SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------
FORM 10-Q
---------
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 25, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
COMMISSION FILE NUMBER 0-314
Pulaski Furniture Corporation
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
54-0594965
(IRS employer identification number)
P.O. Box 1371, Pulaski, Virginia
(Address of principal executive offices)
24301
(Zip Code)
540-980-7330
(Registrant's telephone number)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
2,813,324 shares of common stock outstanding as of February 27, 1998
<PAGE>
Pulaski Furniture Corporation
Index
PART I: Financial Statements
Consolidated Condensed Balance Sheets as of
January 25, 1998 and November 2, 1997 . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Income
Three 4-week periods ended January 25, 1998
and January 26, 1997 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three 4-week periods ended January 25, 1998
and January 26, 1997 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . 5
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income . . . . . . . . . . . 6
PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Balance Sheets
(in thousands)
January 25, November 2,
1998 1997
ASSETS ---------- ----------
Current assets:
Cash and cash equivalents $ 6,585 $ 2,702
Accounts receivable, net 24,966 36,726
---------- ----------
31,551 39,428
Inventories:
Raw materials 13,328 13,270
Work-in-process 6,751 5,220
Finished goods 24,014 27,612
---------- ----------
44,093 46,102
Less LIFO reserve (14,758) (14,758)
---------- ----------
29,335 31,344
Prepaid expenses 462 874
Recoverable income taxes 0 1,474
Deferred income taxes 1,277 1,277
---------- -----------
Total current assets 62,625 74,397
Property, plant and equipment, net 34,641 35,248
Cash surrender value of life insurance 1,223 1,223
Other 11 11
---------- -----------
Total assets $ 98,500 $ 110,879
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses:
Accounts payable $ 5,860 $ 6,222
Wages and commissions 1,084 2,902
Taxes withheld from employees 462 400
Other accrued liabilities 1,069 1,889
---------- ----------
8,475 11,413
Notes payable 2,000 12,000
Federal and state income taxes 103 0
Current portion of long-term debt 2,000 2,000
---------- ----------
Total current liabilities 12,578 25,413
Long-term notes payable 25,338 25,774
Deferred income taxes 3,720 3,742
Deferred compensation 2,628 2,681
Shareholders' equity
Common stock 5,408 4,989
Retained earnings 49,001 48,479
Unamortized restricted stock (173) (199)
---------- ----------
Total shareholders' equity 54,236 53,269
Total liabilities and shareholders' equity $ 98,500 $ 110,879
========== ==========
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Statements of Income
(in thousands, except for per share data)
Three 4-week periods ended
Jan. 25, Jan. 26, Incr
1998 1997 (Decr) %
--------- --------- -------- ----
Net sales $ 36,310 $ 35,422 $ 888 2.5 %
Costs and expenses
Cost of sales 29,215 28,487 728 2.6
Selling & administrative 5,098 5,315 (217) (4.1)
---------- ---------- --------
Operating income 1,997 1,620 377 23.3
Other income and expenses
Interest expense 446 585 (139) (23.8)
Interest income (4) (4) 0 0.0
---------- ---------- --------
Total 442 581 (139) (23.9)
Income before income taxes 1,555 1,039 516 49.7
Provision for taxes on income 555 375 180 48.0
---------- ---------- --------
Net income $ 1,000 $ 664 $ 336 50.6
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,815,724 2,820,855
Diluted 2,824,204 2,828,625
Earnings per share:
Basic $0.36 $0.24
Diluted $0.35 $0.23
Cash dividends per share: $0.17 $0.17
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Statements of Cash Flows
Three 4-week periods ended
January 25, January 26,
1998 1997
------------ ------------
OPERATING ACTIVITIES
Net income $ 1,000,107 $ 663,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation/amortization 1,152,624 1,229,252
Provision for deferred income taxes (22,500) (22,500)
Provision for deferred compensation (52,582) (6,692)
Changes in operating assets and liabilities:
Decrease in trade receivables 11,760,138 11,646,045
(Increase) decrease in inventories 2,008,859 (1,556,105)
(Increase) decrease in prepaid expenses 412,946 (221,808)
Decrease in recoverable income taxes 1,473,577 0
Decrease in accounts payable and
accrued expenses (2,937,763) (2,656,558)
Increase (decrease) in federal and state
income taxes payable 102,361 (419,044)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,897,767 8,656,431
INVESTING ACTIVITIES
Purchase of property, plant and equipment (520,020) (848,351)
Increase in cash surrender value 0 (7,095)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (520,020) (855,446)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 514,930 469,210
Repurchase of common stock (96,250) (400,000)
Payment of dividends (477,925) (482,383)
Decrease in notes payable (10,000,000) (9,000,000)
Payments on long-term debt (435,979) (508,458)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (10,495,224) (9,921,631)
------------ ------------
Increase (decrease) in cash and cash equivalents 3,882,523 (2,120,646)
Cash and cash equivalents at beginning of period 2,702,339 2,396,850
------------ ------------
Cash and cash equivalents at end of period $ 6,584,862 $ 276,204
============ ============
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Notes to Consolidated Condensed Financial Statements
See notes to financial statements included in the Corporation's 10-K for the
year ended November 2, 1997, for information concerning accounting policies,
long-term debt, stock options and other financial matters. There have been
no material changes in financial matters since November 2, 1997.
In the opinion of the Corporation, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial position as of
January 25, 1998 and November 2, 1997, and the results of operations and
cash flows for the three 4-week periods ended January 25, 1998 and January
26, 1997.
The results of operations for the three 4-week periods ended January 25,
1998 and January 26, 1997 are not necessarily indicative of the results to
be expected for the full year. See Management's Discussion and Analysis for
a detailed discussion on the cyclical nature of the Corporation's operating
results.
In 1997, the Financial Accounting Standards Board issued Statement of Finan-
cial Accounting Standards No. 128, "Earnings per Share." Statement 128 re-
placed the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
The following table sets forth the computation of earnings per share:
Three 4-week periods ended
January 25, January 26,
1998 1997
------------ ------------
Numerator:
Net income $ 1,000,107 $ 663,841
Denominator:
Denominator for basic earnings per
share - weighted average shares 2,815,724 2,820,855
Effect of dilutive securities:
Stock options 4,800 3,421
Stock purchase plan 3,680 4,349
Denominator for diluted earnings per
share - adjusted weighted average shares 2,824,204 2,828,625
Basic earnings per share $0.36 $0.24
Diluted earnings per share $0.35 $0.23
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income
Comparison of First Quarter 1998 to First Quarter 1997 (See page 3 for
dollar and percent changes.)
- ----------------------------------------------------------------------------
The stronger retail environment in the first quarter of 1998 caused an incr-
ease in orders throughout the period and was the primary reason for the sales
increase compared with the 1997 quarter. The 1997 quarter included sales of
two divisions subsequently closed. The increase in net income was due primar-
ily to the sales increase, lower administrative and interest expense, and the
elimination of the two unprofitable divisions.
Historically, the quarterly results of the Corporation have reflected a cyc-
lical pattern, as indicated below:
QTR 1 QTR 2 QTR 3 QTR 4
4-year average of net sales volume 22.4% 22.7% 18.3% 36.6%
This pattern reveals that the Corporation's first quarter, ending in January,
has accounted for approximately 22% of net sales volume. The second quarter,
ending in April, is roughly equivalent in sales volume to the first quarter,
while the third quarter, ending in July, shows a drop in volume to 18%. The
remainder, or 37% of sales volume, is recorded in the fourth quarter, which
comprises four 4-week reporting periods and which also includes the strongest
selling season for certain product lines. However, due to a number of risks
and uncertainties beyond the Corporation's control, including economic condi-
tions and consumer confidence, historical trends should not be viewed as an
accurate predictor of future results. The Corporation believes the results
of the first quarter ended January 25, 1998, are reasonable in relation to
the historical pattern, considering the retail environment for household
furniture.
The Corporation recognizes that the year 2000 presents many challenges for
information systems. In light of this recognition, management has enacted a
strategic business plan to ensure the needs of the year 2000 are met and that
the costs of preparing for this challenge are both understood and manageable.
Based on recent assessments, the Corporation has determined that it will be
required to modify or replace significant portions of its software so that
its computer systems will properly reflect dates beyond December 31, 1999. If
such modifications are not made, or are not completed timely, the Year 2000
Issue could have a material impact on the operations of the Corporation. The
Corporation expects to complete the modifications timely.
The Corporation will use both internal and external resources to reprogram,
or replace, and test the software for the Year 2000 modifications. The Corp-
oration is funding the Year 2000 project with cash generated from operations.
The project will be expensed or capitalized as appropriate over the next two
years, and is not expected to have a material effect on the results of oper-
ations.
Formal communications with all significant suppliers, customers and financial
service organizations of the Corporation is currently underway to determine
the extent to which the Corporation might be made vulnerable by those third
parties' failure to remediate their own Year 2000 Issue. The Corporation has
determined that it has no exposure to contingencies related to the Year 2000
for the products already sold.
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (cont.)
Capital Resources and Liquidity
- --------------------------------
Working capital provided by operations was $2,100,000 for the quarter ended
January 25, 1998 compared to $1,864,000 for the quarter ended January 26,
1997. Net working capital increased by $1,063,000 during the first quarter
of 1998 compared with a decrease of $2,913,000 in the first quarter of 1997.
During the first quarter of 1998, the Corporation's average amount of
outstanding indebtedness for borrowed money was $33,969,871. The weighted
average rate of interest on such indebtedness was approximately 5.58% per
annum.
<PAGE>
Pulaski Furniture Corporation
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On February 13, 1998, the Corporation held its annual meeting of share-
holders, at which the following business was transacted:
O. Kenton McCartney, III, was elected to serve as a Class I director
of the Corporation for a term of two years.
Robert C. Greening, Jr., and John G. Wampler were elected to serve as
Class II directors of the Corporation, each for a term of three years.
The votes for the election of the Class I directors and for the approval
of the resolution were as follows:
FOR AGAINST ABSTAIN
---------- ---------- ----------
Mr. McCartney 2,314,436 0 5,091
Mr. Greening 2,314,586 0 4,941
Mr. Wampler 2,314,586 0 4,941
The terms of the following directors continued beyond the 1998 annual
meeting: Bernard C. Wampler, Harry H. Warner, Harry J.G. van Beek, and
Hugh V. White, Jr.
Item 5. Other Information
All other information called for by other items of Part II of the Form 10-Q
is either inapplicable or the response to the items would be negative.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 Amended and Restated Rights Agreement between Pulaski
Furniture Corporation and First Union National Bank,
dated as of December 15, 1997. *
27 Financial Data Schedule *
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended January 25, 1998.
* Filed herewith.
<PAGE>
Pulaski Furniture Corporation
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PULASKI FURNITURE CORPORATION
Date: February 27, 1998 /s/ John G. Wampler
---------------------------------------
John G. Wampler
President and Chief Executive Officer
/s/ Jason A. Gibbs
---------------------------------------
Jason A. Gibbs
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
Pulaski Furniture Corporation
Exhibit Index
Exhibit
Number Description
4 Amended and Restated Rights Agreement between Pulaski Furn-
iture Corporation and First Union National Bank, dated as of
December 15, 1997.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1998
<PERIOD-END> JAN-25-1998
<CASH> 6585
<SECURITIES> 0
<RECEIVABLES> 24966
<ALLOWANCES> 0
<INVENTORY> 29335
<CURRENT-ASSETS> 62625
<PP&E> 90248
<DEPRECIATION> 55607
<TOTAL-ASSETS> 98500
<CURRENT-LIABILITIES> 12578
<BONDS> 0
0
0
<COMMON> 5408
<OTHER-SE> 48828
<TOTAL-LIABILITY-AND-EQUITY> 98500
<SALES> 36310
<TOTAL-REVENUES> 36310
<CGS> 29215
<TOTAL-COSTS> 34313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 446
<INCOME-PRETAX> 1555
<INCOME-TAX> 555
<INCOME-CONTINUING> 1000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1000
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
- --------------------------------------------------------------------------------
PULASKI FURNITURE CORPORATION
and
FIRST UNION NATIONAL BANK
Rights Agent
---------------
Amended and Restated
Rights Agreement
Dated as of December 15, 1997
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Certain Definitions......................................................... 1
Section 2. Appointment of Rights Agent................................................. 9
Section 3. Issue of Rights and Rights Certificates..................................... 10
Section 4. Form of Rights Certificates................................................. 13
Section 5. Countersignature and Registration........................................... 15
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates........................................................ 16
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
Restriction on Transfer of Rights................................... 17
Section 8. Cancellation and Destruction of Rights Certificates......................... 21
Section 9. Reservation and Availability of Preferred Stock............................. 22
Section 10. Preferred Stock Record Date................................................ 24
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.................................................... 25
Section 12. Certificates of Adjusted Purchase Price or Number of Shares................ 40
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power............................................................... 40
Section 14. Fractional Rights and Fractional Shares.................................... 44
Section 15. Rights of Action........................................................... 46
Section 16. Agreement of Rights Holders................................................ 47
Section 17. Rights Certificate Holder Not Deemed a Shareholder......................... 49
-i-
<PAGE>
Section 18. Concerning the Rights Agent................................................ 49
Section 19. Merger or Consolidation or Change of Name of Rights Agent.................. 50
Section 20. Duties of Rights Agent..................................................... 52
Section 21. Change of Rights Agent..................................................... 56
Section 22. Issuance of New Rights Certificates........................................ 58
Section 23. Redemption and Termination................................................. 58
Section 24. Exchange................................................................... 61
Section 25. Notice of Certain Events................................................... 63
Section 26. Notices.................................................................... 65
Section 27. Supplements and Amendments................................................. 66
Section 28. Successors................................................................. 67
Section 29. Determinations and Actions by the Board of Directors, etc.................. 67
Section 30. Benefits of this Agreement................................................. 68
Section 31. Severability............................................................... 69
Section 32. Governing Law.............................................................. 69
Section 33. Counterparts............................................................... 70
Section 34. Descriptive Headings....................................................... 70
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
This Agreement, dated as of December 15, 1997 (the "Agreement"),
between PULASKI FURNITURE CORPORATION, a Virginia corporation (the "Company"),
and FIRST UNION NATIONAL BANK, a national banking corporation (the "Rights
Agent"), provides as follows:
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend distribution of one Right (as hereinafter defined) for each
outstanding share of Common Stock of the Company to shareholders of record at
the Close of Business (as hereafter defined) on the Record Date (as hereinafter
defined) and has authorized the issuance of one Right (as such number may
hereinafter be adjusted as provided herein) for each share of Common Stock that
shall be issued between the Record Date and the earliest of the Distribution
Date, the Redemption Date or the Expiration Date (as such terms are hereinafter
defined) unless the Board of Directors provides to the contrary before or at the
time of issuance of any such Common Stock, each Right initially representing the
right to purchase one Unit of Preferred Stock, (as hereinafter defined), and
being in the form of the Rights Certificate attached hereto as Exhibit A, upon
the terms and subject to the conditions hereof (the "Rights");
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:
<PAGE>
(a) "Acquiring Person" shall mean any Person who or which,
alone or together with all Affiliates and Associates of such Person, shall at
any time be the Beneficial Owner of either or both of (i) 15% or more of the
shares of Common Stock then outstanding or (ii) 15% or more of the Rights then
outstanding, but shall not include (a) 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 or, (b) any such Person
who has become and is such a Beneficial Owner solely because (1) of a reduction
in the aggregate number of shares of Common Stock outstanding due to a
repurchase of shares of Common Stock by the Company since the last date on which
such Person acquired Beneficial Ownership of any shares of Common Stock or (2)
it acquired such Beneficial Ownership of in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to equal or exceed 15%
of the shares of Common Stock then outstanding and such Person relied in good
faith in computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company that are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding clause (b)(2) of the preceding sentence, if any
Person that is not an Acquiring Person due to such clause (b)(2) does not reduce
its percentage of Beneficial Ownership of shares of Common Stock to less than
15% by the Close of Business on the fifth Business Day after notice from the
Company (the date of notice being the first day) that such Person's Beneficial
Ownership of shares of Common Stock so equals or exceeds 15%, such Person shall,
at the end of such five Business Day period, become an Acquiring Person (and
such clause (b)(2) shall no longer apply to such Person). For purposes of this
definition,
2
<PAGE>
the determination whether any Person acted in "good Faith" shall be conclusively
determined by the Board of Directors of the Company, acting by a vote of those
directors of the Company whose approval would be required to redeem the Rights
under Section 23.
(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 Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's
Affiliates or Associates is deemed to "beneficially own" within the
meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act;
(ii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed to be
the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or
3
<PAGE>
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 the Rights.
(iii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
vote, 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 (iii) 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
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act,
and (B) the beneficial ownership of such security is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iv) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to
subparagraph (iii) of this paragraph (c)) or disposing of any voting
securities of the Company; provided, however, that notwithstanding any
provision of this Section 1(c), any Person engaged in business
4
<PAGE>
as an underwriter of securities who acquires any securities of the
Company through such Person's participation in good faith in a firm
commitment underwriting registered under the Securities Act of 1933, as
amended (the "Act"), shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," such securities until the expiration of 40 days
after the date of acquisition; and provided, further, that in no case
shall an officer or director of the Company be deemed (x) the
beneficial owner of any securities beneficially owned by another
officer or director of the Company solely by reason of actions
undertaken by such persons in their capacity as officers or directors
of the Company; or (y) the beneficial owner of securities held of
record by the trustee of any employee benefit plan of the Company or
any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or
director, by reason of any influence that such officer or director may
have over the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which national banking institutions in the Commonwealth of
Virginia or the State of North Carolina 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., Pulaski, Virginia time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Pulaski, Virginia time, on the
next succeeding Business Day.
5
<PAGE>
(f) "Common Stock" shall mean the common stock of the Company,
except that "Common Stock" when used with reference to any Person other than the
Company, if such Person is a corporation, shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other equity
interest in such Person having power to control or direct the management of such
Person, or any shares of capital stock or other equity interests into which the
foregoing shall be reclassified or changed.
(g) "Continuing Director" shall mean any member of the Board
of Directors of the Company, while a member of the Board, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
(i) who is a member of the Board on the date of this Agreement or (ii) whose
subsequent nomination for election or election to the Board was recommended or
approved by a majority of the Continuing Directors serving at the time of such
nomination or election.
(h) "Distribution Date" shall mean the earlier of (i) the
close of business on the tenth day after the Stock Acquisition Date (as
hereinafter defined) or (ii) the close of business on the tenth business day
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
6
<PAGE>
Act if, upon consummation thereof, such Person would be an Acquiring Person
(irrespective of whether any shares were actually purchased pursuant to any such
offer).
(i) "Equivalent Shares" shall mean shares of Preferred Stock
(as hereinafter defined) and any other class or series of capital stock of the
Company that is entitled to participate in dividends and other distributions,
including distributions upon the liquidation, dissolution or winding up of the
Company, on a proportional basis with the Common Stock. In calculating the
number of any class or series of Equivalent Shares for purposes of Section 11
hereof, the number of shares, or fractions of a share, of such class or series
of capital stock that is entitled to the same dividend or distribution as a
whole share of Common Stock shall be deemed to be one share.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date of this Agreement, unless a different
date is otherwise specifically provided herein.
(k) "Exchange Date" shall mean the date on which the Board of
Directors authorizes the exchange of Rights for shares of Common Stock pursuant
to Section 24 hereof.
(l) "Expiration Date" shall mean the earliest of (i) the close
of business on the Final Expiration Date, or (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof, or (iii) the Exchange Date.
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(m) "Final Expiration Date" shall mean December 15, 2007.
(n) "Person" shall mean any individual, firm, corporation,
partnership or other entity and any particular Person shall include any "group"
acting as described in Section 13(d)(3) of the Exchange Act.
(o) "Preferred Stock" shall mean shares of Series A Cumulative
Preferred Stock, without par value, of the Company.
(p) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof, as adjusted in accordance with this Agreement and as in
effect from time to time.
(q) "Record Date" shall mean the close of business on December
19, 1997.
(r) "Rights" shall mean the rights to purchase Preferred Stock
(or other securities) as provided in this Agreement and "Rights Certificate"
shall have the meaning set forth in Section 3(a) hereof.
(s) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
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(t) "Section 13 Event" shall mean any event described in
clause (w), (x), (y) or (z) of Section 13(a) hereof.
(u) "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) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(v) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect a majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(w) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
(x) "Unit" shall mean one one-hundredth of a share of
Preferred Stock.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be holders of Common Stock) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such
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appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Rights and Rights Certificates.
(a) Until the Distribution Date, (x) the Rights shall be
evidenced (subject to the provisions of paragraphs (b) and (c) of this Section
3) 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 shall be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). Subject
to the provisions of Section 7(e) hereof, as soon as practicable after the
Company has notified the Rights Agent of the occurrence of a Distribution Date,
the Rights Agent shall send by first-class, insured, postage prepaid mail, to
each such record holder of shares 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 A 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(n) 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
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of any fractional Rights. As of and after the Distribution Date, the Rights
shall be evidenced solely by such Rights Certificates.
(b) A Summary of Rights, in substantially the form attached
hereto as Exhibit B (the "Summary of Rights"), shall be sent by the Company by
first-class, postage prepaid mail, to each record holder of the Common Stock on
the Record Date, at the address of each such holder shown on the records of the
Company. Until the Distribution Date, the Rights shall be evidenced by such
certificates evidencing 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, the transfer
of any certificates evidencing shares of Common Stock in respect of which Rights
have been issued shall also constitute, subject to the provisions of Section
7(e) hereof, the transfer of the Rights associated with such shares of Common
Stock.
(c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance (including pursuant to the exercise of rights
under the Company's benefit plans) of any shares of Common Stock specifies to
the contrary, Rights shall be issued in respect of all shares of Common Stock
that are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing shares of
Common Stock outstanding prior to the Record Date that are issued upon transfer
or exchange of such Common Stock, shall also be deemed to be certificates for
Rights, and shall bear the following legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the Rights
Agreement between Pulaski
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Furniture Corporation (the "Company") and First Union National
Bank (the "Rights Agent") dated as of December 15, 1997 (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 will 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 that are owned or that were previously owned by a
Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate of an Acquiring Person 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, subject to the provisions of
Section 7(e) hereof, the transfer of the Rights associated with the Common Stock
represented by such certificates.
In the event that the Company purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such shares of Common Stock shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the shares of Common Stock that are no longer outstanding.
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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 A 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 Distribution Date, and on their face shall entitle the holders
thereof to purchase such number of Units of Preferred Stock as shall be set
forth therein at the price set forth therein (such exercise price per unit,
being hereinafter referred to as the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any 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
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<PAGE>
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 that the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has 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) 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 an
Associate of an Acquiring Person. Accordingly, this
Rights Certificate and the Rights represented hereby
may become void in the circumstances specified in
Section 7(e) of the Rights Agreement.
The Company shall notify the Rights Agent, and, if such notification is given
orally, the Company shall confirm promptly the same in writing, at such time as
the Company has notice that any Person constitutes an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, and until such notice is received
by the Rights Agent the Rights Agent may conclusively presume for all purposes
that the foregoing legend need be imprinted only on Right Certificates
beneficially owned by Persons that the Company has previously identified to the
Rights Agent as constituting an Acquiring Person or an Affiliate or Associate of
an Acquiring Person and transferees of any such Persons.
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Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any 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 manually or by
facsimile by the Rights Agent and shall not be valid for any purpose unless so
countersigned. The Rights Certificates shall be countersigned by an authorized
signatory of the Rights Agent but it shall not be necessary for the same
signatory to countersign all of the Rights Certificates issued hereunder. 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 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 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
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<PAGE>
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, (other
than Rights Certificates that have become void pursuant to Section 7(e) hereof
or that have been exchanged pursuant to Section 24 hereof) entitling the
registered holder to purchase a like number of Units 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 entitle 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
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<PAGE>
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 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 from the holder of the Rights 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) Subject to Section 7(e) hereof, 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 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; Restriction on Transfer 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,
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without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(ii), Section 11(a)(iii), Section 13, Section 23(a), and
Section 24 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, except as otherwise provided in Section 11(a)(ii) hereof,
with payment of the aggregate Purchase Price with respect to the total number of
Units of Preferred Stock (or Common Stock or other securities or property, as
the case may be) as to which surrendered Rights are then exercisable, at or
prior to the Expiration Date.
(b) The Purchase Price for each Unit of Preferred Stock
pursuant to the exercise of a Right shall initially be $80 and shall be subject
to adjustment from time to time as provided in Section 11 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 Unit of Preferred Stock (or Common Stock, other
securities or property, 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 Units of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of Units of Preferred Stock to be purchased and the Company
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<PAGE>
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 Units of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of Units of Preferred Stock as are to be purchased (in
which case certificates for the Units of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary 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 depositary receipts, cause the same to be 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, 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 (including to zero) pursuant to Section
11(a)(iii) hereof) may 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 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.
(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
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<PAGE>
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
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer 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 the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure 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 any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or its Affiliates
or Associates, or any transferee thereof, hereunder.
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<PAGE>
(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 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.
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<PAGE>
Section 9. Reservation and Availability of Preferred 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 (or, following the occurrence of a Triggering Event, out of its
authorized and unissued Preferred Stock or other securities, as the case may
be), the number of shares of Preferred Stock (or such other securities) that,
except as provided in Section 11(a)(iii) hereof, will be sufficient from time to
time to permit the exercise in full of all outstanding Rights and all Rights
that are at the time issuable, in accordance with the provisions of this
Agreement.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, any 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.
(c) The Company shall use its best efforts (i) to 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)(ii) and (iii) hereof, or as soon as is required by law following
the Distribution Date, as the case may be, a registration statement under the
Act on an appropriate form, with respect to the securities purchasable upon
exercise of the Rights, (ii) to
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cause such registration statement to become effective as soon as practicable
after such filing, and (iii) to 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 Expiration Date. 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 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, and notify the Rights Agent, that the exercisability of
the Rights has been temporarily suspended. The Company shall also issue a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of Preferred Stock (or
other securities, as the case may be) delivered upon exercise of the Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly authorized, validly issued, fully paid
and nonassessable.
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<PAGE>
(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
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Preferred Stock (or other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax that may be payable in respect
of any transfer or delivery of Rights Certificates to a Person other than, or
the issuance or delivery of a number of shares of Preferred Stock (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 shares of
Preferred Stock (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 Units of Preferred Stock (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 Units of Preferred Stock (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
other securities, as the case may be) transfer books of the
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<PAGE>
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 such transfer books are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate as such shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive 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, and 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), the Purchase Price in effect
at the time of the record date for such dividend or of the effective
date of such
25
<PAGE>
subdivision, combination or reclassification, and the number and kind
of shares of Preferred Stock or the number and kind of shares of other
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 of shares of
Preferred Stock or the number and kind of shares of other capital
stock, as the case may be, that, 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 that
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) Subject to Section 23 and Section 24 hereof, in
the event any Person becomes an Acquiring Person, then, proper
provision shall be made by the Company so that each record holder of
each Right (except as provided in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof for the Purchase Price
in accordance with terms of this Agreement, such number of Units of
Preferred Stock (or, in lieu of Preferred Stock, at the option of the
Company and to the extent available, such number of shares of Common
Stock) as shall equal the result obtained by multiplying the Purchase
Price by a fraction, the numerator of which is the number of
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Units of Preferred Stock for which a Right is then exercisable and the
denominator of which is 50% of the current market price of a share of
Common Stock (determined pursuant to Section 11(d) hereof) on the date
of the first occurrence of a Section 11(a)(ii) Event (such result being
hereinafter referred to as the "Adjustment Shares").
(iii) To the extent that the number of shares of
Preferred Stock that are authorized by the Company's articles of
incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), and subject to such
limitations as are necessary to prevent a default under any agreement
for money borrowed as presently constituted to which the Company is a
party and subject to any limitations contained in Section 13.1-653 of
the Virginia Stock Corporation Act, the Company shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value"), over (2) the Purchase Price
(such excess being hereinafter referred to as the "Spread"), and (B)
with respect to each Right, make adequate provision to substitute for
such unavailable Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
other equity securities of the Company, (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing,
having, together with the Adjustment Shares issued upon exercise of
such Right, an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a
27
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nationally recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B)
above within 30 days following the first occurrence of a Section
11(a)(ii) Event, then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of
the Purchase Price, shares of preferred stock of the Company or Common
Stock (to the extent such securities are available) and then, if
necessary, cash, which securities and/or assets in the aggregate are
equal to the Spread. If the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional
shares of preferred stock of the Company or Common Stock could be
authorized for issuance upon exercise in full of the Rights, the 30 day
period set forth above may be extended to the extent necessary, but not
more than 90 days following the first occurrence of a Section 11(a)(ii)
Event, in order that the Company may seek shareholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been
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temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of the
Common Stock on the date of the first occurrence of a Section 11(a)(ii)
Event.
(b) If at any time after the date of this Agreement the
Company shall fix a record date for the issuance of rights, options or warrants
to all holders of Common Stock or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within 45 calendar days after such
record date) to subscribe for or to purchase Common Stock or Equivalent Shares
(or securities convertible into Common Stock or Equivalent Shares) at a price
per share (or having a conversion price per share, if a security convertible
into Common Stock or Equivalent Shares) less than the current market price of
such Common Stock or Equivalent Shares on such record date, then, in each such
case, each Right outstanding immediately prior to such record date shall
thereafter evidence the right to purchase, for the Purchase Price, that number
of Units of Preferred Stock or Equivalent Shares obtained by multiplying the
number of Units of Preferred Stock issuable upon exercise of a Right immediately
prior to such record date by a fraction, the numerator of which shall be the
total number of shares of Common Stock and Equivalent Shares (if any)
outstanding on such record date plus the number of additional shares of Common
Stock and Equivalent Shares (if any) to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible) and the denominator of which shall be the total number of shares of
Common Stock and Equivalent
29
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Shares (if any) outstanding on such record date plus the number of shares of
Common Stock or Equivalent Shares, as the case may be, that the aggregate
offering price of the total number of shares of Common Stock or Equivalent
Shares, as the case may be, 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. In case such subscription price may be paid in a
consideration, part or all of which shall be in a form other than cash, the
value of such consideration shall be 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. Common Stock and Equivalent Shares owned by or held
for the account of the Company or any Subsidiary 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, options or warrants are not so issued, each Right shall
be adjusted to evidence the right to receive that number of Units of Preferred
Stock that such Right would have entitled the holder to receive, for the
Purchase Price, if such record date had not been fixed.
(c) If at any time after the date of this Agreement the
Company shall fix a record date for the making of a distribution to all holders
of Common Stock or of any class or series of Equivalent Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of cash (other than a
regular quarterly cash dividend of the Company in compliance with Section
13.1-653 of the Virginia Stock Corporation Act), evidences of indebtedness,
assets, securities (other than Common Stock or any Equivalent Shares) or
subscription rights, options or warrants
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(excluding those referred to in Section 11(b) hereof), then, in each such case,
each Right outstanding immediately prior to such record date shall thereafter
evidence the right to purchase, for the Purchase Price, that number of Units of
Preferred Stock obtained by multiplying the number of Units of Preferred Stock
issuable upon exercise of a Right immediately prior to such record date by a
fraction, the numerator of which shall be the current market price of a share of
Common Stock or an Equivalent Share on the record date and the denominator of
which shall be the current market price of a share of Common Stock or an
Equivalent Share 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, evidences of indebtedness, assets or securities so to be distributed
or of such subscription rights, options or warrants applicable to a share of
Common Stock or an Equivalent Share, as the case may be. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, each Right shall be adjusted to evidence the
right to receive that number of Units of Preferred Stock that such Right would
have entitled the holder to receive, for the Purchase Price, 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 30
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section
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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 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 prior to the expiration of the requisite 30 Trading Day or ten Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current 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
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<PAGE>
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 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 in Section 11(d)(i) hereof
(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
33
<PAGE>
Common Stock and Preferred Stock occurring after the date of this Agreement)
multiplied by the current market price per share of the Common Stock. 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 number of Units of Preferred Stock for which a Right is
exercisable or in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent in such number of
shares or in the Purchase Price; provided, however, that any adjustments that by
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a Unit 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 years from the
date of the transaction that mandates such adjustment, or (ii) the Expiration
Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares
34
<PAGE>
of capital stock other than Preferred Stock, thereafter the number of such other
shares so receivable upon exercise of any Right and if required, 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 Section 11(a), (b), (c), (e), (g), (h), (i),
(k) and (l) hereof, 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 number or kind of shares purchasable upon exercise of
the Rights or to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the adjusted number of Units of
Preferred Stock or other securities 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 below in this Section 11(h), upon each adjustment of the Purchase Price
as a result of the calculations made in Section 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
Units of Preferred Stock obtained by (i) multiplying (x) the number of Units of
Preferred Stock covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment and (ii)
dividing the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price. On or after the date of any
adjustment of the Purchase Price, in lieu of any adjustment in the number
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<PAGE>
of Units of Preferred Stock or any other capital stock purchasable upon the
exercise of a Right, the Company may elect to adjust the number of Rights. Each
of the Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Units 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-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten 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(h), 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 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
36
<PAGE>
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.
(i) Irrespective of any adjustment or change in the Purchase
Price or the number of Units of Preferred Stock or the number and kind of other
securities issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
Unit, the number of Units and the other terms that were expressed in the initial
Rights Certificates issued hereunder.
(j) In any case in which this Section 11 shall require that an
adjustment 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 of the number of Units
of Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of Units of Preferred
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise before giving effect 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.
(k) 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
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<PAGE>
expressly required by this Section 11, as and to the extent that in its 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 that by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividend 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
shareholders.
(l) 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 that complies with Section
11(m) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction that complies with Section 11(m) hereof), (iii)
effect a statutory share exchange with any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), or (iv)
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(m) hereof), if at the time of or immediately after such
consolidation, merger, statutory share exchange or sale there are any rights,
warrants or other instruments or
38
<PAGE>
securities outstanding or agreements in effect that would substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights.
(m) 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.
(n) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Record 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 Common Stock, or (iii) combine the outstanding 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 of 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.
39
<PAGE>
Section 12. Certificates of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 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 or 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 Stock) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained, and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such a certificate.
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, (w) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(m) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (x)
any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) 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
40
<PAGE>
securities of any other Person or cash or any other property, (y) the Company
shall be a party to a statutory share exchange with any other Person (other than
a Subsidiary of the Company in a transaction that complies with Section 11(m)
hereof) after which the Company is a Subsidiary of any other Person, 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(m) hereof),
then, and in each such case, proper provision shall be made so that: (i) each
record 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 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 shares of Common
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
shares 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 (2) dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right for all purposes of this Agreement) by
50% of the current
41
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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; and (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 necessary to ensure 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 (w), (x) or (y) of the first sentence of Section 13(a) hereof,
the Person that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger, consolidation
or statutory share exchange, and if no securities are so issued, the
Person that is the other party to such merger, consolidation or
statutory share exchange; and
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<PAGE>
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a) hereof, 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-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, statutory share exchange, sale or transfer unless the Principal Party
shall have a sufficient number of authorized shares of its Common Stock that
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
43
<PAGE>
consolidation, merger, statutory share exchange 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 on an appropriate form 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 similarly
comply with applicable state securities laws; and
(ii) deliver to record holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or statutory share exchanges 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 that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a)
hereof.
Section 14. Fractional Rights and Fractional Shares.
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<PAGE>
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(n)
hereof, or to distribute Rights Certificates that 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
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<PAGE>
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.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions that are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates that evidence fractional shares of Preferred Stock
(other than in such integral multiples). In lieu of fractional shares of
Preferred Stock that are not in such integral multiples, 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 current market
price of a share of Preferred Stock (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Right 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
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 in respect of which Rights have
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been issued); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of such 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 such Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such 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:
(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
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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 Certificate or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company, subject to the last sentence of Section 7(e) hereof, 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.
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Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Units of Preferred Stock or
any other securities of the Company that 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 shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in 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 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. The Company also agrees to indemnify the Rights Agent, its directors,
officers, employees and agents, for, and to hold each of them harmless against,
any loss, liability, or expense incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent or other such indemnified
party, for anything done or omitted by the
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Rights Agent or such other indemnified party in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be fully 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 or the exercise or
performance of its duties hereunder 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, instruction, 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, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
The indemnity provided in this Section 18 shall survive the
expiration of the Rights and the termination of the Agreement.
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
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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 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.
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Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of 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 written advice or 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 written advice or 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, any Vice-Chairman, the President, any Vice President,
the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
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(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 any provision 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 provided for
in this Agreement 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 Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Preferred Stock will, when so issued, be duly authorized, validly 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
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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, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer, or for any delay
in acting while awaiting instructions. At any time the Rights Agent may apply to
the Company for written instructions with respect to any matter arising in
connection with the Rights Agent's duties and obligations arising under this
Agreement. Such application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent with respect to its
duties or obligations under this Agreement and the date on and/or after which
such action shall be taken and the Rights Agent shall not be liable for any
action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall be not less
than one Business Day after the Company receives such application, without the
Company's consent) unless, prior to taking or initiating any such action, the
Rights Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
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(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company.
(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, as long as the Rights Agent was not grossly
negligent 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 Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election
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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.
(l) The Rights Agent undertakes only the express duties and
obligations imposed on it by this Agreement and no implied duties or obligations
shall be read into this Agreement against the Rights Agent.
(m) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits).
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Preferred Stock or Common Stock, by registered or certified mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Preferred Stock or Common
Stock, by registered or certified mail, and 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 30 days after giving notice of such removal or
after
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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 any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of North Carolina or the Commonwealth of Virginia (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of North Carolina or the
Commonwealth of Virginia), in good standing, having a principal office in the
State of North Carolina or the Commonwealth of Virginia, that is authorized
under such laws to exercise corporate trust powers and is subject to supervision
or examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$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 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
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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, the Company may,
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 the issuance or sale of shares of Common Stock following the
Distribution Date.
Section 23. Redemption and Termination.
(a)(i) The Company may, at its option, at any time prior to
the earlier of (A) the close of business on the tenth day following the
Stock Acquisition Date, or (B) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights (which shall not
include any rights that have become void pursuant to Section 7(e)
hereof) at a redemption price of $.01 per Right, as it may be
appropriately adjusted by the Board of Directors of the Company to
reflect any stock split or combination, stock dividend or similar
transaction occurring after the date hereof (such redemption price
being
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hereinafter referred to as the "Redemption Price") and the Company may,
at its option, pay the Redemption Price either in shares of Common
Stock (based on the current market price (as determined pursuant to
Section 11(d) hereof) per share of the Common Stock at the time of
redemption) or cash; provided, however, that if the Board of Directors
of the Company authorizes redemption of the Rights in either of the
circumstances set forth in clauses (x) and (y) below, then there must
be Continuing Directors in office and such authorization shall require
the concurrence of a majority of such Continuing Directors: (x) such
authorization occurs on or after the date a Person becomes an Acquiring
Person, or (y) such authorization occurs on or after the date of a
change (resulting from a proxy solicitation) in a majority of the
directors in office at the commencement of such solicitation if any
Person who is a participant in such solicitation has stated (or, if
upon the commencement of such solicitation, a majority of the Board of
Directors of the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or may
consider taking, any action that would result in such Person becoming
an Acquiring Person or that would cause the occurrence of a Triggering
Event.
(ii) In addition, if there are Continuing Directors then in
office, the Board of Directors may redeem all but not less than all of
the then outstanding Rights at the Redemption Price with the
concurrence of a majority of such Continuing Directors, following the
occurrence of a Stock Acquisition Date and following the expiration of
the right of redemption hereunder, if either (A) (1) a Person who is an
Acquiring Person
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shall have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or a series of transactions not
directly or indirectly involving the Company or any of its
Subsidiaries, such that such Person is thereafter a Beneficial Owner of
less than 10% of the outstanding shares of Common Stock and (2) there
are no other Persons, immediately following the occurrence of the event
described in clause (1), who are Acquiring Persons, or (B) in
connection with the type of transaction specified in Section 13(a)
hereof in which all holders of Common Stock are treated alike and not
involving an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any other Person in which such Acquiring Person,
Affiliate or Associate has any interest, or any other Person acting
directly or indirectly on behalf of or in association with any such
Acquiring Person, Affiliate or Associate.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Triggering Event until
such time as the Company's right of redemption under clause (i) above is not
exercisable.
(b) Immediately upon the action of the Board of Directors of
the Company authorizing the redemption of the Rights pursuant to subsection (a)
of this Section 23 and without any further action and without any notice, the
right to exercise the Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors authorizing the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent
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and to the holders of such 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 that is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption shall state the method by which the payment of
the Redemption Price will be effected.
Section 24. Exchange.
(a) The Company may, at its option, by resolution of its Board
of Directors, at any time (including a time after any Person becomes an
Acquiring Person), exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become void pursuant to Section
7(e) hereof) for shares of 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 with respect to the Common Stock after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio"); provided, however, under the circumstances described in the
proviso to Section 23(a)(i) hereof, an Exchange shall be effective only if there
are Continuing Directors and shall require the concurrence of a majority of such
Continuing Directors.
(b) Immediately upon the action of the Board of Directors of
the Company authorizing the exchange of the Rights pursuant to subsection (a) of
this Section 24 and without
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any further action and without any notice, the right to exercise the Rights will
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 Rights held
by such holder multiplied by the Exchange Ratio. Promptly after the action of
the Board of Directors authorizing the exchange of the Rights, the Company shall
give notice of such exchange to the Rights Agent and to the holders of such
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 that is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected.
(c) In the event that there shall not be sufficient shares of
Common Stock authorized but unissued to permit the exchange in full of such
Rights in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional shares of Common Stock, the Company shall substitute, for each
share of Common Stock that would otherwise be issuable upon exchange of a Right,
a number of shares of other equity securities of the Company or fraction thereof
such that the current per share market price of one share of such other equity
securities multiplied by such number or fraction
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is equal to the current per share market price of one share of Common Stock as
of the date of issuance of such shares of such other equity securities or
fraction thereof.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates that evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid 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 subsection (d), 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 Section 11(d) hereof) for the
Trading Day immediately prior to the Exchange Date.
Section 25. Notice of Certain Events.
(a) 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 of the Company in
compliance with Section 13.1-653 of the Virginia Stock Corporation Act), 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
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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 that
complies with Section 11(m) hereof), or to effect a statutory share exchange
with any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) 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 a Subsidiary of the Company in one or
more transactions each of which complies with Section 11(m) 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, statutory share exchange, 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 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 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.
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(b) In case any Section 11(a)(ii) Event shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer, if appropriate, not only to
Preferred Stock but also to Common Stock or other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any 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:
Pulaski Furniture Corporation
P.O. Box 1371
Pulaski, Virginia 24301
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
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:
First Union National Bank
Shareholder Services Group
1525 West W. T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
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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
and subject to the penultimate sentence of this Section 27, the Company may, and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, 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 that may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder (which lengthening or
shortening, under the circumstances described in the proviso to Section 23(a)(i)
hereof, shall be effective only if there are Continuing Directors and shall
require the concurrence of a majority of such Continuing Directors), or (iv) to
change or supplement the provisions hereunder in any manner that the Company may
deem necessary or desirable and that shall not adversely affect the interests of
the holders of Rights Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, that this Agreement
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time
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period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless 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 that 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. No supplement or amendment shall be
made that changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of shares of Common Stock for which a Right is exercisable;
provided, however, that at any time prior to the Distribution Date, the Board of
Directors of the Company may amend this Agreement to increase the Purchase Price
or extend the Final Expiration Date. 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, no supplement or amendment that changes the rights or
duties of the Rights Agent under this Agreement shall be effective without the
consent of the Rights Agent.
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
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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
General Rules and Regulations under the Exchange Act. The Board of Directors of
the Company (and, where specifically provided for herein, the Continuing
Directors) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board, or the Company (or, where specifically provided for herein, the
Continuing Directors), 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 (or, where specifically provided
for herein, by the Continuing Directors) 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 or the Continuing
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, the
registered holders from time to time 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; and
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this Agreement shall be for the sole and exclusive benefit of the Company and
the Persons specified above.
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 Commonwealth of Virginia and for all purposes shall be governed by
and construed in accordance with the laws of such Commonwealth applicable to
contracts made and to be performed entirely within such Commonwealth.
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Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
PULASKI FURNITURE CORPORATION
By /s/ JOHN G. WAMPLER
---------------------------------
John G. Wampler
President
FIRST UNION NATIONAL BANK
By /s/ LYNN BALLARD
----------------------------------
Vice President
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EXHIBIT A
[Form of Rights Certificate]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER DECEMBER 15, 2007, OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE COMPANY, AT ITS OPTION, MAY REDEEM THE RIGHTS EVIDENCED BY THIS
CERTIFICATE AT A REDEMPTION PRICE OF $.01 PER RIGHT OR EXCHANGE THE RIGHTS FOR
SHARES OF COMMON STOCK 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 AN ASSOCIATE OF AN ACQUIRING PERSON.
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.]1
Rights Certificate
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 December 15, 1997 (the "Rights
Agreement"), between Pulaski Furniture Corporation, a Virginia corporation (the
"Company"), and First Union National Bank, a national banking corporation (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
(Pulaski, Virginia time) on December 15, 2007 at the office or offices of the
Rights Agent
- --------
1 The bracketed language shall be inserted only if applicable.
A-1
<PAGE>
designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, non-assessable share (a "Unit") of Series A
Cumulative Preferred Stock (the "Preferred Stock") or other securities of the
Company, at a purchase price of $____ per Unit (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. (All capitalized terms not
defined herein shall have the meaning set forth in the Rights Agreement.) The
Purchase Price may be paid in cash or by certified bank check or bank draft
payable to the order of the Company. 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 ______ __, [199_], based on the
Preferred Stock as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities that 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.
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.
Under certain circumstances specified in
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<PAGE>
Sections 7(e) of the Rights Agreement, Rights that are or were owned by an
Acquiring Person or an Affiliate or Associate of an Acquiring Person may become
null and void and no longer exercisable by any Person (including any subsequent
transferee). Copies of the Rights Agreement are on file at the above-mentioned
office of the Rights Agent and are also available upon written request to the
Rights Agent or the Secretary of the Corporation.
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 Units of Preferred Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered then
entitle 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 Company, at its
option, may redeem the Rights evidenced by this Certificate at a redemption
price of $.01 per Right or exchange the Rights for shares of Common Stock.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
integral multiples of one one-hundredth of a share of Preferred Stock), 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 of any other securities of the
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Company that may at any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the 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 signatures of the proper officers of the Company
and its corporate seal.
Dated as of ___________ __, ______
[SEAL]
ATTEST: PULASKI FURNITURE CORPORATION
By:
- ------------------------ --------------------
Secretary Title:
--------------------
A-4
<PAGE>
Countersigned:
FIRST UNION NATIONAL BANK
By
- -------------------------------------
Authorized Signature
A-5
<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
Signature Guaranteed:
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<PAGE>
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 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_____________________________
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.
A-7
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: PULASKI FURNITURE CORPORATION:
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 that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or other
securities) 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)
_______________________________________________________________________________
(Please print name and address)
Date: _______________, ____
_____________________
Signature
Signature Guaranteed:
A-8
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are
[ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined 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 became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:____________________, ____ Signature___________________________
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase 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.
A-9
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On December 12, 1997, the Board of Directors of Pulaski Furniture
Corporation, a corporation organized under the laws of Virginia (the "Company"),
approved a Rights Agreement, dated as of and to be effective on December 15,
1997 (the "Rights Agreement") having the principal terms summarized below. In
accordance with the Rights Agreement, the Board also declared a dividend
distribution of one Right for each outstanding share of common stock (the
"Common Stock"), of the Company to shareholders of record at the close of
business on December 19, 1997 (the "Record Date").
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of the Company's Series A Cumulative Preferred
Stock ("Preferred Stock"). Each one one-hundredth of a share (a "Unit") of
Preferred Stock is structured to be the equivalent of one share of Common Stock
of the Company ("Common Stock"). Shareholders will receive one Right per share
of Common Stock held of record at the close of business on the Record Date. The
exercise price of the Right will be $80 subject to adjustment (the "Purchase
Price").
Rights will also attach to shares of Common Stock issued after the
Record Date but prior to the Distribution Date unless the Board of Directors
determines otherwise at the time of issuance. The description and terms of the
Rights are set forth in the Rights Agreement (the "Rights Agreement") between
the Company and First Union National Bank, as Rights Agent.
The Rights will be appurtenant to the shares of Common Stock and will
be evidenced by Common Stock certificates, and no separate certificates
evidencing the Rights (the "Rights Certificates") will be distributed initially.
The Rights will separate from the Common Stock and a distribution of the Rights
Certificates will occur (the "Distribution Date") 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 following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially becoming an Acquiring Person. 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) any Common Stock certificates issued will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 15, 2007, unless earlier redeemed or
exchanged by the Company as
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described below. 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 such separate Rights
Certificates alone will represent the Rights.
While each Right will initially provide for the acquisition of one Unit
of Preferred Stock at the Purchase Price, the Agreement provides that if any
person becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right (except as set forth below) will thereafter have the right to
receive, upon exercise and payment of the Purchase Price, Preferred Stock or, at
the option of the Company, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to twice the
amount of the Purchase Price.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger, statutory share exchange, or other
business combination in which the Company is not the surviving corporation, or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except as set forth below) shall thereafter
have the right to receive, upon exercise and payment of the Purchase Price,
common stock of the acquiring company having a value equal to twice the Purchase
Price. The events set forth in this paragraph and in the immediately preceding
paragraph are referred to as the "Triggering Events."
Upon the occurrence of a Triggering Event that entitles Rights holders
to purchase securities or assets of the Company, Rights that are or were owned
by the Acquiring Person, or any affiliate or associate of such Acquiring Person,
on or after such Acquiring Person's Stock Acquisition Date shall be null and
void and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase common stock of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Stock Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of shares of Preferred
Stock, Common Stock or other securities or property issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution.
At any time (including a time after any person becomes an Acquiring
Person), the Company may exchange all or part of the Rights (except as set forth
below) for shares of Common Stock (an "Exchange") at an exchange ratio of one
share per Right, as appropriately adjusted to reflect any stock split or similar
transaction.
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 $.01 per
Right (the "Redemption Price"). Under certain circumstances set forth in the
Rights Agreement, the decision to make an Exchange or to redeem the Rights shall
require the concurrence of a majority of the Continuing Directors (as defined
below). Additionally, the Company may thereafter but prior to the occurrence of
a Triggering Event redeem the Rights in whole, but not in part, at the
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<PAGE>
Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Directors, does not involve an Acquiring Person,
and in which all holders of Common Stock are treated alike. After the redemption
period has expired, the Company's right of redemption may be reinstated if an
Acquiring Person reduces his beneficial ownership to less than 10% of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company. Immediately upon the action of the Board ordering
redemption of the Rights, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
The term "Continuing Directors" means any member of the Board who was a
member of the Board immediately before the adoption of the Rights Agreement, and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors, but does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Directors) in order
to cure any ambiguity, to make certain other changes that 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, no amendment to adjust the time period governing
redemption may be made at such time as the Rights are not redeemable.
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