Corporation hereby
irrevocably authorizing its transfer agents to comply
with all such requisitions); and
(ii) after receipt of such certificates, deliver the
same to, or upon the order of the registered holder
of such Rights Certificate, registered in such name
or names as may be designated by such holder.
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued
by the Rights Agent to such holder or to such holder's duly authorized
assigns.
(g) The Corporation covenants and agrees that it will:
(i) take all such action as may be necessary and within its
power to ensure that all securities delivered upon exercise of
Rights shall, at the time of delivery of the certificates for
such securities (subject to payment of the Exercise Price), be
duly and valid authorized, executed, issued and delivered and
fully paid and non-assessable;
(ii) take all such action as may be necessary and within its
power to comply with the requirements of the Delaware
Corporation Law, the 1933 Securities Act and the 1934 Exchange
Act and any other applicable law, rule or regulation
applicable to the issuance and delivery of the Rights
Certificates and the issuance of any securities upon exercise
of Rights;
(iii) use reasonable efforts to cause all securities issued
upon exercise of Rights to be listed upon issuance on the
principal exchanges on which the Common Shares were traded
prior to the Stock Acquisition Date;
(iv) cause to be reserved and kept available out of its
authorized and unissued Common Shares, the number of Common
Shares that, as provided in this Agreement, will from time to
time be sufficient to permit the exercise in full of all
outstanding Rights;
SHAREHOLDERS RIGHTS AGREEMENT PAGE 12 OF 30
<PAGE> 14
(v) pay when due and payable any and all federal and state
transfer taxes and charges (not including any income or
capital gain taxes of the holder or exercising holder or any
liability of the Corporation to withhold tax) which may be
payable in respect of the original issuance or delivery of the
Rights Certificates, provided that the Corporation shall not
be required to pay any transfer tax or charge which may be
payable in respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or delivery of
certificates for securities in a name other than that of the
holder of the Rights being transferred or exercised; and
(vi) after the Stock Acquisition Date, except as permitted by
Section 5.1 or Section 5.4 hereof, not take (or permit any
Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will
diminish substantially or otherwise the benefits intended to
be afforded by the Rights.
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS
The Exercise Price, the number and kind of securities subject to purchase upon
exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 2.3.
(a) In the event the Corporation shall at any time after the date of
this Agreement
(i) declare or pay a dividend on its Common Shares payable in
Common Shares (or other capital stock or securities
exchangeable for or convertible into or giving a right to
acquire its Common Shares or other capital stock) other than
pursuant to any optional stock dividend program and other than
a dividend payable in Common Shares in lieu of annual cash
dividends,
(ii) subdivide or change the outstanding Common Shares into a
greater number of Common Shares,
(iii) combine or change the outstanding Common Shares into a
smaller number of Common Shares or
(iv) issue any Common Shares (or other securities exchangeable
for or convertible into or giving a right to acquire Common
Shares or other securities) in respect of, in lieu of or in
exchange for existing Common Shares except as otherwise
provided in this Section 2.3
the Exercise Price and the number of Rights outstanding, or, if the
payment or effective date thereof shall occur after the Stock
Acquisition Date, the securities purchasable upon exercise of Rights
shall be adjusted as of the payment or effective date in the manner
set forth below. If the Exercise Price and number of Rights
outstanding are to be adjusted,
(x) the Exercise Price in effect after such adjustment will be
equal to the Exercise Price in effect immediately prior to
such adjustment divided by the number of Common Shares (or
other capital stock) (the "Expansion Factor") that a holder of
one Common Share immediately prior to such dividend,
subdivision, change, combination or issuance would hold
thereafter as a result and
SHAREHOLDERS RIGHTS AGREEMENT PAGE 13 OF 30
<PAGE> 15
(y) each Right held prior to such adjustment will become that
number of Rights equal to the Expansion Factor, and the
adjusted number of Rights will be deemed to be distributed
among the Common Shares with respect to which the original
Rights were associated (if they remain outstanding) and the
shares issued in respect of such dividend, subdivision,
change, combination or issuance, so that each such Common
Share (or other capital stock) will have exactly one Right
associated with it.
If the securities purchasable upon exercise of Rights are to be
adjusted, the securities purchasable upon exercise of each Right after
such adjustment will be the securities that a holder of the securities
purchasable upon exercise of one Right immediately prior to such
dividend, subdivision, change, combination or issuance would hold
thereafter as a result thereof. If after the Record Date and prior to
the Expiration Date the Corporation shall issue any shares of capital
stock other than Common Shares in a transaction of a type described in
the first sentence of this clause 2.3(a), shares of such capital stock
shall be treated herein as nearly equivalent to Common Shares as may
be practicable and appropriate under the circumstances and the
Corporation and the Rights Agent agree to amend this Agreement in
order to effect, and the Corporation will not consolidate with, merge
with or into or enter into an arrangement with, any other Person
unless such Person agrees to be bound by the terms of an amendment
effecting, such treatment.
In the event the Corporation shall at any time after the Record Date
and prior to the Stock Acquisition Date issue any Common Shares
otherwise than in a transaction referred to in the preceding
paragraph, each such Common Share so issued shall automatically have
one new Right associated with it, which Right shall be evidenced by
the certificate representing such share.
(b) In the event the Corporation shall at any time after the Record
Date and prior to the Expiration Date fix a record date for the
issuance of rights, options or warrants to all or substantially all of
the holders of Common Shares entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or
purchase Common Shares (or securities convertible into or exchangeable
for or carrying a right to purchase Common Shares) a price per Common
Share (or, if a security convertible into or exchangeable for or
carrying a right to purchase or subscribe for Common Shares having
conversion, exchange or exercise price, including the price required
to be paid to purchase such convertible or exchangeable security or
right per share) of less than 90 per cent of the Market Price per
Common Share on such record date, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares that
the aggregate offering price of the total number of Common Shares so
to be offered (and/or the aggregate initial conversion, exchange or
exercise price of the convertible or exchangeable securities or rights
to be offered, including the price required to be paid to purchase
such convertible or exchangeable securities or rights) would purchase
at such Market Price per Common Share, and the denominator of which
shall be the number of Common Shares outstanding on such record date
plus the number of additional Common Shares to be offered for
subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially convertible,
exchangeable or exercisable). In case such subscription price may be
paid by delivery of consideration, part or all of which may be in a
form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the
Rights.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 14 OF 30
<PAGE> 16
Such adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not so
issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect is such record date had not been fixed.
For purposes of this Agreement, the granting of the right to purchase
Common Shares (whether from treasury shares or otherwise) pursuant to
any dividend or interest reinvestment plan and/or any Common Share
purchase plan providing for the reinvestment of dividends or interest
payable in securities of the Corporation and/or the investment of
periodic optional payments and/or employee benefit stock option or
similar plans (so long as such purchase is in no case evidenced by the
delivery of rights or warrants) shall not be deemed to constitute an
issue of rights, options or warrants by the Corporation; provided,
however, that, in the case of any dividend or interest reinvestment
plan, the right to purchase Common Shares is at a price per share of
not less 90 percent of the current market price per share (determined
as provided in such plans) of the Common Shares.
(c) In the event the Corporation shall at any time after the Record
Date and prior to the Expiration Date fix a record date for a
distribution to all or substantially all of the holders of Common
Shares (including any such distribution made in connection with a
merger in which the Corporation is the continuing corporation) of
evidences of indebtedness, cash (other than annual cash dividends),
assets (including securities, but except a dividend described in
subclause 2.3(a) above), or rights, options or warrants (excluding
those referred to in clause 2.3(b) hereof), the Exercise Price to be
in effect on such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Market Price per Common
Share on such record date, less the fair market value (as determined
in good faith by the Board of Directors, whose determination shall be
described in a statement file with the Rights Agent) of the portion of
the cash, assets or evidences of indebtedness so to be distributed or
of such rights or warrants applicable to a Common Share and the
denominator of which shall be such Market Price per Common Share.
Such adjustments shall be made successively whenever such a record
date is fixed, and in the event that such distribution is not made,
the Exercise Price shall be adjusted to be the Exercise Price which
would have been in effect is such record date had not been fixed.
(d) Notwithstanding anything herein to the contrary, no adjustment in
the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least one percent in the
Exercise Price; provided, however, that any adjustments which by
reason of this clause 2.3(d) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 2.3 shall be made to the nearest
cent or to the nearest cent or to the nearest hundredth of a share.
Notwithstanding the first sentence of this clause 2.3(d), any
adjustment required by this Section 2.3 shall be made no later than
the earlier of (i) three years from the date of the transaction which
mandates such adjustment or (ii) the Termination Date.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 15 OF 30
<PAGE> 17
(e) In the event the Corporation shall at any time after the Record
Date and prior to the Stock Acquisition Date issue any shares of
capital stock (other than Common Shares), or rights or warrants to
subscribe for or purchase any such capital stock, or securities
convertible into or exchangeable for any such capital stock, in a
transaction referred to in clause (a)(i) or (a)(iv) above, or if the
Corporation shall take any other action (other than the issue of
Common Shares) which might have a negative effect on the holders of
Rights, then, unless the Board of Directors acting in good faith
determines that the adjustments contemplated by clauses (a), (b) and
(c) above in connection with such transaction will appropriately
protect the interests of the holders of Rights, the Corporation will
determine what other adjustments to the Exercise Price, number of
Rights and/or securities purchasable upon exercise of Rights would be
appropriate and, notwithstanding clauses (a), (b) and (c) above, such
adjustments, rather than the adjustments contemplated by clauses (a),
(b) and (c) above, shall be made. The Corporation and the Rights
Agent shall amend this Agreement as appropriate to provide for such
adjustments.
(f) Each Right originally issued by the Corporation subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the
right to purchase, at the adjusted Exercise Price, the number of
Common Shares purchasable from time to time hereunder upon exercise of
a Right immediately prior to such issue, all subject to further
adjustment as provided herein.
(g) Irrespective of any adjustment or change in the Exercise Price or
the number of Common Shares issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue
to express the Exercise Price per Common Share and the number of
Common Shares which were expressed in the initial Rights Certificates
issued hereunder.
(h) In any case in which this Section 2.3 shall require that an
adjustment in the Exercise Price be made effective as of a record date
for a specified event, the Corporation may elect to defer until the
occurrence of such event the issuance to the holder of any Rights
exercised after such record date the number of Common Shares and other
securities of the Corporation, if any, issuable upon such exercise
over and above the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however,
that the Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustments.
(i) Notwithstanding anything in this Section 2.3 to the contrary, the
Corporation shall be entitled to make such reductions in the Exercise
Price, in addition to those adjustments expressly required by this
Section 2.3, as and to the extent that in their good faith judgment
the Board of Directors shall determine to be advisable in order that
any (i) consolidation or subdivision of the Common Shares, (ii)
issuance wholly or in part for cash of cash of Common Shares or
securities that by their terms are convertible into or exchangeable
for Common Shares, (iii) stock dividends or (iv) issuance of rights,
options or warrants referred to in this Section 2.3, hereafter made by
the Corporation to holders of its Common Shares, shall not be taxable
to such shareholders.
(j) In any case in which Section 2.3 shall require any adjustment, the
Corporation shall deliver to the Rights Agent a certificate duly
executed by an officer of the Corporation describing such adjustment,
in addition to any other statement or document required by this
Section 2.3.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 16 OF 30
<PAGE> 18
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each Person in whose name any certificate for Common Shares or other
securities, if applicable, is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Common Shares or
other securities, if applicable, represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered (together with a duly completed Election to
Exercise) and payment of the Exercise Price for such Rights (and any applicable
transfer taxes and other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such surrender and
payment is a date upon which the relevant transfer books of the Corporation are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business
Day on which the relevant transfer books of the Corporation are open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES
(a) The Rights Certificates shall be executed on behalf of the
Corporation by its Chairman, President or any of its Vice Presidents
and by its Secretary or one of its Assistant Secretaries. The
signature and attestation of any of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing
the manual or facsimile signatures of individuals who were at any time
the proper officers of the Corporation shall bind the Corporation,
notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such
Rights Certificates.
(b) Promptly after the Corporation learns of the Stock Acquisition
Date, the Corporation will notify the Rights Agent of such Stock
Acquisition Date and will deliver Rights Certificates executed by the
Corporation to the Rights Agent for countersignature, and the Rights
Agent shall manual countersign and send such Rights Certificates to
the holders of the Rights pursuant to clause 2.2(c)hereof. No Rights
Certificate shall be valid for any purpose until countersigned by the
Rights Agent as aforesaid.
(c) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Corporation will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may
prescribe, the Corporation will provide for the registration and
transfer of Rights. The Rights Agent is hereby appointed registrar
for the Rights (the "Rights Registrar") for the purpose of maintaining
the Rights Register for the Corporation and registering Rights and
transfers of Rights as herein provided and the Rights Agent hereby
accepts such appointment. In the event that the Rights Agent shall
cease to be the Rights Registrar, the Rights Agent will have the right
to examine the Rights Register at all reasonable times.
After the Stock Acquisition Date and prior to the Expiration Date,
upon surrender for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of clause 2.6(c) below, the
Corporation will execute, and the Rights Agent will manually
countersign and deliver, in the name of the holder or the designated
transferees, as required pursuant to the holder's instructions, one or
more new Rights certificates evidencing the same aggregate number of
Rights as in the Rights Certificates so surrendered.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 17 OF 30
<PAGE> 19
(b) All Rights issued upon any registration of transfer or exchange of
Rights Certificates shall be the valid obligations of the Corporation,
and such Rights shall be entitled to the same benefits under this
Agreement as the Rights surrendered upon such registration of transfer
or exchange.
(c) Every Rights Certificate surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Corporation or the
Rights Agent, as the case may be, duly executed by the holder thereof
or such holder's attorney duly authorized in writing. As a condition
to the issuance of any new Rights Certificate under this Section 2.6,
the Corporation may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Rights Agent) connected therewith.
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES
(a) If any mutilated Rights Certificate is surrendered to the Rights
Agent prior to the Expiration Date, the Corporation shall execute and
the Rights Agent shall countersign and deliver in exchange therefore a
new Rights Certificate evidencing the same number of Rights as did the
Rights Certificate so surrendered.
(b) If there shall be delivered to the Corporation and the Rights
Agent prior to the Expiration Date (i) evidence to their reasonable
satisfaction of the destruction, loss or theft of any Rights
Certificate and (ii) such security or indemnity as may be reasonably
required by them to save each of them and any of their agents
harmless, then, in the absence of notice to the Corporation or the
Rights Agent that such Rights Certificate has been acquired by a bona
fide purchaser, the Corporation shall execute and upon the
Corporation's request the Rights Agent shall countersign and deliver,
in lieu of any such destroyed, lost or stolen Rights Certificate, a
new Rights Certificate evidencing the same number of Rights as did the
Rights Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under
this Section 2.7, the Corporation may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expense (including the fees
and expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.7
in lieu of any destroyed, lost or stolen Rights Certificate shall
evidence the contractual obligation of the Corporation whether or not
the destroyed, lost or stolen Rights Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other
Rights duly issued by the Corporation.
2.8 PERSONS DEEMED OWNER
The Corporation, the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat any Person in whose name a Rights Certificate
(or, prior to the Stock Acquisition Date, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement,
unless the context otherwise requires, the term "holder" of any Rights shall
mean the registered holder of such Rights (or, prior to the Stock Acquisition
Date, the associated Common Share certificate).
SHAREHOLDERS RIGHTS AGREEMENT PAGE 18 OF 30
<PAGE> 20
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired
in any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled
as provided in this Section 2.9, except as expressly permitted by this
Agreement. The Rights Agent shall destroy all cancelled Rights Certificates
and deliver a certificate of destruction to the Corporation.
2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights, by accepting the same, consents and agrees with the
Corporation and the Rights Agent and with every other holder of Rights:
(a) to be bound by and subject to the provisions of this Agreement, as
amended from time to time in accordance with the terms hereof, in
respect of all Rights held;
(b) that prior to the Stock Acquisition Date, each Right will be
transferable only together with, and will be transferred by a transfer
of, the Common Share certificate representing such Right;
(c) that prior to due presentment of a Rights Certificate (or, prior
to the Stock Acquisition Date, the associated Common Share
certificate) for registration of transfer, the Corporation, the Rights
Agent and any agent of the Corporation or the Rights Agent may deem
and treat the Person in whose name the Rights Certificate (or, prior
to the Stock Acquisition Date, the associated Common Share
certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership
or writing on such Rights Certificate or the associated Common Share
certificate made by anyone other than the Corporation or the Rights
Agent) for all purposes whatsoever, and neither the Corporation nor
the Rights Agent shall be affected by any notice to the contrary;
(d) that such holder of Rights has waived his right to receive any
fractional Rights or any fractional shares or other securities upon
exercise of a Right (except as provided herein); and
(e) that without the approval of any holder of Rights and upon the
sole authority of the Board of Directors acting in good faith this
Agreement may be supplemented or amended from time to time pursuant to
and as provided herein.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 19 OF 30
<PAGE> 21
2.11 RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights or Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose whatsoever the holder of
any Common Share or any other share or security of the Corporation which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed or
deemed to confer upon the holder of any Right or Rights Certificate, as such,
any of the rights, titles, benefits or privileges of a holder of Common Shares
or any other shares or securities of the Corporation or any right to vote at
any meeting of shareholders of the Corporation whether for the election of
Directors or otherwise or upon any matter submitted to holders of shares of the
Corporation at any meeting thereof, or to give or withhold consent to any
action of the Corporation, or to receive notice of any meeting or other action
affecting any holder of Common Shares or any other shares or securities of the
Corporation except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised in accordance
with the terms and provisions hereof.
ARTICLE 3 - FLIP-IN EVENT
3.1 FLIP-IN EVENT
(a) Subject to clause 3.1(b), Section 3.2, clause 5.1(b), clause
5.1(c) clause 2.2(a), in the event that prior to the Expiration Date a
Flip-In Event shall occur, each Right shall constitute, effective on
and after the Stock Acquisition Date, the right to purchase from the
Corporation, upon payment of the Exercise Price and otherwise
exercising such Right in accordance with the terms hereof, that number
of Common Shares as shall equal the result obtained by dividing the
then current Exercise Price by 50 percent of the Market Price on the
Stock Acquisition Date of the Common Shares (such Right to be
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in the event that after the
Stock Acquisition Date an event of a type analogous to any of the
events described in Section 2.3 shall have occurred).
(b) Notwithstanding anything in this Agreement to the contrary, upon
the occurrence of any Flip-in Event, any Rights that are Beneficially
Owned by (i) an Acquiring Person (or any Affiliate or Associate of an
Acquiring Person or any Person acting jointly or in concert with an
Acquiring Person or any Affiliate or Associate of an Acquiring Person)
or (ii) a transferee of Rights, directly or indirectly, of an
Acquiring Person (or of any Affiliate or Associate of an Acquiring
Person or of any Person acting jointly or in concert with an Acquiring
Person or any Associate or Affiliate of an Acquiring Person) who
becomes a transferee concurrently with or subsequent to the Acquiring
Person becoming such shall become null and void without any further
action, and any holder of such Rights (including transferees) shall
not have any rights whatsoever to exercise such Rights under any
provision of this Agreement and shall not have thereafter any other
rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 20 OF 30
<PAGE> 22
(c) From and after the Stock Acquisition Date, the Corporation shall
do all such acts and things as shall be necessary and within its power
to ensure compliance with the provisions of this Section 3.1,
including without limitation, all such acts and things as may be
required to satisfy the requirements of the Delaware Corporation Law,
the 1933 Securities Act and the 1934 Exchange Act and the rules of the
stock exchange(s) where the Common Shares are listed at such time in
respect of the issue of Common Shares upon the exercise of Rights in
accordance with this Agreement.
3.2 EXCHANGE OPTION
(a) In the event that the Board of Directors acting in good faith
shall determine that conditions exist which would eliminate or
otherwise materially diminish in any respect the benefits intended to
be afforded to the holders of Rights pursuant to this Agreement, the
Board of Directors, at its option, at any time after a Flip-in Event
has occurred, may authorize the Corporation to issue or deliver in
resect of each Right which is not void pursuant to the second sentence
of clause 2.2(a) or clause 3.1(b), in return for the Right, subject to
any amounts that may be required to be paid under applicable law, debt
or equity securities or assets of the Corporation (or a combination
hereof) having a value equal to the value of the Right, in full and
final settlement of all rights attaching to the Rights,
where the value of such debt or equity securities or assets (or a
combination thereof) and the value of the Right shall be determined by
the Board of Directors who may rely upon the advice of a nationally or
internationally recognized firm of investment dealers or investment
bankers selected by the Board of Directors.
(b) If the Board of Directors authorizes the exchange of debt or
equity securities or assets of the Corporation (or a combination
thereof) for Rights pursuant to clause 3.2(a), without any further
action or notice the right to exercise the Rights will terminate and
the only right thereafter of a holder of Rights shall be to receive
the debt or equity securities or assets of the Corporation (or a
combination thereof) in accordance with the exchange formula
authorized by the Board of Directors. Within 10 Business Days after
the Board of Directors has authorized an exchange for Rights pursuant
to clause 3.2(a), the Corporation shall give notice of such exchange
to the holders of such Rights by mailing such notice to all such
holders at their last addresses as they appear upon the register of
Rights holders maintained by the Rights Agent. Each such notice of
exchange will state the method by which the exchange of debt or equity
securities or assets of the Corporation (or a combination thereof) for
Rights will be effected.
(c) In the event that there shall not be sufficient securities
authorized but unissued to permit the exchange in full of such Right
pursuant to this Section 3.2, the Corporation shall take all such
action as may be necessary and within its power to authorize
additional securities for issuance upon the exchange of Rights.
(d) The Corporation shall not be required to issue fractions of
securities or to distribute certificates evidencing fractional
securities. In lieu of issuing such fractional securities, there
shall be paid to the registered holders of Rights to whom such
fractional securities would otherwise be issuable an amount in cash
equal to the same fraction of the Market Price of a whole security.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 21 OF 30
<PAGE> 23
ARTICLE 4 - THE RIGHTS AGENT
4.1 GENERAL
(a) The Corporation hereby appoints the Rights Agent to act as agent
for the Corporation in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such Co-Rights Agents
("Co-Rights Agents") as it may deem necessary or desirable. In the
event the Corporation appoints one or more Co-Rights Agents, the
respective duties of the Rights Agents shall be as the Corporation may
determine. The Corporation 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 wilful 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, which right to indemnification will survive the
termination of this Agreement.
The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of
its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon
any certificate for Voting Shares or Common Shares or any Rights
Certificate or certificate for other securities of the Corporation,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement,
or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledge, by the
proper Person or Persons.
4.2 MERGER 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, statutory arrangement or
consolidation to which the Rights Agent or any successor Rights Agent
is a party, or any corporation succeeding to the shareholder or
stockholder service business of the Rights Agent or any successor
Rights Agent, will be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided that such
corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 4.4 hereof. In case at the time
successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights certificates have been countersigned but
not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of
the Rights Certificates have not been countersigned, any successor
Rights Agent may countersign such Rights 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 Rights Certificates will have
the full force provided in the Rights Certificates and in this
Agreement.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 22 OF 30
<PAGE> 24
(b) In case at any time the name of the Rights Agent is changed and at
such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have
been countersigned, the Rights Agent may countersign such Rights
certificates either in its prior name or in its changed name; and in
all such cases such Right Certificate shall have the full force
provided in the Right Certificates and in this Agreement.
4.3 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
Corporation and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:
(a) the Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation) and the opinion of such counsel will 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 deems it necessary or desirable that any fact or matter
be proved or established by the Corporation prior 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 a
Person believed by the Rights Agent to be the Chairman of the Board,
the President or any Vice President of the Corporation and delivered
to the Rights Agent; and such certificate will 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 will be liable hereunder only for its own
negligence, bad faith or wilful misconduct;
(d) the Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for Voting Shares or Common Shares or the Rights
Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and will be
deemed to have been made by the Corporation only;
SHAREHOLDERS RIGHTS AGREEMENT PAGE 23 OF 30
<PAGE> 25
(e) the Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery hereto by the
Rights Agent) or in respect of the validity or execution of any Common
Share certificate or Rights Certificate (except its countersignature
thereof); nor will it be responsible for any breach by the Corporation
of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void
pursuant to clause 3.1(b) hereof) or any adjustment required under the
provisions of Section 2.3 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 after receipt of the certificate
contemplated by Section 2.3 describing any such adjustment); nor will
it by any act hereunder be deemed to make any representation or
warranty as to the authorization of any Common Shares to be issued
pursuant to this Agreement or any Rights or as to whether any Common
Shares will, when issued, be duly and validly authorized, executed,
issued and delivered and fully paid and non-assessable;
(f) the Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances
as may reasonably be required by the Rights Agent for the carrying out
or performing by the Rights Agent of the provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from any Person believed by the Rights Agent to be the Chairman of the
Board, the President, any Vice President, or the Treasurer or the
Controller of the Corporation, and to apply to such Persons for advice
or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in
accordance with instructions of any such Person;
(h) the Rights Agent and any shareholder or stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in
Common Shares, Rights or other securities of the Corporation or become
pecuniarily interested in any transactions in which the Corporation
may be interested, or contract with or lend money to the Corporation
or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or for any
other legal entity; and
(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 will
not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the
Corporation resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 24 OF 30
<PAGE> 26
4.4 CHANGE OF RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under this
Agreement upon 90 days' notice (or such lesser notice as is acceptable to the
Corporation) in writing mailed to the Corporation and to each transfer agent of
Common Shares by registered or certified mail, and to the holders of the Rights
in accordance with Section 5.8. The Corporation may remove the Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent and to each
transfer agent of the Common Shares by registered or certified mail, and to the
holders of the Rights in accordance with Section 5.8. If the Rights Agent
should resign or be removed or otherwise become incapable of acting, the
Corporation will appoint a successor to the Rights Agent. If the Corporation
fails to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapability by
the resigning or incapacitated Rights Agent or by the holder of any Rights
(which holder shall, with such notice, submit such holder's Rights Certificate
for inspection by the Corporation), then the holder of any Rights may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Corporation or by such a
court, shall be a corporation authorized to carry on the business of a trust
company. After appointment, the successor Rights Agent will be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Corporation will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares, and mail a notice thereof in writing to the holders of the
Rights. Failure to give any notice provided for in this Section 4.4, 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.
ARTICLE 5 - MISCELLANEOUS
5.1 REDEMPTION AND WAIVER
(a) The Board of Directors may, at its option, at any time prior to
Stock Acquisition Date, elect to redeem all but not less than all of
the then outstanding Rights at a redemption price of $0.001 per Right
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in the event that an event of
the type analogous to any of the event described in Section 2.3 shall
have occurred (such redemption price being herein referred to as he
"Redemption Price"). The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may
establish.
(b) The Board of Directors may until the Stock Acquisition Date
determine, upon prior written notice delivered to the Rights Agent, to
waive the application to Section 3.1 to any particular Flip-in Event.
(c) The Board of Directors may prior to the Stock Acquisition Date
waive the application of Section 3.1 to any particular Flip-in Event,
provided that both of the following conditions are satisfied:
SHAREHOLDERS RIGHTS AGREEMENT PAGE 25 OF 30
<PAGE> 27
(i) the Board of Directors has determined that the Acquiring
Person became an Acquiring Person by inadvertence and without
any intent or knowledge that he would become an Acquiring
Person; and
(ii) such Acquiring Person has reduced his Beneficial
Ownership of Voting Shares so that at the time of waiver
pursuant to this clause he is no longer an Acquiring Person.
(d) The Board of Directors shall, without further formality, be deemed
to have elected to redeem the Rights at the Redemption Price on the
date of expiry of a Permitted Bid, provided that the Offeror takes up
and pays for the Voting Shares pursuant to the terms and conditions of
the Permitted Bid.
(e) If the Board of Directors elects to redeem the Rights, the right
to exercise the Rights will thereupon, without further action and
without notice, terminate and the only right thereafter of the holders
of rights shall be to receive the Redemption Price.
(f) Within 10 days after the Board of Directors elect to redeem the
Rights, the Corporation shall give notice of redemption to the holders
of the then outstanding Rights by mailing such notice to all such
holders at their last address as they appear upon the registry books
of the Rights Agent or, prior to the Stock Acquisition Date, on the
registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. The Corporation may not redeem, acquire
or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 5.1, or other than in
connection with the purchase of Common Shares prior to the Stock
Acquisition Date.
5.2 EXPIRATION DATE
No Person shall have any rights whatsoever pursuant to or arising out of this
Agreement or in respect of any Right after the Expiration Date, except the
Rights Agent as specified in clause 4.1(a) of this Agreement.
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement, the Corporation may,
at its opinion, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change
in the number or kind or class of securities purchasable upon exercise of
Rights made in accordance with the provisions of this Agreement.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 26 OF 30
<PAGE> 28
5.4 SUPPLEMENTS AND AMENDMENTS
(a) The Corporation may from time to time supplement or amend this
Agreement without the approval of any holders of Rights:
(i) to make any changes which the Board of Directors acting in
good faith may deem necessary or desirable, provided that no
such supplement or amendment made on or after the Stock
Acquisition Date shall materially adversely affect the
interests of the holders of Rights generally and provided
further that no supplement or amendment shall be made to the
provisions of Article 4 except with the written concurrence of
the Rights Agent to such supplement or amendment; or
(ii) in order to cure any ambiguity or to correct or
supplement an provision contained therein which may be
inconsistent with any other provisions herein or otherwise
defective.
(b) The Corporation may, with the consent of the holders of Rights
obtained as set forth below, at any time after the Stock Acquisition
Date, amend, vary or rescind any of the provisions of this Agreement
and the Rights (whether or not such action would materially adversely
affect the interests of the holders of Rights generally). Such
consent shall be deemed to have been given and be binding upon all
holders of Rights if such action is authorized by the affirmative
votes of the holders of Rights present or represented at and entitled
to be voted at a meeting of the holders and representing 50 per cent
plus one of the votes cast in respect thereof. For the purposes
hereof, each outstanding Right (other than Rights which are void
pursuant to the provisions hereof) shall be entitled to one vote, and
the procedures for the calling, holding and conduct of the meeting
shall be those, as nearly as may be, which are provided in the
Corporation's by-laws with respect to meetings of its shareholders.
(c) Any supplement or amendment to this Agreement made by the Board of
Directors pursuant to subclause (a)(i) in connection with the
definitions of "Acquiring Person", "Exercise Price", "Expiration
Date", other than an extension thereof by resolution of the Board of
Directors, "Flip-in Event", "Grandfathered Person", or "Permitted Bid"
shall, if made prior to the Stock Acquisition Date, be submitted to
the shareholders of the Corporation at the next meeting of
shareholders and the shareholders may, by ordinary resolution, confirm
or reject such supplement or amendment; if made at or after the Stock
Acquisition Date such supplement or amendment shall be submitted to
the holders of the Rights at a meeting to be called for on a date not
latter than immediately following the next meeting of shareholders and
the holders of Rights may, by ordinary resolution (on the same basis
as described in clause (b) hereof), confirm or reject such supplement
or amendment. A supplement or amendment to this Agreement made by the
Board of Directors as contemplated by the previous sentence shall be
effective from the date of the relevant resolution of the Board of
Directors until it is confirmed or rejected or until it ceases to be
effective (as described in the next following sentence) and, where the
supplement or amendment is confirmed, it continues in effect in the
form in which it was so confirmed. If such supplement or amendment to
this Agreement made by the board of Directors is rejected by the
shareholders or holders of Rights or is not submitted to the
shareholders or holders of Right as required, then such supplement or
amendment shall cease to be effective from and after the termination
of the meeting at which it was rejected or to which it should have
been but was not submitted, or from and after the last date on which a
meeting of holders of Rights should have been but was not held, and no
subsequent resolution of the Board of Directors to supplement or amend
the Agreement to substantially the same effect shall be effective
until confirmed by the shareholders or holders of Rights, as the case
may be.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 27 OF 30
<PAGE> 29
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) Subject to clause 3.2(d) in respect of circumstances referred to
in clause 3.2(a), the Corporation shall not be required to issue
fractions of Rights or distribute Rights Certificates which evidence
fractional Rights and no amount shall be paid to the registered
holders of the Rights Certificates with regard to with such fractional
Rights would otherwise be issuable.
(b) The Corporation shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares. In lieu of issuing fractional
Common Shares, the Corporation may pay to the registered holders of
Rights Certificates, at the time such Rights are exercised as herein
provided, an amount in cash equal to the same fraction of the Market
Price of one Common Share.
5.6 RIGHTS OF ACTION
Subject to the terms of this Agreement, all rights of action in respect of this
Agreement, other than rights of action vested solely in the Rights Agent, are
vested in the respective registered holders of the Rights; and any registered
holder or any Rights, without the consent of the Rights Agent or of the
registered holder of any other Rights, may, on such holder's own behalf and for
such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Corporation to enforce such holder's right to
exercise such holder's Rights in the manner provided in such holder's Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies 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.
5.7 REGULATORY APPROVALS
Any obligation of the Corporation or action or event contemplated by this
Agreement shall be subject to the receipt of any requisite approval or consent
from any governmental or regulatory authority.
5.8 NOTICES
Notices or demands authorized or required by this Agreement to be given or made
by the Rights Agent or by the holder of any Rights to or on the Corporation
shall be sufficiently given or made if delivered or sent by first class mail,
postage prepaid, by telecopier or by other similar means of telecommunications
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Kaydon Corporation
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624-3148
Any notice or demand authorized or required by this Agreement to be given or
made by the Corporation or by the holder of any Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, by telecopier or by other similar means of
telecommunications addressed (until another address is filed in writing with
the Corporation) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
SHAREHOLDERS RIGHTS AGREEMENT PAGE 28 OF 30
<PAGE> 30
Notices or demands authorized or required by this Agreement to be given or made
by the Corporation or the Rights Agent to or on the holder of any Rights shall
be sufficiently given or made if delivered or sent by first class mail, postage
prepaid, by telecopier or by other similar means of telecommunications
addressed to such holder at the address of such holder as it appears upon the
registry books of the Rights Agent or, prior to the Stock Acquisition Date, on
the registry books of the Corporation for its Common Shares. Any notice which
is mailed or sent in the manner herein provided shall be deemed given, whether
or not the holder receives the notice.
5.9 COST OF ENFORCEMENT
The Corporation agrees that if the Corporation fails to fulfill any of its
obligations pursuant to this Agreement, then the Corporation will reimburse the
holder of any Rights for the costs and expenses (including attorney's fees)
incurred by such holder to enforce his rights pursuant thereto in any action,
suit or proceeding in which a court of competent jurisdiction in a final
non-appealable judgment has rendered judgment in favor of the holder.
5.10 SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit of the
Corporation or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder, including any corporation into
which the Corporation may be amalgamated.
5.11 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person other than
the Corporation, the Rights Agent and the holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the holders of the Rights.
5.12 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a contract
made under the laws of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such Delaware applicable to contracts
to be made and performed entirely within Delaware.
5.13 SEVERABILITY
If any Section, clause, term or provision hereof or the application thereof to
any circumstance or any right hereunder shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such Section, clause, term or provision or
such right shall be ineffective only as to such jurisdiction and to the extent
of such invalidity or unenforceability in such jurisdiction without
invalidating or rendering unenforceable or ineffective the remaining Sections,
clauses, terms and provisions hereof or rights hereunder in such jurisdiction
or the application of such Section, clause, term or provision or rights
hereunder in any other jurisdiction or to circumstances other than those as to
which it is specifically held invalid or unenforceable.
5.14 EFFECTIVE DATE
This Agreement is effective and in full force and effect in accordance with its
terms from the date hereof.
SHAREHOLDERS RIGHTS AGREEMENT PAGE 29 OF 30
<PAGE> 31
5.15 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to
(i) interpret the provisions of this Agreement,
(ii) make the public announcement referred to under "Stock Acquisition
Date" in section 1.1 hereof and
(iii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem
or not to redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the forgoing),
which are gone or made by the Board of Directors, in good faith, shall (x) be
final, conclusive and binding on the Corporation, the Rights Agent, the holders
of the Rights Certificates (including Rights which are void pursuant to the
provisions hereof) and all other parties, and (y) not subject the Board of
Directors or any director of the Corporation to any liability to the holders of
the Rights Certificates (including Rights which are void pursuant to the
provisions hereof).
5.16 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
5.17 EXECUTION IN 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 one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
KAYDON CORPORATION CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
/s/ Lawrence J. Cawley /s/ Michael J. Nelson
- ------------------------------- ------------------------------
By: Lawrence J. Cawley By: Michael J. Nelson
Chairman of the Board President
Chief Executive Officer
SHAREHOLDERS RIGHTS AGREEMENT PAGE 30 OF 30
<PAGE> 32
EXHIBIT "A"
[Form of Rights Certificate]
Certificate No. Rights
THE RIGHTS ARE SUBJECT TO TERMINATION, AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES
(SPECIFIED IN SECTION 3.1(b) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR TRANSFEREE OF AN ACQUIRING PERSON OR ITS
AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
MAY BECOME VOID.
RIGHTS CERTIFICATE
This certifies that _______________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Rights Plan Agreement dated June 21, 1995 (the
"Rights Agreement") between Kaydon Corporation a corporation duly incorporated
under laws of Delaware (the "Corporation") and Continental Stock Transfer &
Trust Company, a trust company incorporated under the laws of New York (the
"Rights Agent") (which term shall include any successor Rights Agent under the
Rights Agreement), as amended, to purchase from the Corporation at any time
after the Stock Acquisition Date (as such term is defined in the Rights
Agreement) and prior to the Expiration Date (as such term is defined in the
Rights Agreement), one fully paid common share of the Corporation (a "Common
Share") at the Exercise Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise duly
executed and submitted to the Rights Agent at its principal office. The
Exercise Price shall initially be $30.00 per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or shares in the capital stock of the
Corporation other than Common Shares or more or less than one Common Share (or
a combination thereof), all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement which terms, provisions and conditions are
hereby incorporated herein by reference and deem 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 thereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the registered office of the
Corporation.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in
part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate of Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be terminated by the Corporation under certain circumstances at
its option.
<PAGE> 33
No holder of this Rights Certificates, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Shares or
of any other securities which may at any time be issuable upon the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation
Date:
By: By:
Title: Title:
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: Authorized Signature
<PAGE> 34
EXHIBIT "B"
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificates.)
FOR VALUED RECEIVED transferor hereby sells, assigns and transfers unto
-------------------
transferee
---------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all rights, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------------------------------
as attorney, to transfer the within Rights Certificate on the books of the
within named Corporation, with full power of substitution.
Dated:
Signature Guaranteed: Signature
(Signature must correspond to name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever)
Signature must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, beneficially Owned
by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement).
Signature
[To be attached to each Rights Certificate]
<PAGE> 35
EXHIBIT "C"
FORM OF ELECTION TO EXERCISE
TO: KAYDON CORPORATION
The undersigned hereby irrevocably elects to exercise whole Rights represented
by the attached Rights Certificate to purchase the Common Shares or other
securities, if applicable, suable upon the exercise of such Rights and requests
that certificates for such securities be issued n the name of:
Address:
Social Insurance, Social Security or Other Taxpayer Identification Number:
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate to purchase the Common Shares or other securities, if applicable,
issuable upon the exercise of such Rights and requests that certificates for
such securities be issued in the name of:
Address:
Social Insurance, Social Security or Other Taxpayer Identification Number:
Dated: Signature
(Signature must correspond to name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever)
Signature must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned
by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
rights Agreement)
Signature
<PAGE> 36
NOTICE
In the event the certification set forth above in the Forms of Assignment and
Election is not completed, the Corporation will deem the Beneficial Owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement)). No
Rights Certificates shall be issued in exchange for a Rights Certificate owned
or deemed to have ben owned by an Acquiring Person or an Affiliate or Associate
thereof.
<PAGE> 1
EXHIBIT 99.0
Shelley A. Schwemley For Immediate Release
(813) 531-1101, ext. 307
or
Lawrence J. Cawley
(813) 531-1101, ext. 305
KAYDON ADOPTS SHAREHOLDERS RIGHTS PLAN
Clearwater, Florida; June 28, 1995
Kaydon Corporation (Kaydon) announced today that its Board of Directors
has adopted a Shareholders Rights Plan designed to enchance the ability of all
of Kaydon's stockholders to realize the long-term value of their investment in
the corporation. The rights plan provides that one stock purchase right will
be attached to each share of common stock of the corporation held as of the
close of business on July 7, 1995.
The rights plan is intended to deter coercive or unfair takeover
tactics and will discourage a potential acquiror from gaining control of Kaydon
without offering fair and equal treatment to all of Kaydon's stockholders.
Details of the Shareholders Rights Plan will be summarized in a letter to the
shareholders of record, mailed on or about July 11, 1995.
Lawrence J. Cawley, Chairman of the Board and Chief Executive Officer
of Kaydon stated: "The Shareholders Rights Plan we have adopted will assure
that the Board of Directors has the capability and opportunity to act in the
best interests of Kaydon and its shareholders when responding to any proposed
transaction. The Rights are not being distributed in response to any effort to
acquire control of Kaydon, and the Board is not aware of any such effort. The
rights plan allows the Board to protect shareholders from any effort to acquire
control of Kaydon by unfair tactics or without providing all shareholders with
full and fair consideration for their shares. The rights plan does not prevent
an acquisition of Kaydon on terms that are favorable and fair to all
shareholders. However, the plan will deter any attempt to acquire Kaydon
through use of abusive tactics that are calculated to deprive the shareholders
and the Board of Directors of their ability to determine the corporation's
future."
Kaydon Corporation is a leading designer and manufacturer of custom-
engineered products, including antifriction bearings, bearing systems and
components, filters and filter housings, specialty retaining rings, specialty
balls, custom rings, shaft seals, and various types of slip-rings. Kaydon is
headquartered in Clearwater, Florida and operates facilites located in
Michigan, South Carolina, Georgia, Tennessee, Maryland, Missouri, Virginia,
Mexico, Germany, and England.
Kaydon stock is traded on the New York Stock Exchange under the symbol
KDN.
#####
<PAGE> 1
EXHIBIT 99.1
July 11, 1995
To Kaydon Shareholders:
On June 21, 1995, your Board of Directors adopted a Shareholders Rights Plan.
The Plan provides one Stock Purchase Right for each share of common stock you
own. This letter describes the principal features of the Plan and explains our
reasons for adopting it.
The purpose of the Plan is to protect you, as a shareholder, in the event
Kaydon becomes the target of an unsolicited attempt to acquire Kaydon. It is
designed to deal with the potential problems caused by an acquiror's use of
abusive tactics used to deprive Kaydon's shareholders, and its Board, of any
real opportunity to evaluate the situation and determine its future.
Unsolicited takeover attempts frequently involve a gradual accumulation of
shares; a partial or two-tier tender offer that does not treat all shareholders
equally; a squeeze-out merger, or other abusive takeover tactics. The Board
believes these tactics are not in the best interests of shareholders because
they can unfairly pressure shareholders and squeeze them out of their
investment without giving them any real choice thus depriving them of the full
value of their shares.
In excess of fifteen hundred public companies have adopted some form of a
Shareholders Rights Plan. We consider the Plan adopted by Kaydon to be an
excellent means of protecting your right to retain an equity investment in
Kaydon and obtain the full value of your investment, while not foreclosing the
possibility of a fair acquisition bid. The Plan is not intended to prevent an
acquisition of Kaydon on fair and equal terms for all its shareholders, and
will not do so. However, it should help deter any attempt to acquire Kaydon in
a manner or on terms the Board determines not to be in the best interests of
all of the shareholders.
The Rights are not being distributed in response to any effort to acquire
control of Kaydon, and the Board is not aware of any such effort. The Plan has
been adopted to provide the Board with a mechanism to protect your interests in
the future.
Issuance of the Rights does not in any way weaken the financial strength of
Kaydon or interfere with its business plans. The issuance of the Rights has no
dilutive effect; will
<PAGE> 2
Shareholders Rights Plan
July 11, 1995
Page 2
not affect reported earnings per share; is not taxable to Kaydon or to you; and
will not change the way in which you can presently trade Kaydon's shares. As
explained in detail in the enclosed summary, the Rights will only be
exercisable if and when a problem arises which triggers their effectiveness.
They will then operate to protect you against being deprived of your right to
share in the full measure of Kaydon's long-term value.
Rights associated with the Plan will be effective as to shareholders of record
on July 7, 1995. No certificates representing the Rights will be distributed
initially, and the Rights will trade with and be represented by the
certificates for Kaydon's common stock. The rights will expire at the close of
business on July 7, 2000, unless earlier redeemed.
Your Board believes that the Shareholders Rights Plan represents a sound and
reasonable means of addressing the complex issues of corporate policy created
by the possibility of a takeover attempt. In adopting the Plan, we have
expressed our confidence in the future and our determination that you will be
given every opportunity to participate in that future.
On behalf of the Board of Directors,
Sincerely,
Lawrence J. Cawley
Chairman
<PAGE> 3
SUMMARY OF SHAREHOLDERS RIGHTS PLAN
On June 21, 1995, the Board of Directors for Kaydon Corporation ("Kaydon")
adopted a Rights Plan which attaches one Right to each share of Kaydon Common
Stock (the "Common Stock") to shareholders of record at the close of business
on July 7, 1995 (the "Record Date"). When the Right becomes exercisable, each
registered holder will be entitled to purchase from Kaydon additional common
stock having a value of twice the exercise price upon payment of the exercise
price. The exercise price, subject to adjustment, is thirty dollars ($30.00)
per Right. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between Kaydon and Continental Stock
Transfer and Trust Company, as Rights Agent.
Initially the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will become exercisable eight days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"). Prior to the Stock Acquisition date, (i) the
Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates, (ii) new Common
Stock certificates issued after July 7, 1995 will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates.
The Rights are not exercisable until the Stock Acquisition Date and will expire
at the close of business on July 7, 2000, unless earlier redeemed by Kaydon as
described below.
As soon as practicable after the Stock Acquisition Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Stock Acquisition Date and, thereafter, such separate Rights
Certificates alone will represent the Rights. Except as otherwise provided in
the Rights Agreement or determined by the Board of Directors, only shares of
Common Stock issued prior to the Stock Acquisition Date will be issued with
Rights.
After the Stock Acquisition Date, the Rights become exercisable. Each holder
of a Right will thereafter have the right to receive, upon exercise, Common
Stock (or, in certain circumstances, cash, property or other securities of
Kaydon) having a value equal to two
<PAGE> 4
times the exercise price of the Right. Notwithstanding any of the foregoing,
following the Stock Acquisition Date, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void.
For example, at an exercise price of $30 per Right, each Right not owned by an
Acquiring Person (or by certain related parties) following the Stock
Acquisition Date would entitle its holder to purchase $60 worth of Common Stock
(or other consideration, as noted above) for $30. Assuming that the Common
Stock had a per share value of $15 at such time, the holder of each valid Right
would be entitled to purchase four shares of Common Stock for $30. The Stock
Acquisition Date is also referred to as a "triggering event."
The Exercise Price payable, and the number of shares issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock, (ii) if the holders of Common Stock are
granted certain rights or warrants to subscribe for Common Stock at less than
current market price, or (iii) upon the distribution to holders of Common Stock
of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
herein).
With certain exceptions, no adjustment to the Exercise Price will be required
until cumulative adjustments amount to at least 1% of the Exercise Price. No
fractional shares will be issued and, in lieu thereof, an adjustment in cash
will be made based on the market price of the Common Stock on the last trading
date prior to the date of exercise.
At anytime prior to the Stock Acquisition Date, Kaydon may redeem the Rights at
a price of $.01 per Right. After the redemption period has expired, Kaydon's
right of redemption may be reinstated by a waiver of a particular triggering
event. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of Kaydon, including, without limitation, the right to vote or
receive dividends. While the distribution of the Rights will not be taxable to
shareholders or to Kaydon, shareholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the
<PAGE> 5
Company prior to the Stock Acquisition Date. After the Stock Acquisition Date,
the provisions of the Rights Agreement may be amended by the Board in order to
cure any ambiguity, to make changes which do not adversely affect the interests
of holders of Rights (excluding the interests of any Acquiring Person).
A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Form 8-A dated June 28, 1995. A copy of the
Rights Agreement is available free of charge from Kaydon. This summary
description of the Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
