<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1 TO
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
MMI COMPANIES, INC.
-------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3263253
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(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
540 Lake Cook Road, Deerfield, Illinois 60015-5290
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(Address of principal executive offices) (zip code)
<TABLE>
<S> <C>
If this Form relates to the registration of a If this Form relates to the registration of a
class of debt securities and is effective upon class of debt securities and is to become
filing pursuant to General Instruction effective simultaneously with the effectiveness
A(c)(1), please check the following box. / / of a concurrent registration statement under the
Securities Act of 1933 pursuant to General
Instruction A(c)(2) please check the following
box. / /
</TABLE>
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which each class is to
to be so registered: be registered:
Preferred Stock Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
----
(Title of class)
<PAGE>
This Amendment No. 1 to the Form 8-A filed June 27, 1997 is to reflect the
amendment and restatement by the board of directors of MMI Companies, Inc. (the
"Company") on September 24, 1998 to the Rights Agreement dated as of June 14,
1997, by and between the Company and ChaseMellon Shareholder Services L.L.C., as
Rights Agent.
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On June 14, 1997, the Board of Directors of MMI Companies, Inc. (the
"Company") adopted a Shareholder Rights Plan, and declared a dividend
distribution of one Right for each outstanding share of Common Stock, payable to
stockholders of record at the close of business on June 30, 1997 (the "Record
Date"). On September 24, 1998, the Board of Directors of the Company amended
and restated the Shareholder Rights Plan in certain respects. One Right will be
attached to each share of Common Stock and each Right will entitle the
registered holder to purchase from the Company a unit consisting of one one-
hundredth of a share (a "Unit") of Series B Junior Participating Preferred
Stock, par value $20 per share (the "Preferred Stock"), at a purchase price of
$75 per Unit (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in an Amended and Restated Rights Agreement
(the "Rights Agreement") between the Company and ChaseMellon Shareholder
Services L.L.C., 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. Any shares issued by the Company following the Record Date will
bear a legend indicating that the Rights are attached to such Common Stock
certificates. Shares issued and owned by stockholders prior to the Record Date
will be deemed to have Rights attached. Stockholders should not surrender such
certificates for legending. The Rights will separate from the Common Stock upon
the earlier of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, Beneficial Ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) 10
business days (or such later date as the Board of Directors may determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an Acquiring Person (a person or group of
affiliated or associated persons who has acquired Beneficial Ownership of 15% or
more of the outstanding Common Stock of the Company). The earlier of (i) and
(ii) is known as the "Distribution Date." Until the Distribution 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 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 certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 30, 2007, unless earlier redeemed or extended
by the Company.
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<PAGE>
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that any person becomes an Acquiring Person, 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 the Company)
having a value equal to two times the Purchase Price. Notwithstanding any of
the foregoing, following the occurrence of the event set forth in this
paragraph, 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. However, Rights are not exercisable following the occurrence of any
of the Flip-in Events set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.
In the event that following the Stock Acquisition Date, (i) the Company
engages in a merger or business combination transaction in which the Company is
not the surviving corporation; (ii) the Company engages in a merger or business
combination transaction in which the Company is the surviving corporation and
the Common Stock of the Company is changed or exchanged; or (iii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise of the Right, common stock
of the acquiring company having a value equal to two times the Purchase Price.
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the Current Market Price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock at the
close of the last trading date prior to the date of exercise.
Generally, at any time until ten days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $0.01
per Right. 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 $0.01 redemption price.
3
<PAGE>
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the acquiring company
as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to lengthen any time period under the Rights Agreement
unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or benefits to, holders of Rights; provided,
however, that no amendment shall be made at such time as the Rights are not
redeemable.
As of June 30, 1997, there were 11,641,977 shares of Common Stock of the
Company outstanding and 140,376 shares of Common Stock of the Company in the
treasury. Each share of Common Stock of the Company outstanding at the close of
business on June 30, 1997 will receive one Right. So long as the Rights are
attached to the Common Stock, one additional Right (as such number may be
adjusted pursuant to the provisions of the Rights Agreement) shall be deemed to
be delivered for each share of Common Stock issued or transferred by the Company
in the future. In addition, following the Distribution Date and prior to the
expiration or redemption of the Rights, the Company may issue Rights when it
issues Common Stock only if the Board deems it to be necessary or appropriate,
or in connection with the issuance of shares of Common Stock pursuant to the
exercise of stock options or under employee plans or upon the exercise,
conversion or exchange of certain securities of the Company. 300,000 shares of
Preferred Stock are initially reserved for issuance upon exercise of the Rights.
The Rights may have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired, and under certain circumstances the Rights
beneficially owned by such a person or group may become void. The Rights,
however, should not affect any prospective offeror willing to negotiate with the
Board and to make an offer at a fair price and otherwise in the best interests
of the Company and its shareholders as determined by a majority of the Directors
who are not affiliated with the person making the offer. The Rights should not
interfere with any merger or other business combination approved by the Board
since the Board may, at its option, at any time
4
<PAGE>
until ten days following the Stock Acquisition Date redeem all but not less than
all of the then outstanding Rights at the Redemption Price.
The Amended and Restated Rights Agreement, dated as of September 24, 1998,
between the Company and ChaseMellon Shareholder Services L.L.C., as Rights
Agent, specifying the terms of the Rights is attached hereto as an exhibit and
is incorporated herein by reference. The foregoing description of the Rights is
qualified in its entirety by reference to such exhibit. A Certificate of
Designation, Preferences and Rights setting forth the terms of the Preferred
Stock was filed with the Secretary of State of the State of Delaware on June 30,
1997.
ITEM 2. EXHIBITS.
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1 Amended and Restated Rights Agreement, dated as of September 24, 1998,
between MMI Companies, Inc. and ChaseMellon Shareholder Services L.L.C., as
Rights Agent, including Exhibit A (the Form of Certificate of Designation),
Exhibit B (the Form of Rights Certificate) and Exhibit C (the Summary of
Rights to Purchase Preferred Stock sent to the shareholders of the Company in
August of 1997). Pursuant to the Rights Agreement, printed Rights
Certificates will not be mailed until after the Distribution Date (as such
term is defined in the Rights Agreement).
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized.
Dated: November 2, 1998
MMI COMPANIES, INC.
By: /s/ PAUL M. ORZECH
----------------------
Paul M. Orzech
Executive Vice President and
Chief Financial Officer
5
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
1 Amended and Restated Rights Agreement, dated as of September 24, 1998,
between MMI Companies, Inc. and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, including Exhibit A (the Form of Certificate
of Designation), Exhibit B (the Form of Rights Certificate) and
Exhibit C (the Summary of Rights to Purchase Preferred Stock sent to
the shareholders of the Company in August of 1997). Pursuant to the
Rights Agreement, printed Rights Certificates will not be mailed until
after the Distribution Date (as such term is defined in the Rights
Agreement).
6
<PAGE>
EXHIBIT 99.1
- --------------------------------------------------------------------------------
MMI COMPANIES, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
RIGHTS AGENT
AMENDED AND RESTATED RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 24, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
Section 1. Certain Definitions............................................................. 1
Section 2. Appointment of Rights Agent..................................................... 4
Section 3. Issue of Rights Certificates.................................................... 5
Section 4. Form of Rights Certificates..................................................... 6
Section 5. Countersignature and Registration............................................... 7
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.......... 8
Section 7. Exercise of Rights: Purchase Price: Expiration Date of Rights................... 9
Section 8. Cancellation and Destruction of Rights Certificates............................. 10
Section 9. Reservation and Availability of Capital Stock................................... 11
Section 10. Preferred Stock Record Date..................................................... 12
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights....................................................................... 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................... 21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power........................................................................... 22
Section 14. Fractional Rights and Fractional Shares......................................... 24
Section 15. Rights of Action................................................................ 25
Section 16. Agreement of Rights Holders..................................................... 25
Section 17. Rights Certificate Holder Not Deemed a Stockholder.............................. 26
Section 18. Concerning the Rights Agent..................................................... 26
Section 19. Merger or Consolidation or Change of Name of Rights Agent....................... 27
Section 20. Duties of Rights Agent.......................................................... 28
Section 21. Change of Rights Agent.......................................................... 29
Section 22. Issuance of New Rights Certificates............................................. 30
Section 23. Redemption and Termination...................................................... 31
Section 24. Exchange........................................................................ 31
Section 25. Notice of Certain Events........................................................ 33
Section 26. Notices......................................................................... 33
Section 27. Supplements and Amendments...................................................... 34
Section 28. Successors...................................................................... 34
Section 29. Determinations and Actions by the Board of Directors etc........................ 34
Section 30. Benefits of this Agreement...................................................... 35
Section 31. Severability.................................................................... 35
Section 32. Governing Law................................................................... 35
Section 33. Counterparts.................................................................... 35
Section 34. Descriptive Headings............................................................ 36
</TABLE>
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of September 24, 1998 (the
"Agreement"), between MMI Companies, Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services L.L.C. (the "Rights
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on June 14, 1997 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $0.10 per
share, of the Company (the "Common Stock") outstanding at the close of business
on June 30, 1997 (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the provisions of
Section 11(p) hereof) for each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date, each Right initially representing
the right to purchase one one-hundredth of a share of Series B Junior
Participating Preferred Stock (the "Preferred Stock") of the Company having the
rights, powers and preferences set forth in the Form of Certificate of
Designation, Preferences and Rights attached to this Agreement as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
WHEREAS, on June 14, 1997 the Company and the Rights Agent entered into a
Rights Agreement (the "1997 Rights Agreement");
WHEREAS, as of the hereof, the Company and the Rights Agent are amending
the 1997 Rights Agreement in certain respects, and as so amended, the Rights
Agreement is hereby restated in its entirety as follows:
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, or (iv) any person holding Common Stock issued to
that Person by the Company in a transaction approved in advance by a majority of
Directors then in office of the Company to the extent and only to the extent so
approved. Notwithstanding the foregoing, if (a) the Board of Directors of the
Company determines in
<PAGE>
good faith that a Person who would otherwise be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph, has become such
inadvertently, and such Person divests as promptly as practicable (and in any
event within ten (10) business days after notification by the Company) a
sufficient number of Common Shares so that such Person would no longer be an
Acquiring Person, as defined pursuant to the foregoing provisions of this
paragraph, then such Person shall not be deemed to be an "Acquiring Person" for
any purposes of this Agreement; and (b) no Person shall become an "Acquiring
Person" as a result of an acquisition of Common Stock by the Company which, by
reducing the number of such shares then outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the
outstanding Common Stock, except that if such Person, after such share purchases
by the Company, becomes the Beneficial Owner of any additional shares of Common
Stock, such Person shall be deemed to be an "Acquiring Person."
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b 2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the ''Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
-------- -------
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as
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<PAGE>
determined pursuant to Rule 13d 3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (c)) or disposing of any voting securities of the
Company; provided, however, that nothing in this paragraph (c) shall
cause a person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any securities
acquired through such person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the
date of such acquisition; and provided further, however, that nothing
in this paragraph (c) shall cause a person to be the "Beneficial
Owner" of, or to "beneficially own," any securities held by any
employee benefit plan of the Company or any trust created pursuant
thereto solely as a result of such person being (A) a member of a
committee which is authorized to make decisions on behalf of any such
plan or with respect to securities held pursuant thereto or (B) a
trustee of any trust created pursuant thereto.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York or Illinois are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Chicago time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Chicago time, on the next succeeding
Business Day.
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<PAGE>
(f) "Common Stock" shall mean the common stock, par value $0.10 per
share, of the Company, except that "Common Stock'' when used with reference to
any Person other than the Company shall mean the capital stock (or equity
interest) of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.
(g) "Person" shall mean any individual, firm, corporation,
partnership or other entity and shall include any successor (by merger or
otherwise) of such entity.
(h) "Preferred Stock" shall mean shares of Series B Junior
Participating Preferred Stock, par value $20 per share, of the Company having
the rights, powers and preferences set forth in the Form of Certificate of
Designation, Preferences and Rights attached to this Agreement as Exhibit A,
and, to the extent that there are not a sufficient number of shares of Series B
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, par value $20 per share, of the
Company designated for such purpose containing terms substantially similar to
the terms of the Series B Junior Participating Preferred Stock.
(i) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(j) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(k) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(l) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(m) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(n) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
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<PAGE>
SECTION 3. ISSUE OF RIGHTS CERTIFICATES.
----------------------------
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), or (ii) the close of business on the tenth business day (or such
later date as the Board shall determine) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d 2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would become an Acquiring Person (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by first-
class, insured, postage prepaid mail, to each record holder of the Common Stock
as of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall make
the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) The Company will send a copy of a Summary of Rights, in substantially
the form attached hereto as Exhibit C (the "Summary of Rights") to each holder
of the Common Stock promptly after the close of business on the Record Date
(other than any Acquiring Person), at the address of such holder shown on the
records of the Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date
-5-
<PAGE>
but prior to the earlier of the Distribution Date or the Expiration Date.
Certificates representing such shares of Common Stock shall also be deemed to be
certificates for Rights, and shall bear a legend substantially equivalent to the
following:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between MMI
Companies, Inc. (the "Company") and the Rights Agent thereunder (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices
of the Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights may be redeemed, may expire, or may be
evidenced by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any subsequent holder, may
become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and type
of securities
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<PAGE>
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible and otherwise reasonably
identifiable as such) the following legend:
The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
The provisions of Section 7(e) shall apply whether or not any Rights
Certificate actually contains the foregoing legend.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its
President, or an Executive Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be countersigned by the Rights Agent, either manually or by facsimile
signature, and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual
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<PAGE>
date of the execution of such Rights Certificate, shall be a proper officer of
the Company to sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
------------------------------------------------------
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new
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<PAGE>
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS: PURCHASE PRICE: EXPIRATION DATE OF RIGHTS.
-------------------------------------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) the
close of business on June 30, 2007 (the ''Final Expiration Date"), or (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof (the
earlier of (i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $75, and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depository agent, requisition from the depository agent
depository receipts representing such number of one one-hundredths of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depository agent) and the Company will direct the
depository agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depository receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights
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<PAGE>
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check or bank draft payable
to the order of the Company. In the event that the Company is obligated to issue
other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered 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, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights, shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights
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<PAGE>
Agent for cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Rights Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock the number of shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized and issued shares
held in its treasury) that, as provided in this Agreement including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Securities Act of 1933 (the "Act"),
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date , the Company may temporarily suspend the
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<PAGE>
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each person in whose name any
---------------------------
certificate for a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive
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<PAGE>
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
----------------------------------------------------------
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any
time after the date of this Agreement (A) declare a
dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including
any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section
7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification, and the number and kind of shares
of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the
aggregate number and kind of shares of Preferred
Stock or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to
such date and at a time when the Preferred Stock
transfer books of the Company were open, he would
have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs
which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) In the event that any Person, alone or
together with its Affiliates and Associates, shall,
at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, then, promptly
following the occurrence of any such event, proper
provision shall be made so that each holder of a
Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase
Price in accordance with the terms of this
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<PAGE>
Agreement, in lieu of a number of one one-hundredths
of a share of Preferred Stock, such number of shares
of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-
hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first
occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes
of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of shares
of Common Stock which are authorized by the Company's
certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit
the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section
11(a), the Company shall (A) determine the value of
the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of
the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including,
without limitation, shares, or units of shares, of
preferred stock, such as the Preferred Stock, which
the Board has deemed to have essentially the same
value or economic rights as shares of Common Stock
(such shares of preferred stock being referred to as
"Common Stock Equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination
of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction
in the Purchase Price), where such aggregate value
has been determined by the Board based upon the
advice of a nationally recognized investment banking
firm selected by the Board; provided, however, that
-------- -------
if the Company shall not have made adequate provision
to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x)
and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for
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<PAGE>
exercise of a Right and without requiring payment of
the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence,
the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the
Board determines in good faith that it is likely that
sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such
additional shares (such thirty (30) day period, as it
may be extended, is herein called the "Substitution
Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in
order to seek such shareholder approval for such
authorization of additional shares and/or to decide
the appropriate form of distribution to be made
pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating
that the exercisability of the Rights has been
temporarily suspended, as well as a public
announcement at such time as the suspension is no
longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall
be the Current Market Price per share of the Common
Stock on the Section 11(a)(ii) Trigger Date and the
per share or per unit value of any Common Stock
Equivalent shall be deemed to equal the Current
Market Price per share of the Common Stock on such
date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of
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<PAGE>
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid 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 of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation
hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the Current Market Price
per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices per
share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for
purposes of computations
-16-
<PAGE>
made pursuant to Section 11(a)(iii) hereof, the
Current Market Price per share of Common Stock on any
date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the
ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the
-------- -------
event that the Current Market Price per share of the
Common Stock is determined during a period following
the announcement by the issuer of such Common Stock
of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or
securities convertible into shares of such Common
Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such
Common Stock, and the tax-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification shall
not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each
such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading.
The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the
shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting
system with respect to securities listed on the
principal national securities exchange on which the
shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not
listed or admitted to trading on any national
securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such
organization, the average of the closing bid and
asked prices as furnished by a professional market
maker making a market in the Common Stock selected by
the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors of
the Company shall be used. The term ''Trading Day"
shall mean a day on which the principal national
securities exchange on which the shares of Common
Stock are listed or admitted to
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<PAGE>
trading is open for the transaction of business or,
if the shares of Common Stock are not listed or
admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current
Market Price per share shall mean the fair value per
share as determined in good faith by the Board of
Directors of the Company, whose determination shall
be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the Current Market Price per share of
Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock of the
Company in clause (i) of this Section 11(d) (other
than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be
determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this
Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be
appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date
of this Agreement) multiplied by the Current Market
Price per share of the Common Stock of the Company.
If neither the Common Stock nor the Preferred Stock
is publicly held or so listed or traded, Current
Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the
Current Market Price of one one-hundredth of a share
of Preferred Stock shall be equal to the Current
Market Price of one share of Preferred Stock divided
by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
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<PAGE>
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-hundredths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one one-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such
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<PAGE>
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredths of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock (or other
securities of the Company, if any) issuable upon such exercise over and above
the number of one one-hundredths of a share of Preferred Stock (and other
capital stock or securities of the Company, if any), issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
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<PAGE>
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common
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<PAGE>
Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
--------------------------------------------------------------
POWER.
- -----
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case except as may be contemplated by
Section 13(d) hereof, proper provision shall be made so that: (i) each holder of
a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one one-hundredths of a share for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price
in effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be
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<PAGE>
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and take any necessary action under
applicable blue sky laws; and
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<PAGE>
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything herein to the contrary, if any Person
shall merge with and into the Company without any change in any shares of Common
Stock, but under circumstances in which if shares of Common Stock were changed
or exchanged in whole or in part then the provisions of this Section 13 would
apply, then for purposes of this Section 13 the Common Stock shall be deemed
changed, the provisions of this Section 13 shall be deemed to apply and the
Company shall be deemed to be the Principal Party after such merger.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
----------------------------------------------------
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors, of the Company shall be used.
-24-
<PAGE>
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company 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 current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue or deliver fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company 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 current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
-----------------------------
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such holder's right to exercise the Rights evidenced by such Rights Certificate
in the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
----------------------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
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<PAGE>
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent), subject to the last sentence of
Section 7(e) hereof, for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be required to be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
---------------------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
hundredths of a share of Preferred Stock (or any other securities) of the
Company 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 to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
----------------------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of
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<PAGE>
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. Except as
provided in Section 20(c), in no case will the Rights Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the possibility of such loss or damage. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be 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 Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
-------- -------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the 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 Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in
-27
<PAGE>
its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
-----------------------------------
duties and obligations imposed by this Agreement (and only such duties and
obligations) upon the following terms and conditions, by all of which the
Company 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 Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, Chief Executive Officer, President, or an Executive Vice
President of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any
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<PAGE>
shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, an Executive
Vice President, the Secretary, any Assistant Secretary, or the Treasurer, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
-------- -------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights
-29-
<PAGE>
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail,
and reasonably promptly to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any
registered holder of no less than 100 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 Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100,000,000. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
-------- -------
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company
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<PAGE>
or the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION AND TERMINATION.
--------------------------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired. The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the Current Market Price, as defined in Section 11(d)(i) hereof,
of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock. 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.
SECTION 24. EXCHANGE. (a) The Board of Directors of the Company may, at
--------
its option, at any time after a Triggering Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Affiliate of the Company, any employee
benefit plan of the Company or any such Affiliate, or any entity holding Common
Stock for or pursuant to the terms of any such
-31-
<PAGE>
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- -------
affect the validity of any such exchange. The Company shall promptly mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of shares of Common Stock for the
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in Section 11(b) hereof) for Common Stock exchangeable for
Rights, at the initial rate of one one-hundredth of a share of Preferred Stock
(or equivalent preferred stock) for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a share of Preferred
Stock delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.
(d) In the event that there shall not be sufficient Common Stock or
Preferred Stock issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Stock or Preferred Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractional shares of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares of Common Stock, the Company shall pay
to the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the Current Market Value of a whole share of
Common Stock. For the purposes of this paragraph (e), the Current Market Value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
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<PAGE>
SECTION 25. NOTICE OF CERTAIN EVENTS. In case the Company shall propose,
------------------------
at any time after the Distribution Date, (i) to pay any dividend payable in
stock of any class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular quarterly
cash dividend out of earnings or retained earnings of the Company), or (ii) to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), or (iv) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock whichever
shall be the earlier.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
MMI Companies, Inc.
540 Lake Cook Road
Deerfield, IL 60015-5290
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
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<PAGE>
ChaseMellon Shareholder Services L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
Attention: Relationship Management
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
--------------------------
the Company and the Rights Agent shall, if the Company so directs by resolution
of its Board of Directors (which resolution shall be effective only with the
concurrence of a majority of the Directors then in office), supplement or amend
any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs by resolution of its Board of Directors (which resolution shall be
effective only with the concurrence of a majority of the Directors then in
office), supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder or (iv) to change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided,
from and after the Distribution Date, this Agreement may not be supplemented or
amended to lengthen any time period hereunder pursuant to clause (iii) of this
sentence unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may not be amended at a time when the Rights are not redeemable.
SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS ETC. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3 (d)(1)(i) of the
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<PAGE>
General Rules and Regulations under the Exchange Act. The Board of Directors of
the Company (with, where specifically provided for herein, the concurrence of a
majority of the Directors then in office), 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 to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors (with, where specifically provided for herein, the concurrence of a
majority of the Directors then in office), in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board of Directors to any
liability to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
SECTION 32. GOVERNING LAW. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
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<PAGE>
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: MMI COMPANIES, INC.
/s/ George S. Rosic /s/ Paul M. Orzech
By ___________________________ By ________________________________
Name: George S. Rosic Name: Paul M. Orzech
Title: Ass't. Secretary Title: Executive Vice President
and Chief Financial Officer
Attest: CHASEMELLON SHAREHOLDER
SERVICES L.L.C.
/s/ Martin J. Curran /s/ Michael Legregin
By ___________________________ By _______________________________
Name: Martin J. Curran Name: Michael Legregin
Title: Vice President Title: Assistant Vice President
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<PAGE>
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND OTHER RIGHTS
OF THE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
MMI COMPANIES, INC.
________________________
Pursuant to Section 151(g) of the
Delaware General Corporation Law
MMI Companies, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies that, pursuant to
the authority conferred upon the Board of Directors of the Corporation (the
"Board of Directors") by the Restated Certificate of Incorporation of the
Corporation and in accordance with Section 151(g) of the Delaware General
Corporation Law, the Board of Directors at a meeting held on June 14, 1997 duly
adopted the following resolution, which resolution remains in full force and
effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
and in accordance with the provisions of the Corporation's Restated Certificate
of Incorporation, there is hereby created and authorized a series of Preferred
Stock of the Corporation, and the designation and amount thereof and the powers,
preferences and rights of the shares of such series, and the qualification,
limitations or restrictions thereof are as follows:
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
- ---------------------------------------------
SECTION 1. DESIGNATION AND AMOUNT. There shall be a series of Preferred
----------------------
Stock of the Corporation which shall be designated as "Series B Junior
Participating Preferred Stock," par value $20.00 per share (hereinafter called
"Series B Preferred Stock"), and the number of shares constituting such series
shall be 300,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors and by the filing of a certificate pursuant
to the provisions of the General Corporation Law of the State of Delaware
stating that such increase or reduction has been so authorized.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series B Preferred Stock with
A-1
<PAGE>
respect to dividends, the holders of shares of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash to
holders of record on the last business day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series B Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non cash dividends
or other distributions other than a dividend payable in shares of Common Stock
(hereinafter defined) or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock, par value
$0.10 per share, of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Stock. In the event the Corporation
shall at any time following June 14, 1997 (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying each such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the Series
B Preferred Stock as provided in paragraph (A) above at the time it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).
(C) No dividend or distribution (other than a dividend payable in shares
of Common Stock) shall be paid or payable to the holders of shares of Common
Stock unless, prior thereto, all accrued but unpaid dividends to the date of
such dividend or distribution shall have been paid to the holders of shares of
Series B Preferred Stock.
(D) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series B Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among
A-2
<PAGE>
all such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series B Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than thirty (30) days prior to the date fixed
for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series B Preferred
-------------
Stock shall have the following voting rights:
(A) Except as otherwise required by law and subject to the provisions for
adjustment hereinafter set forth, each share of Series B Preferred Stock shall
entitle the holder thereof to 100 votes on each matter submitted to a vote of
the stockholders of the Corporation at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of the
stockholders is solicited. In the event the Corporation shall at any time
following June 14, 1997 (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of shares, then
in each such case the number of votes per share to which holders of shares of
Series B Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common on Stock that were
outstanding immediately prior to such event. Except as otherwise provided herein
or by law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(B) (i) If at any time dividends on any Series B Preferred Stock shall
be in arrears in an amount equal to six (6) quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends, whether or not declared and whether or not consecutive,
for all previous quarterly dividend periods and for the current quarterly
dividend period on all shares of Series B Preferred Stock then outstanding shall
have been declared and paid or set apart for payment. During each default
period, all holders of Preferred Stock (including holders of the Series B
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series B Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(B) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
neither such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of ten percent (10%) in number
of shares of Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any meeting
at which the holders of Preferred Stock shall exercise
A-3
<PAGE>
such voting right initially during an existing default period, they shall have
the right, voting as a class, to elect Directors to fill such vacancies, if any,
in the Board of Directors as may then exist up to two (2) Directors or, if such
right is exercised at an annual meeting, to elect two (2) Directors. If the
number which may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have the right to make
such increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the Preferred
Stock shall have exercised their right to elect Directors in any default period
and during the continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series B Preferred Stock.
---- -----
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chief Executive Officer, the President, any Executive
Vice President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (B)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than twenty (20) days and not later than sixty (60) days
after such order or request or in default of the calling of such meeting within
sixty (60) days of such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less then
ten percent (10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (B)(iii), no such special
meeting shall be called during the period within sixty (60) days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(B)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this paragraph
(B) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any
A-4
<PAGE>
Directors elected by the holders of Preferred Stock as a class shall terminate,
and (z) the number of Directors shall be such number as may be provided for in
the certificate of incorporation or by-laws irrespective of any increase made
pursuant to the provisions of paragraph (B)(ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by law or in
the certificate of incorporation or by-laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series B Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, and whether or not consecutive, on shares of Series B Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except dividends paid ratably on the Series B Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series B Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual
A-5
<PAGE>
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series B Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preferred Stock unless, prior thereto, the holders
of shares of Series B Preferred Stock shall have received $20.00 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series B Liquidation
Preference"). Following the payment of the full amount of the Series B
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series B Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series B
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
Series B Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series B Preferred Stock and Common Stock, respectively,
holders of Series B Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio, on a per share basis, of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series B Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series B Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
A-6
<PAGE>
(C) In the event the Corporation shall at any time following June 14, 1997
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock (by reclassification or
otherwise), or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock (by reclassification or otherwise), or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series B Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 8. REDEMPTION. The shares of a Series B Preferred Stock shall
----------
not be redeemable by the Corporation. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares of stock
to the extent permitted by law.
SECTION 9. RANKING. As to distributions upon any liquidation,
-------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series B Preferred Stock shall rank senior to the Common Stock of the
Corporation, par value $0.10 per share, but shall rank junior to all other
series of the Corporation's preferred stock (whether with or without par value),
unless the terms of any such series shall provide otherwise.
SECTION 10. AMENDMENT. The Restated Certificate of Incorporation of the
---------
Corporation or any certificate, amendment or supplement thereto (including any
Certificate of Designation or any similar document relating to any series of
preferred stock) shall not be amended, altered or repealed in any manner which
would adversely change the powers, preferences or rights of the Series B
Preferred Stock without the affirmative vote or consent of the holders of a
majority of the outstanding shares of such series, voting separately as a
series. For purposes of this Section 10, creation of additional
classes of preferred stock ranking senior
A-7
<PAGE>
to or equal to the Series B Preferred Stock shall not be deemed to be a change
adversely altering the preferences and special rights of the Series B Preferred
Stock.
SECTION 11. FRACTIONAL SHARES. Series B Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock.
IN WITNESS WHEREOF, MMI Companies, Inc. has caused this Certificate to be
signed by George S. Rosic, its Assistant Secretary, this ____ day of _________,
1997.
MMI COMPANIES, INC.
BY:_________________________________
George S. Rosic
Assistant Secretary
A-8
<PAGE>
EXHIBIT B
---------
[Form of Rights Certificate]
Certificate No. R- ____________ Rights
NOT EXERCISABLE AFTER JUNE 30, 2007 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]/1/
Rights Certificate
MMI COMPANIES, INC.
This certifies that ___________________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 14, 1997 (the "Rights Agreement"), between MMI
Companies, Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services L.L.C. (the "Rights Agent"), to purchase from the Company
at any time prior to 5:00 PM (Chicago time) on June 30, 2007 at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a full share of Series B Junior Participating
Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of
$75 per one one-hundredth of a share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of June 30, 1997, based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
_______________________
/1/ The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE>
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This 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 made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
A copy of the Rights Agreement is on file at the principal office of the Company
and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or 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 Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or 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 redeemed by the Company at its option at a redemption
price of $0.01 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date, and (ii) the
Final Expiration Date.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be
B-2
<PAGE>
evidenced by depository receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or 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 officer of the Company and
its corporate seal.
MMI COMPANIES, INC.
By:__________________________________
Name:
Title:
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES L.L.C., as Rights Agent
By:_______________________________
Name:
Title:
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<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED______________________________________________________________
hereby sells, assigns and transfers unto________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated:________________
_____________________________________________
Signature
Medallion Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or
<PAGE>
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:_____________
_____________________________________
Signature
Medallion Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
2
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: MMI COMPANIES, INC.
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:______________
________________________________________
Signature
Medallion Signature Guaranteed:
<PAGE>
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
2
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being exercised, sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:_____________
_____________________________________
Signature
Medallion Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
NOTICE
------
The signature to the foregoing Election to Purchase must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
3
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On June 14, 1997, the Board of Directors of MMI Companies, Inc. (the
"Company") adopted a Shareholder Rights Plan, and declared a dividend
distribution of one Right for each outstanding share of Common Stock, payable to
stockholders of record at the close of business on June 30, 1997 (the "Record
Date"). One Right will be attached to each share of Common Stock and each Right
will entitle the registered holder to purchase from the Company a unit
consisting of one one-hundredth of a share (a "Unit") of Series B Junior
Participating Preferred Stock, par value $20 per share (the "Preferred Stock")
at a purchase price of $75 per Unit (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and ChaseMellon
Shareholder Services L.L.C., 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. Any shares issued by the Company following the Record Date will
bear a legend indicating that the Rights are attached to such Common Stock
certificates. Shares issued and owned by stockholders prior to the Record Date
will be deemed to have Rights attached. STOCKHOLDERS SHOULD NOT SURRENDER SUCH
CERTIFICATES FOR LEGENDING. The Rights will separate from the Common Stock upon
the earlier of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, Beneficial Ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) 10
business days (or such later date as the Board of Directors may determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an Acquiring Person (a person or group of
affiliated or associated persons who has acquired Beneficial Ownership of 15% or
more of the outstanding Common Stock of the Company). The earlier of (i) and
(ii) is known as the "Distribution Date." Until the Distribution 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 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 certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 30, 2007, unless earlier redeemed or extended
by the Company.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
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<PAGE>
In the event that any person becomes an Acquiring Person, 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 the Company)
having a value equal to two times the Purchase Price. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
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. However, Rights are not exercisable following the occurrence of any of the
Flip-in Events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event that following the Stock Acquisition Date, (i) the Company
engages in a merger or business combination transaction in which the Company is
not the surviving corporation; (ii) the Company engages in a merger or business
combination transaction in which the Company is the surviving corporation and
the Common Stock of the Company is changed or exchanged; or (iii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise of the Right, common stock
of the acquiring company having a value equal to two times the Purchase Price.
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the Current Market Price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock at the close
of the last trading date prior to the date of exercise.
Generally, at any time until ten days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $0.01
per Right. 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 $0.01 redemption price. The foregoing
notwithstanding, the Rights generally may not be redeemed for one hundred eighty
(180) days following a change in a majority of the Board as a result of a proxy
contest or consent solicitation.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the
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<PAGE>
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment shall be made at such time as
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the Rights are not redeemable.
Only Board action by a majority of Continuing Directors (a member of the
Board on June 14, 1997 and certain successors), as defined in the Rights
Agreement, can amend or supplement the Rights Agreement or exclude from the
definition of Acquiring Person any person receiving Common Stock from the
Company in a transaction approved in advance by such Board action.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8 A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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