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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
CLIFFS DRILLING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0248934
(State of Incorporation (I.R.S. Employer
or Organization) Identification Number)
1200 Smith Street, Suite 300
Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
<TABLE>
<S> <C>
If this Form relates to the registration of a If this Form relates to the registration of a
class of debt securities and is effective upon class of debt securities and is to become
filing pursuant to General Instruction A(c)(1) effective simultaneously with the effectiveness of
please check the following box. [ ] a concurrent registration statement under the
Securities Act of 1933 pursuant to General
Instruction A(c)(2) please check the following
box. [ ]
</TABLE>
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- -------------------------------------
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
<PAGE> 2
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
On May 21, 1997, the Board of Directors of Cliffs Drilling Company
(the "Company") authorized and declared a dividend of one Right (a "Right") for
each outstanding share of Common Stock, par value $0.01 per share ("Common
Stock"), of the Company (the "Common Shares"). The dividend is payable on June
17, 1997 (the "Record Date") to the holders of record of the Common Shares at
the close of business on that date. In addition, the Company has authorized
the issuance of one Right with respect to each share of Common Stock that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined). When exercisable each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, no par value, of the Company (the
"Preferred Shares"), at a price of $150.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15 percent or more of
the outstanding Common Shares and (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) following the commencement of, or first public announcement
of an intention to commence, a tender offer or exchange offer the consummation
of which would result in the beneficial ownership by a person or group of
affiliated or associated persons of 15 percent or more of the outstanding
Common Shares (the earlier of such dates being herein referred to as the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of a Summary of Rights to Purchase Preferred
Shares ("Summary of Rights") in substantially the form attached as Exhibit C to
the Rights Agreement.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common Shares, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding on or
after the Record Date, even without such notation or a copy of this Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
<PAGE> 3
The Rights are not exercisable until the Distribution Date. The
Rights will expire on June 17, 2007 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
subject to redemption by the Company. Each Preferred Share will be entitled to
a minimum preferential quarterly dividend payment of $.01 per share but will be
entitled to an aggregate dividend of 1000 multiplied times the dividend
declared per Common Share. In the event of liquidation, the holder of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $1.00 per share but will be entitled to an aggregate payment of 1000
multiplied times the payment made per Common Share. Each Preferred Share will
have 1000 votes, voting together with the Common Shares. Finally, in the event
of any merger, consolidation or other transaction in which Common Shares are
exchanged, each Preferred Share will be entitled to receive 1000 multiplied
times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
In the event that the Company is acquired in a merger or other
business combination transaction or 50 percent or more of its consolidated
assets or earning power are sold after a person or group of affiliated or
associated persons has become an Acquiring Person, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a
<PAGE> 4
market value of two times the exercise price of the Right. In the event that
any person or group of affiliated or associated persons becomes an Acquiring
Person, proper provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter
be null and void and nontransferable), will thereafter have the right to
receive upon exercise that number of Common Shares of the Company having a
market value of two times the exercise price of the Right.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such person
or group of 50 percent or more of the outstanding Common Shares, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group which will have become null and void and nontransferable),
in whole or in part, at an exchange ratio of one Common Share, or one
one-thousandth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. The Company may, but shall not be required to,
issue fractions of a Preferred Share (other than one one-thousandth of a
Preferred Share or any integral multiple thereof, which may, at the election of
the Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the close of business on the tenth day following
a public announcement that an Acquiring Person has become such an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The time at which the Rights are redeemed by the Company is herein
referred to as the "Redemption Date." Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, including without
limitation an amendment to lower certain thresholds described above to not less
than the greater of (i) the sum of 0.001 percent and the largest percentage of
the outstanding Common Shares then known by the Company to be beneficially
owned by any person or group of affiliated or associated persons and (ii) 10
percent, except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
<PAGE> 5
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Preferred Shares shall rank, with respect to the payment of
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Company, junior to all other series of preferred stock of the
Company, if any, unless the Board of Directors of the Company shall
specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of any
such other series and the qualifications, limitations and restrictions thereof.
As of JUNE 3, 1997, there were 15,237,114 Common Shares issued
and outstanding, and an aggregate of an additional 614,200 Common Shares
reserved for issuance under the Company's employee stock option plans,
non-employee director stock option plan and agreements (giving effect to a
two-for-one stock split effected in the form of a 100% stock dividend to all
holders of record of Common Stock at the close of business on May 22, 1997).
One Right will be distributed to holders of the Common Stock for each Common
Share owned of record at the close of business on June 17, 1997. One Right
will be issued with respect to each Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date. In certain circumstances, the
Company may issue Rights with respect to Common Shares issued following the
Distribution Date and prior to the earlier of the Redemption Date and the
Final Expiration Date. The Company's Board of Directors has initially reserve
for issuance upon exercise of the Rights 500,000 Preferred Shares, which
number is subject to adjustment from time to time in accordance with the
Rights Agreement.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner or on terms not approved by the Board of Directors. The Rights,
however, should not deter any prospective offeror willing to negotiate in good
faith with the Board of Directors, nor should the Rights interfere with any
merger or business combination approved by the Board of Directors of the
Company prior to an Acquiring Person's acquiring 15 percent or more of the
Common Shares.
The Certificate of Incorporation and the Bylaws of the Company contain
several provisions that may make the acquisition of control of the Company by
means of a tender offer, open market purchases, proxy fight or otherwise more
difficult. These provisions are expected to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company and to encourage persons seeking to acquire control of the Company to
consult first with the Company's Board to negotiate the terms of any proposed
business combination or offer. Takeovers or changes in the Board that might be
proposed and effected without prior consultation and negotiation with the Board
or the Company's management would not necessarily be detrimental to the Company
and its shareholders. However, the Company nonetheless believes that the
benefits of increased protection of the Company's potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to take
over or restructure the Company outweigh the disadvantages of discouraging such
proposal, because, among other things, negotiation of such proposals could
result in an improvement of their terms.
<PAGE> 6
The Company has in place certain additional measures which could also
be considered to have anti-takeover effects. The Company's Certificate of
Incorporation and Bylaws (i) provide that the size of the Board will be fixed
by resolution of the directors of the Company, (ii) classify the Board into 3
classes, as nearly equal in number as possible, each class to serve for 3
years, with one class elected each year, (iii) provide that directors may be
removed only for cause and only with the approval of the holders of at least 80
percent of the combined voting power of the outstanding shares of the Company
capital stock entitled to vote generally in the election of directors (the
"Voting Stock"), (iv) provide that any vacancy on the Board may be filled only
by the remaining directors then in office, though less than a quorum, (v)
provide that no shareholder action may be taken by written consent, (vi)
provide that special meetings of the shareholders of the Company may be called
only pursuant to a resolution adopted by a majority of the total number of
directors that the Board would have if there were no vacancies or by the
Chairman of the Board, (vii) require advance notice of business to be brought
before, or nominations to be made at, a meeting of shareholders by a
shareholder, (viii) authorize the Board to issue one or more series of
preferred stock and to determine with respect to any such series the terms and
rights thereof, and (ix) provide that certain provisions of the Certificate of
Incorporation and of the Bylaws may not be amended or repealed or provisions
inconsistent therewith adopted, without the approval of the holders of at least
80% of the Voting Stock.
The foregoing is a summary of certain provisions in the Company's
Certificate of Incorporation and Bylaws, and is qualified in its entirely by
reference to the Certificate of Incorporation and Bylaws.
A copy of the Rights Agreement between the Company and the Rights
Agent specifying the terms of the Rights is filed as an exhibit to this
Registration Statement and incorporated herein by reference. The foregoing
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
ITEM 2. EXHIBITS
4.3 Rights Agreement, dated effective June 17, 1997, between Cliffs
Drilling Company and Harris Trust and Savings Bank, which
includes as Exhibit B thereto the Form of Right Certificate.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized.
CLIFFS DRILLING COMPANY
Dated: June 6, 1997 By: /s/ EDWARD A. GUTHRIE
------------------------------------
Edward A. Guthrie
Vice President - Finance
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
4.3 Rights Agreement, dated effective June 17, 1997, between Cliffs
Drilling Company and Harris Trust and Savings Bank, which includes
as Exhibit B thereto the Form of Right Certificate
</TABLE>
<PAGE> 1
EXHIBIT 4.3
CLIFFS DRILLING COMPANY
and
HARRIS TRUST AND SAVINGS BANK
Rights Agent
RIGHTS AGREEMENT
Dated as of June 17, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Description Page
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<S> <C> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Issue of Rights and Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Execution, Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. Transfer, Split-up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Exercise of Rights; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Cancellation and Destruction of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9. Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Preferred Shares Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights . . . . . . . . . . . . . . . . . 13
Section 12. Certificate of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . 20
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 17. Right Certificate Holder Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
i
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<TABLE>
<S> <C> <C>
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 22. Issuance of New Right Certificates and Additional Rights . . . . . . . . . . . . . . . . . . . . . . 29
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 29. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Exhibit A - Form of Certificate of Designations of Cliffs Drilling Company
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
</TABLE>
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AGREEMENT
This AGREEMENT, dated as of June 17, 1997 (the "Agreement"), between
CLIFFS DRILLING COMPANY, a Delaware corporation (the "Company"), and Harris
Trust and Savings Bank, as Rights Agent (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend of one Right (as such term is hereinafter defined) for each
share of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock") outstanding at the close of business (as such term is hereinafter
defined) on June 17, 1997 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereafter be adjusted pursuant to the
provisions of this Agreement) with respect to each share of Common Stock that
shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement. Each Right shall initially represent the right to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock, no
par value, of the Company (the "Preferred Shares"), having the powers, rights
and preferences set forth in the Certificate of Designations attached to this
Agreement as Exhibit A;
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:
"Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of fifteen percent (15%) or more of the
Common Shares (as such term is hereinafter defined) of the Company then
outstanding, but shall not include the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan of the Company
or any Subsidiary of the Company, or any entity holding Common Shares of the
Company for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares of the Company by the Company which, by reducing
the number of such shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to fifteen percent (15%) or more of
the Common Shares of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of fifteen percent (15%) or more of
the Common Shares of the Company then outstanding by reason of share purchases
by the Company and shall, after such share purchases
<PAGE> 5
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this definition,
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares of the Company so that such
Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this definition, then such person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
"Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
"Affiliate" and "Associate," when used with reference to any Person,
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act (as such term is
hereinafter defined), as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," and shall be deemed to have "Beneficial
Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy
or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the
2
<PAGE> 6
purpose of acquiring, holding, voting (except to the extent contemplated by the
proviso in clause (ii)(B) of this definition) or disposing of any securities of
the Company. Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
"Agreement" shall mean the Agreement between Cliffs Drilling Company
and Harris Trust and Savings Bank, as Rights Agent, dated as of June 17, 1997.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in Houston, Texas or Chicago, Illinois are
authorized or obligated by law or executive order to close.
"Certificate of Designations" shall mean the Certificate of
Designations of Series A Junior Participating Preferred Stock of the Company
setting forth the powers, preferences, rights, qualifications, limitations and
restrictions of such series of Preferred Stock of the Company, a copy of the
form of which is attached to this Agreement as Exhibit A.
"Close of business" on any given date shall mean 5:00 P.M., Houston,
Texas time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Houston, Texas time, on the next
succeeding Business Day.
"Common Shares" when used with reference to the Company shall mean the
shares of Common Stock of the Company. "Common Shares" when used with
reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person.
"Common share equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Common Stock" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Current per share market price" shall have the meaning set forth in
Section 11(d)(i) hereof.
"Company" shall mean Cliffs Drilling Company.
"Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Distribution Date" shall have the meaning set forth in Section 3(b)
hereof.
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<PAGE> 7
"Equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question, unless otherwise specifically provided.
"Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
"Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
"Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
"Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Flip-Over Event" shall have the meaning set forth in Section 13(a)
hereof.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc Automated Quotations System.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Shares" shall have the meaning set forth in the
introductory paragraph of this Agreement. Any reference in this Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
"Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
"Purchase Price" with respect to each Right shall mean $150.00, as
such amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
"Redemption Price" shall have the meaning set forth in Section 23
hereof.
"Right Certificate" shall mean a certificate evidencing a Right in
substantially the form attached to this Agreement as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Agreement.
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<PAGE> 8
"Rights Agent" shall mean Harris Trust and Savings Bank.
"Rights Agreement" shall have the meaning set forth in Section 3(d)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as in effect
on the date in question, unless otherwise specifically provided.
"Security" shall have the meaning set forth in Section 11(d)(i)
hereof.
"Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
"Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall have the meaning set forth in Section 3(c)
hereof.
"Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
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 the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issue of Rights and Right Certificates.
(a) One Right shall be associated with each Common Share
outstanding on the Record Date, each additional Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date, and each additional Common
Share with which Rights are issued after the Distribution Date and prior to the
earlier of the Redemption Date and the Final Expiration Date as provided in
Section 22 hereof; provided, however, that, if the number of outstanding Rights
are combined into a smaller number of outstanding Rights pursuant to Section 11
hereof, the appropriate fractional Right determined pursuant to such Section
shall thereafter be associated with each such Common Share.
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<PAGE> 9
(b) Until the earlier of (i) the tenth day after the Shares
Acquisition Date and (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors of the Company prior to such
time as any Person becomes an Acquiring Person) after the date of the
commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares of the Company for or pursuant to
the terms of any such plan) of, or of the first public announcement of the
intention of any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding Common Shares of the Company for or pursuant to the terms of
any such plan) to commence, a tender or exchange offer the consummation of
which would result in any Person becoming the Beneficial Owner of Common Shares
aggregating fifteen percent (15%) or more of the then outstanding Common Shares
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights; the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(c) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also
be deemed to be Right Certificates) and not by separate Right Certificates, and
(y) the Rights, including the right to receive Right Certificates, will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate evidencing one whole Right for each
Common Share (or for the number of Common Shares with which one whole Right is
then associated if the number of Rights per Common Share held by such record
holder has been adjusted in accordance with the provision in Section 3(a)
hereof) so held. If the number of Rights associated with each Common Share has
been adjusted in accordance with the proviso in Section 3(a) hereof, at the
time of distribution of the Right Certificates, the Company may make any
necessary and appropriate rounding adjustments so that Right Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Right in accordance with Section 14 hereof. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(c) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares,
in substantially the form attached to this Agreement as Exhibit C (the "Summary
of Rights"), by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Record Date, at the address of
such holder shown on the records of the Company. With respect to any
certificate for Common Shares outstanding as of the Record Date, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, the Rights will be evidenced by such certificates registered in the names
of the holders thereof together with a copy of the Summary of Rights attached
thereto. Until the earliest of the Distribution Date, the Redemption Date and
the Final Expiration Date, the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date, with or without a copy of the
Summary of Rights attached
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<PAGE> 10
thereto, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
(d) Certificates issued for Common Shares after the Record Date
(including, without limitation, reacquired Common Shares referred to in the
last sentence of this paragraph (d)), but prior to the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date, shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT DATED AS OF JUNE 17,
1997, AS IT MAY BE AMENDED FROM TIME TO TIME (THE "RIGHTS AGREEMENT"),
BETWEEN CLIFFS DRILLING COMPANY AND HARRIS TRUST AND SAVINGS BANK, AS
RIGHTS AGENT, THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF CLIFFS DRILLING 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. CLIFFS DRILLING COMPANY WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES,
AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event
that the Company purchases or acquires any Common Shares after the Record Date
but prior to the Distribution Date, any Rights associated with such Common
Shares shall be deemed cancelled and retired unless and until such Common
Shares are subsequently issued by the Company so that the Company shall not be
entitled to exercise any Rights associated with the Common Shares which are no
longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates
(and the form of election to purchase and form of assignment to be printed on
the reverse side thereof) shall be in substantially the form attached to this
Agreement as Exhibit B and may have such marks of
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<PAGE> 11
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 securities exchange on which the Rights may from time
to time be listed or of any automated quotations system of a national
securities association on which the Rights may from time to time be registered
or quoted, or to conform to usage. Subject to the provisions of Section 22
hereof, the Right Certificates, whenever issued, on their face shall entitle
the holders thereof to purchase such number of one one-thousandths of a
Preferred Share as shall be set forth therein for the Purchase Price per one
one-thousandth of a Preferred Share, subject to adjustment from time to time as
herein provided.
Section 5. Execution, Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President, its Chief Executive
Officer, or any of its Vice Presidents, or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be countersigned manually or by facsimile signature by the
Rights Agent and shall not be valid or obligatory for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as
though the person who signed such Right Certificates had not ceased to be such
an officer of the Company; and any Right Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this 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, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right Certificates, the
certificate number of each of the Right Certificates and the date of each of
the Right Certificates.
Section 6. Transfer, Split-up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e) and 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 earlier of the Redemption Date and the Final
Expiration Date, any Right Certificate or Right Certificates (except as
otherwise provided herein, including, without limitation, Right
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<PAGE> 12
Certificates representing Rights that have become null and void and
nontransferable pursuant to Section 7(e) hereof or that have been exchanged
pursuant to Section 24 hereof) may be transferred, split-up, combined or
exchanged for another Right Certificate or Right Certificates representing, in
the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. Any registered holder desiring to
transfer, split-up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split-up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose; provided, however, that
neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any Right Certificate surrendered
for transfer until the registered holder shall have completed and signed the
certification of status contained in the form of assignment on the reverse side
of such Right Certificate and shall have provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 7(e) and 14 hereof, countersign and
deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split-up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in the case of loss, theft or destruction, of an
indemnity bond or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, the Company will make a
new Right Certificate of like tenor and deliver such new Right Certificate to
the Rights Agent for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof and except as otherwise
provided herein (including Section 24 hereof), each Right shall entitle the
registered holder thereof, upon exercise thereof as provided herein, to
purchase for the Purchase Price, at any time after the Distribution Date and at
or prior to the earliest of (i) the close of business on June 17, 2007 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date") and (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof, one
one-thousandth of a Preferred Share, subject to adjustment from time to time as
provided in Section 11 or 13 hereof.
(b) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices
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<PAGE> 13
of the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-thousandth of a Preferred Share as to which the
Rights are exercised, at or prior to the earliest of (i) the Final Expiration
Date, (ii) the Redemption Date and (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares (or other securities) to
be purchased and an amount equal to any applicable transfer tax required to be
paid by the holder of such Right Certificate in accordance with Section 9
hereof, in lawful money of the United States of America, in cash or by
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon (i) either (A) promptly requisition
from any transfer agent of the Preferred Shares (or make available, if the
Rights Agent is a transfer agent for such shares) certificates for the number
of Preferred Shares to be purchased, and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the Preferred Shares with a depositary
agent under a depositary arrangement, promptly requisition from the depositary
agent depositary receipts representing the number of one one-thousandths of a
Preferred Share to be purchased (in which case certificates for the Preferred
Shares 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 all such requests, (ii) when appropriate, promptly requisition from
the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered
in such name or names as may be designated by such holder, and (iv) when
appropriate, after receipt, promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
any Rights that are at any time beneficially owned by an Acquiring Person or
any Affiliate or Associate of an Acquiring Person shall be null and void and
nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
(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 of any Right Certificate upon the
occurrence of any purported exercise unless such registered holder shall have
(i) completed and signed the certification of status contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered
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<PAGE> 14
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.
(g) The Company may temporarily suspend, for a period of time not
to exceed 90 calendar days after the Distribution Date, the exercisability of
the Rights in order to prepare and file a Registration Statement under the
Securities Act, on appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such Registration Statement
to become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such Registration Statement. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision
herein to the contrary, the Rights shall not be exercisable in any jurisdiction
if the requisite qualification under the Blue Sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, and any Right Certificate representing
Rights that have become null and void and nontransferable pursuant to Section
7(e) hereof surrendered or presented for any purpose shall, if surrendered or
presented to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or, if surrendered or presented to
the Rights Agent, shall be cancelled by it, and no Right 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 Right Certificate purchased or acquired by the Company. The Rights Agent
shall deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in either such case shall deliver a certificate of destruction thereof or a
certificate of cancellation thereof, as may be appropriate, to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any authorized and issued Preferred Shares held in its treasury, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7 hereof.
(b) In the event that there shall not be sufficient Preferred
Shares issued but not outstanding or authorized but unissued to permit the
exercise or exchange of Rights in accordance with Section 11 or 24 hereof, as
the case may be, the Company covenants and agrees that it will take all such
action as may be necessary to authorize additional Preferred Shares for
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issuance upon the exercise or exchange of Rights pursuant to Section 11 or 24
hereof, as the case may be; provided, however, that if the Company is unable to
cause the authorization of additional Preferred Shares, then the Company shall,
or in lieu of seeking any such authorization, the Company may, to the extent
necessary and permitted by applicable law and any agreements or instruments in
effect prior to the Distribution Date to which it is a party, (i) upon
surrender of a Right, pay cash equal to the Purchase Price in lieu of issuing
Preferred Shares and requiring payment therefor, (ii) upon due exercise of a
Right and payment of the Purchase Price for each Preferred Share as to which
such Right is exercised, issue equity securities having a value equal to the
value of the Preferred Shares which otherwise would have been issuable pursuant
to Section 11 or 24 hereof, which value shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company, or (iii) upon due exercise of a Right and payment of the Purchase
Price for each Preferred Share as to which such Right is exercised, distribute
a combination of Preferred Shares, cash and/or other equity securities having
an aggregate value equal to the value of the Preferred Shares which otherwise
would have been issuable pursuant to Section 11 or 24 hereof, which value shall
be determined by a nationally recognized investment banking firm selected by
the Board of Directors of the Company. To the extent that any legal or
contractual restrictions (pursuant to agreements or instruments in effect prior
to the Distribution Date to which it is a party) prevent the Company from
paying the full amount payable in accordance with the foregoing sentence, the
Company shall pay to holders of the Rights as to which such payments are being
made all amounts which are not then restricted on a pro rata basis as such
payments become permissible under such legal or contractual restrictions until
such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights may be listed on any national securities exchange or
automated quotations system of a registered national securities association on
which the Preferred Shares may from time to time be listed, traded or quoted,
the Company covenants and agrees that it will use reasonable efforts to cause,
from and after such time as the Rights become exercisable or exchangeable, all
Preferred Shares reserved for such issuance to be listed on such exchange or
approved for quotation in such quotation system, upon official notice of
issuance upon such exercise.
(e) The Company further covenants and agrees, subject to the
provisions of this Agreement, that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of Right Certificates or of any Preferred Shares or
Common Shares or other securities upon the exercise or exchange of the Rights.
The Company shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Right Certificates to a
Person other than, or in respect of the issuance or delivery of certificates
for Preferred Shares or Common Shares or
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other securities, as the case may be, in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or exchange or to issue or deliver any certificates for Preferred
Shares or Common Shares or other securities, as the case may be, upon the
exercise or exchange of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose
name any certificate for Preferred Shares or Common Shares or other securities
is issued upon the exercise or exchange of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares or Common
Shares or other securities, as the case may be, represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of any Purchase Price
(and any applicable transfer taxes) was made; provided, however, that, if the
date of such surrender and payment is a date upon which the transfer books of
the Company for the Preferred Shares or Common Shares or other securities, as
the case may be, are closed, such Person shall be deemed to have become the
record holder of such Preferred Shares or Common Shares or other securities, as
the case may be, on, and such certificate shall be dated, the next succeeding
Business Day on which the transfer books of the Company for the Preferred
Shares or Common Shares or other securities, as the case may be, are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive 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 of Shares or
Number of Rights. The Purchase Price, the number of Preferred 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 Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a smaller
number of Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any
such reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification,
and the number and kind of shares of capital stock issuable on such
date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time
when the transfer books
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<PAGE> 17
of the Company for the Preferred Shares were open, he would have owned
upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. 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 24 of this Agreement, in the event
any Person becomes an Acquiring Person (a "Flip-In Event"), each
holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have a right to receive, upon exercise thereof at a price
equal to the then current Purchase Price multiplied times the number
of one one-thousandths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of Common Shares of the Company
(such number of Common Shares being referred to herein as the
"Adjustment Shares") as shall equal the result obtained by (x)
multiplying the then current Purchase Price times the number of one
one-thousandths of a Preferred Share for which a Right is then
exercisable and dividing that product by (y) 50 percent of the then
current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the
occurrence of such event. In the event that any Person shall become
an Acquiring Person and the Rights shall then be outstanding, the
Company shall not take any action which would eliminate or diminish
the benefits intended to be afforded by the Rights.
(iii) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with Section
11(a)(ii) hereof, the Company shall, to the extent permitted by
applicable law and regulation: (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 to be
referred to hereinafter as the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for the 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 (including, without limitation, shares, or units of shares, of
preferred stock which the Board of Directors of the Company has deemed
to have the same value as the Common Shares (such shares of preferred
stock being referred to herein as "common share equivalents")), (4)
other assets or (5) any combination of the foregoing, having an
aggregate value equal to the Current Value as determined by the Board
of Directors of the Company; provided, however, that if the Company
shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the first
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<PAGE> 18
occurrence of a Flip-In Event (the "Flip-In Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, Common
Shares (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. In
its sole discretion, the Board of Directors of the Company may take
all actions as may be necessary to authorize additional Common Shares
for issuance upon exercise in full of the Rights. In such event, the
30-day period set forth above may be extended to the extent necessary,
but not to more than 120 days after the Flip-In Trigger Date, in order
that the Company may seek stockholder approval for the authorization
of such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent 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 deliver a notice to the Rights Agent and
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a notice to the
Rights Agent and a public announcement at such time as the suspension
is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the current per share market price
(as determined pursuant to Section 11(d) hereof) of the Common Shares
on the Flip-In Trigger Date, and the value of any common share
equivalent shall be deemed to have the same value as the Common Shares
on such date.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling
them (for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date times a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or
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<PAGE> 19
equivalent preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in consideration part or all of which may be in
a form other than cash, the value of such consideration shall be as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent. Preferred
Shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date times a
fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares 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 assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current per share market price" of any security (a "Security") for
the purpose of this Section 11(d)(i)) on any date shall be deemed to
be the average of the daily closing prices per share of such Security
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 11(a)(iii) hereof, the "current
per share market price" of a Security on any date shall be deemed to
be the average of the daily closing prices per share of such Security
for the 10 consecutive Trading Days immediately following such date;
provided, however, that in the event that the current per share market
price of the Security is determined during a period
16
<PAGE> 20
following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such
Security or securities convertible into shares of such Security (other
than the Rights), or (B) any subdivision, combination or
reclassification of such Security, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, shall not have occurred prior to the
commencement of the requisite 30 Trading Day or 10 Trading Day period,
as set forth above, then, and in each such case, the "current per
share market price" shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. 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 Security is 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
Security is listed or admitted to trading or, if the Security is 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
Quotations System ("NASDAQ") or such other system then in use, or, if
on any such date the Security is 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 Security selected by
the Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted
to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be
determined in accordance with the method set forth in Section 11(d)(i)
hereof. If the Preferred Shares are not publicly traded, the "current
per share market price" of the Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares,
as determined pursuant to Section 11(d)(i) hereof (appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied times 1000.
If neither the Common Shares nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent.
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<PAGE> 21
(e) Except as hereinafter provided, no adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least one percent in the Purchase Price; provided, however, that
any adjustments which by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of any other share or security, 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 which requires such adjustment and
(ii) the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right 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 Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of
a Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-thousandths of a share covered by a Right immediately prior to this
adjustment times (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment
18
<PAGE> 22
of the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public announcement
of its election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Right Certificates have been issued, shall
be at least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the Preferred Shares and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the Preferred Shares and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall
19
<PAGE> 23
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at
less than the current market price, (iii) issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or exchangeable
for Preferred Shares, (iv) dividends on Preferred Shares payable in Preferred
Shares, or (v) issuance of rights, options or warrants referred to hereinabove
in Section 11(b), hereafter made by the Company to holders of its Preferred
Shares, shall not be taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in
the event that at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case (A) the number of one
one-thousandths of a Preferred Share purchasable after such event upon proper
exercise of each Right shall be determined by multiplying the number of one
one-thousandths of a Preferred Share so purchasable immediately prior to such
event times a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected.
Section 12. Certificate of Adjustment. Whenever an adjustment is
made as provided in Section 11 or 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (b) promptly file with the Rights
Agent and with each transfer agent for the Common Shares or the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate (or, prior to the Distribution Date, of the
Common Shares) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment
therein contained and shall not be obligated or responsible for calculating any
adjustment, nor shall it be deemed to have knowledge of such an adjustment
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger, or Sale or Transfer of Assets
or Earning Power.
(a) In the event, directly or indirectly, at any time after a
Person has become an Acquiring Person, (i) the Company shall consolidate with,
or merge with and into, any other Person, (ii) any Person shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or
exchanged for capital stock or other securities of any other Person (or the
Company) or cash or
20
<PAGE> 24
any other property, or (iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50 percent or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person other than the Company or one or more of its wholly-
owned Subsidiaries (any such event described in clauses (i), (ii) or (iii)
being referred to herein as a "Flip-Over Event"), then, and in each such case,
proper provision shall be made so that (A) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
times the number of one one-thousandths of a Preferred Share for which a Right
is then exercisable, in accordance with the terms of this Agreement and in lieu
of Preferred Shares, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable Common Shares of the Principal Party (as such
term is hereinafter defined), free and clear of liens, encumbrances or other
adverse claims, as shall equal the result obtained by (1) multiplying the then
current Purchase Price times the number of one one-thousandths of a Preferred
Share for which a Right is exercisable immediately prior to the first
occurrence of a Flip-Over Event (or, if a Flip-In Event has occurred prior to
the first occurrence of a Flip-Over Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Flip-In Event times the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Flip-Over Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement) by
(2) 50 percent of the then current per share market price of the Common Shares
of such Principal Party (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer; (B) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (C) 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 Flip-Over Event; (D) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise
of the Rights; and (E) the provisions of Section 11(a)(ii) hereof shall be of
no effect following the first occurrence of any Flip-Over Event. The Company
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
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<PAGE> 25
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(i) or (ii) of the first sentence of Section 13(a) hereof, the Person
that is the issuer of any securities into which Common Shares of the
Company are converted in such transaction, or if there is more than
one issuer, the issuer of Common Shares with the greatest aggregate
market value, and if no securities are so issued, the Person that is
the other party to such transaction, or if there is more than one such
Person, the Person having Common Shares with the greatest aggregate
market value; and
(ii) in the case of any transaction described in clause
(iii) 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 Shares of
such Person are not at such time and have 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
any Person the Common Shares of which are and have been so registered,
"Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Shares of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate
market value.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company may, but shall not be required to, issue fractions
of Rights or distribute Right Certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company may pay to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed 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 or admitted to trading 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
22
<PAGE> 26
such date the Rights are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board of Directors of the
Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith
by the Board of Directors of the Company shall be used.
(b) The Company may, but shall not be required to, issue fractions
of Preferred Shares upon exercise of the Rights or distribute certificates
which evidence fractional Preferred Shares. In lieu of fractional Preferred
Shares, the Company may elect to (i) utilize a depositary arrangement as
provided by the terms of the Preferred Shares or (ii) in the case of a fraction
of a Preferred Share (other than one one-thousandth of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of a whole Preferred
Share, if any are outstanding and publicly traded (or the Formula Number (as
such term is defined in Section 2 of the Certificate of Designations) then in
effect times the current market value of a whole Common Share if the Preferred
Shares are not outstanding and publicly traded). For purposes of this Section
14(b), the current market value of a Preferred Share (or Common Share) shall be
the closing price of a Preferred Share (or Common Share) (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise. If, as a result of an
adjustment made pursuant to Section 11 hereof, the holder of any Right
thereafter exercised shall become entitled to receive any securities other than
Preferred Shares, the provisions of this Section 14(b) shall apply, as nearly
as reasonably may be, on like terms to such other securities.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise or exchange of a Right except as provided in this Section 14.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations hereunder, and injunctive relief against actual
or threatened violations of the obligations of any Person subject to, this
Agreement.
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<PAGE> 27
Section 16. Agreement of Right Holders. Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e) hereof, only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; 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 obligations; provided, however, the Company must use
reasonable efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as reasonably practicable.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote or
receive dividends or be deemed, for any purpose, the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Company, including, without limitation, any right to vote for the election of
directors or upon any other matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 hereof), or to receive dividends or other distributions or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
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Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
(b) The Rights Agent may conclusively rely upon and shall be
protected and shall incur no liability for, or in respect of any action taken,
suffered or omitted by it in connection with, its administration of this
Agreement in reliance upon any Right Certificate or certificate for the
Preferred Shares or Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Notwithstanding anything in this Agreement to the contrary, 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), even if the Rights Agent has been advised of the likelihood
of such loss or damage and regardless of the form of the action.
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 stock transfer or corporate trust powers of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case, at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been
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countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares), by
their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, it may
consult with legal counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in good faith and
in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Treasurer
or the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own negligence or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void and nontransferable pursuant to
Section 7(e) hereof) or any adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or
24 hereof, or the ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
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Preferred Shares or Common Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares or Common Shares
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing in this Agreement shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was exercised in the
selection and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability or expense (including reasonable fees and
expenses of counsel) that the Rights Agent may incur resulting from its actions
as Rights Agent pursuant to this Agreement; provided, however, that the Rights
Agent shall not be indemnified or held harmless with respect to any such loss,
liability, damage or expense incurred by the Rights Agent as a result of, or
arising out of, its own negligence or willful misconduct. The Rights Agent
shall notify the Company, by letter or by facsimile confirmed by letter, of the
assertion of any action, proceeding, suit or claim against the Rights Agent,
promptly after the Rights Agent shall have notice of any such assertion of an
action, proceeding, suit or claim or have been served with the summons or other
first legal process giving information as to the nature and basis of the
action, proceeding, suit or claim. The Company shall be entitled to
participate at its own expense in the defense of any such action, proceeding,
suit or claim, and, if the Company so elects, the Company shall assume the
defense of any such action, proceeding, suit or claim. In the event
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<PAGE> 31
that the Company assumes such defense, the Company shall not thereafter be
liable for the fees and expenses of any additional counsel retained by the
Rights Agent, so long as the Company shall retain counsel satisfactory to the
Rights Agent, in the exercise of its reasonable judgment, to defend such
action, proceeding, suit or claim. The Rights Agent agrees not to settle any
litigation in connection with any action, proceeding, suit or claim with
respect to which it may seek indemnification from the Company without the prior
written consent of the Company.
(k) 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.
(l) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares) by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates (or,
prior to the Distribution Date, of the Common Shares) by first-class mail. If
the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (or, prior to the Distribution Date, of the
Common Shares) (who shall, with such notice, submit his Right Certificate or,
prior to the Distribution Date, the certificate representing his Common Shares,
for inspection by the Company), then the registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares) 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 one of the States thereof, in good standing, which
is authorized under such laws to exercise stock transfer or corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million; provided that the
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights
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Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates
(or, prior to the Distribution Date, of the Common Shares). Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Right Certificates and Additional
Rights. Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of
Directors of the Company to reflect any adjustment or change made in accordance
with the provisions of this Agreement. In addition, in connection with the
issuance or sale of Common Shares following the Distribution Date and prior to
the earlier of the Redemption Date and the Final Expiration Date, the Company
(i) shall, with respect to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon
the exercise, conversion or exchange of securities, notes or debentures issued
by the Company, and (ii) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that no such Right Certificate shall be issued if,
and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Company or the Person to whom such Right Certificate would be issued,
and no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the close of business on the tenth day
following the Shares Acquisition Date (or, if the Shares Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date) and (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"). The redemption of
the Rights by the Board of Directors of the Company may be made effective at
such time, on such basis and with such conditions as the Board of Directors of
the Company in its sole discretion may establish.
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<PAGE> 33
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. Within 10 Business Days
after the action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Each such notice of redemption will
state the method by which payment of the Redemption Price will be made. The
notice, if mailed in the manner herein provided, shall be conclusively presumed
to have been duly given, whether or not the holder of Rights receives such
notice. In any case, failure to give such notice by mail, or any defect in the
notice, to any particular holder of Rights shall not affect the sufficiency of
notice to other holders of Rights. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this
Section 23 or in Section 24 hereof, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person, mandatorily exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Shares of the
Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50
percent or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24, and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied times the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all the holders of such Rights at their last addresses
as they appear upon the registry books of the Rights Agent. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder
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receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Shares for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become null and void and nontransferable pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Shares (or equivalent preferred shares)
for Common Shares exchangeable for Rights, at the initial rate of one one-
thousandth of a Preferred Share (or equivalent preferred share) for each Common
Share, as appropriately adjusted to reflect adjustments in the voting rights of
the Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that the number of Common Shares or Preferred
Shares which are issued but not outstanding or authorized but unissued are not
sufficient to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional Common Shares or Preferred Shares.
(e) The Company may, but shall not be required to, issue fractions
of Common Shares upon exchange of Rights pursuant to this Section 24 or
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24. For purposes of
this paragraph (e), the current market value of a whole Common Share shall be
the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof).
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend
payable in capital stock of any class to the holders of its Preferred Shares or
to make any other distribution to the holders of its Preferred Shares (other
than a regular quarterly cash dividend), (ii) to offer to the holders of its
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of capital stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
or more transactions, of 50 percent or more of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to, any other Person, (v)
to effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a
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subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares), in
accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause (i)
or (ii) above at least 10 days prior to the record date for determining holders
of the Preferred Shares for purposes of such action, and in the case of any
such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case a Flip-In Event shall occur, then the Company shall as
soon as practicable thereafter give to each holder of a Right Certificate (or,
prior to the Distribution Date, of Common Shares), in accordance with Section
26 hereof, a notice of the occurrence of such event, which notice shall
describe such event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Cliffs Drilling Company
1200 Smith Street, Suite 300
Houston, Texas 77002
Attention: Mr. Edward A. Guthrie
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Harris Trust and Savings Bank
111 West Monroe
P.O. Box 755
Chicago, IL 60690
Attention: Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent
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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. At any time prior to the
Distribution Date and subject to the last sentence of this Section 27, the
Company may by action of its Board of Directors, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Agreement
(including, without limitation, the date upon which the Distribution Date shall
occur, the time during which the Rights may be redeemed pursuant to Section 23
or any provision of the Certificate of Designations) in any manner without the
approval of any holder of the Rights. From and after the Distribution Date and
subject to applicable law, the Company may by action of its Board of Directors,
and the Rights Agent shall if the Company so directs, from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order (i) to cure any ambiguity or to correct or supplement any
provision contained in this Agreement which may be defective or inconsistent
with any other provision of this Agreement or (ii) to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of the Rights or Right Certificates (other than an Acquiring Person
or any Affiliate or Associate of an Acquiring Person). Any supplement or
amendment adopted during any period after any Person has become an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
supplement or amendment could have been adopted under the prior sentence from
and after the Distribution Date. Without limiting the foregoing, the Company
may at any time prior to the Distribution Date amend this Agreement to lower
the thresholds set forth in the definition of Acquiring Person in Section 1
hereof and in Section 3(b) hereof to not less than the greater of (i) the sum
of 0.001 percent and the largest percentage of the outstanding Common Shares
then known by the Company to be beneficially owned by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares
of the Company for or pursuant to the terms of any such plan) and (ii) 10
percent. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment; provided, however, that the Rights Agent may, but
shall not be obligated to, enter into any such supplement or amendment which
affects its own rights, duties or immunities under this Agreement. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of the Common Shares of the
Company. In addition, notwithstanding anything to the contrary contained in
this Agreement, no supplement or amendment to this Agreement shall be made
which (i) reduces the Redemption Price (except as required hereunder by
appropriate adjustment to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement) or (ii) provides for an
earlier Final Expiration Date.
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.
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Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, of the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, of the
Common Shares).
Section 30. 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.
SECTION 31. GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER LAWS
OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO
BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
Section 33. 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 of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.
CLIFFS DRILLING COMPANY
Attest:
/s/ James E. Mitchell, Jr. By: /s/ Edward A. Guthrie
- -------------------------------- ----------------------------------------
James E. Mitchell, Jr. Edward A. Guthrie
Secretary Vice President-Finance
(Signatures continued on next page)
34
<PAGE> 38
HARRIS TRUST AND SAVINGS BANK
Attest:
/s/ Ray G. Rosenbaum By: /s/ Lorraine Rodewald
- ---------------------------------- -------------------------------------
Name: Ray. G. Rosenbaum Name: Lorraine Rodewald
----------------------------- --------------------------------
Title: Vice President Title: Assistant Vice President
---------------------------- -------------------------------
35
<PAGE> 39
EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CLIFFS DRILLING COMPANY
--------------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
--------------------------------
CLIFFS DRILLING COMPANY, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that, pursuant to the authority conferred on the Board of
Directors of the Corporation by the Certificate of Incorporation, as amended,
of the Corporation (the "Certificate of Incorporation") and in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation on May 21, 1997, adopted the following
resolution establishing and creating a series of Preferred Stock, no par value,
of the Corporation designated as Series A Junior Participating Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of
the Certificate of Incorporation, as amended, of the Corporation,
a series of Preferred Stock, no par value, of the Corporation is
hereby established and created, and that the designation and
number of shares thereof and the voting and other powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, are as
follows:
A-1
<PAGE> 40
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 500,000; provided, however, that if more than a
total of 500,000 shares of Series A Preferred Stock shall be issuable upon
the exercise of Rights (the "Right") issued pursuant to the Rights Agreement
dated as of June 17, 1997 between the Corporation and Harris Trust and Savings
Bank, as Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, shall direct by resolution or resolutions that a certificate
be properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 103 thereof, providing for the total number of shares of
Series A Preferred Stock authorized to be issued to be increased (to the extent
that the Certificate of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole share) issuable upon exercise of
such Rights.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of shares
of any other series of Preferred Stock or other class of stock of the
Corporation ranking prior and superior to the Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the assets of the Corporation legally available therefor, (i) quarterly
dividends payable in cash on the last day of each fiscal quarter in each year,
or such other dates as the Board of Directors of the Corporation shall approve
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or a fraction of a share of Series A Preferred Stock, in
the amount of $.01 per whole share (rounded to the nearest cent) less the
amount of all cash dividends declared on the Series A Preferred Stock pursuant
to the following clause (ii) since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A
Preferred Stock (the total of which shall not, in any event, be less than zero)
and (ii) dividends payable in cash on the payment date for each cash dividend
declared on the Common Stock in an amount per whole share (rounded to the
nearest cent) equal to the Formula Number (as hereinafter defined) then in
effect multiplied times the cash dividends then to be paid on each share of
Common Stock. In addition, if the Corporation shall pay any dividend or make
any distribution on the Common Stock payable in assets, securities or other
forms of noncash consideration (other than dividends or distributions solely in
shares of Common Stock), then, in each such case, the Corporation shall
simultaneously pay or make on each outstanding whole share of Series A
Preferred Stock a dividend or distribution in like kind equal to the Formula
Number then in effect multiplied times such dividend or distribution on each
share of the Common Stock. As used herein, the "Formula Number" shall be 1000;
provided, however, that, if at any time after June 17, 1997, the Corporation
shall (x) declare or pay any dividend on the Common Stock
A-2
<PAGE> 41
payable in shares of Common Stock or make any distribution on the Common
Stock in shares of Common Stock, (y) subdivide (by a stock split or otherwise)
the outstanding shares of Common Stock into a larger number of shares of Common
Stock or (z) combine (by a reverse stock split or otherwise) the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, then in
each such event the Formula Number shall be adjusted to a number determined by
multiplying the Formula Number in effect immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock that
are outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that are outstanding immediately prior to such
event (and rounding the result to the nearest whole number); and provided
further, that, if at any time after June 17, 1997, the Corporation shall issue
any shares of its stock in a merger, reclassification, or change of the
outstanding shares of Common Stock, then in each such event the Board of
Directors (or, if the Corporation is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) shall make
adjustments, determined by the Board of Directors in its discretion to be
appropriate, to the Formula Number to reflect such merger, reclassification or
change.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (a) of this Section
immediately prior to or at the same time it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution solely in shares of
Common Stock); provided, however, that, in the event no dividend or
distribution (other than a dividend or distribution solely in shares of Common
Stock) shall have been declared on the Common Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $.01 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date. The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from and after the Quarterly Dividend
Payment Date next preceding the date of original issue of such shares of Series
A Preferred Stock; provided, however, that dividends on such shares which are
originally issued after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and
on or prior to the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly Dividend Payment
Date. Notwithstanding the foregoing, dividends on shares of Series A Preferred
Stock which are originally issued prior to the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend on the first Quarterly Dividend Payment Date shall
be calculated as if cumulative from and after the last day of the fiscal
quarter next preceding the date of original issuance of such shares. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total amount of such
A-3
<PAGE> 42
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions except as provided
herein.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied times
the maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class for the election of directors of
the Corporation and on all other matters submitted to a vote of stockholders of
the Corporation.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or
not consecutive) payable on any share or shares of Series A Preferred Stock are
in default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at
said meeting of stockholders (and at any subsequent annual meeting of
stockholders), unless all dividends in arrears have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Corporation, the holders of any Series A Preferred Stock being entitled
to cast a number of votes per share of Series A Preferred Stock equal to the
Formula Number. Until the default in payments of all dividends which permitted
the election of said directors shall cease to exist, any director who shall
have been so elected pursuant to the next preceding sentence may be removed at
any time, either with or without cause, only by the affirmative vote of the
holders of the shares of Series A Preferred Stock at the time entitled to cast
a majority of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when
such default shall cease to exist, the holders of the Series A Preferred Stock
shall be
A-4
<PAGE> 43
divested of the foregoing special voting rights, subject to revesting
in the event of each and every subsequent like default in payments of
dividends. Upon the termination of the foregoing special voting rights, the
terms of office of all persons who have been elected directors pursuant to said
special voting rights shall forthwith terminate, and the number of directors
constituting the Board of Directors shall be reduced by two. The voting rights
granted by this Section 3(c) shall be in addition to any other voting rights
granted to the holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for authorizing or
taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock; provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders
A-5
<PAGE> 44
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (a) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be issued
as part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
or in any other Certificate of Designations creating a series of Preferred
Stock or any similar stock of the Corporation or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon the
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, no distribution shall be made (i) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to the greater of
(x) $1.00 per whole share and (y) an aggregate amount per share equal to the
Formula Number then in effect multiplied times the aggregate amount to be
distributed per share to holders of Common Stock, or (ii) to the holders of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case the then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged for or changed into an amount per share equal
to the Formula Number then in effect multiplied times the aggregate amount of
stock, securities, cash or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is exchanged or
changed. In the event both this Section 7 and Section 2 appear to apply to a
transaction, this Section 7 shall control.
A-6
<PAGE> 45
Section 8. No Redemption; No Sinking Fund.
(a) The shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation; provided, however, that the Corporation may
purchase or otherwise acquire outstanding shares of Series A Preferred Stock in
the open market or by offer to any holder or holders of shares of Series A
Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
Section 9. Ranking. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, junior to all other
series of Preferred Stock of the Corporation, if any, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of any such other series and the qualifications, limitations and
restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth of a
share or any integral multiple of such fraction which shall entitle the holder,
in proportion to such holder's fractional shares, to receive dividends,
exercise voting rights, participate in distributions and to have the benefit of
all other rights of holders of Series A Preferred Stock. In lieu of fractional
shares, the Corporation, prior to the first issuance of a share or a fraction
of a share of Series A Preferred Stock, may elect (i) to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-thousandth of a share or any integral multiple thereof or (ii) to issue
depository receipts evidencing such authorized fraction of a share of Series A
Preferred Stock pursuant to an appropriate agreement between the Corporation
and a depository selected by the Corporation; provided that such agreement
shall provide that the holders of such depository receipts shall have all the
rights, privileges and preferences to which they are entitled as holders of the
Series A Preferred Stock.
Section 11. Amendment. None of the powers, preferences or relative,
participating, optional or other special rights of the Series A Preferred Stock
as provided herein or in the Certificate of Incorporation of the Corporation
shall be amended in any manner that would alter or change the powers,
preferences, rights or privileges of the holders of Series A Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of at
least 66-2/3 percent of the outstanding shares of Series A Preferred Stock,
voting as a separate class.
A-7
<PAGE> 46
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be duly executed in its corporate name on this _____ day of
__________, 1997.
CLIFFS DRILLING COMPANY
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
A-8
<PAGE> 47
EXHIBIT B
[Form of Right Certificate]
Certificate No. R-
____________ Rights
NOT EXERCISABLE AFTER JUNE 17, 2007, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE
NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
CLIFFS DRILLING COMPANY
This certifies that ____________________________________, or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of June 17, 1997
(the "Rights Agreement"), between Cliffs Drilling Company, a Delaware
corporation (the "Company"), and Harris Trust and Savings Bank, as Rights Agent
(the "Rights Agent"), unless the Rights evidenced hereby have been previously
redeemed by the Company, to purchase from the Company at any time after the
Distribution Date (as defined in the Rights Agreement) and prior to 5:00 P.M.,
Houston time, on June 17, 2007 (the "Final Expiration Date"), at the principal
office or agency of the Rights Agent, or its successors as Rights Agent, in the
City of Chicago, one one-thousandth of a fully paid, nonassessable share of
Series A Junior Participating Preferred Stock, no par value, of the Company
(the "Preferred Shares"), at a purchase price per one one-thousandth of a share
equal to $150.00 (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares that may be
purchased upon exercise of each Right evidenced by this Right Certificate, as
set forth above, are the Purchase Price and the number and kind of shares that
may be purchased as of ________, 19__. As provided in the Rights Agreement,
the Purchase Price and the number and kind of shares that may be purchased upon
the exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
B-1
<PAGE> 48
This Right Certificate is subject to all 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
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the above-mentioned office and
agency of the Rights Agent and are also available from the Company upon
request.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Associate or Affiliate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors of the Company to be at least
equivalent in value) of $.01 per Right (which amount may be subject to
adjustment as provided in the Rights Agreement) at any time prior to the
earlier of (i) the close of business on the tenth day following the first date
of public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such and (ii) the Final Expiration Date.
The Company may, but shall not be required to, issue fractions of a
Preferred Share (other than one one-thousandth of a Preferred Share or any
integral multiple thereof) or distribute certificates which evidence fractions
of a Preferred Share upon the exercise of any Right or Rights evidenced hereby.
In lieu of issuing fractional shares, the Company may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandth of a share or any integral multiple thereof or to issue
certificates or utilize a depositary arrangement as provided in the terms of
the Rights Agreement and the Preferred Shares.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed, for any purpose, the holder of the Preferred
Shares or any other securities of the
B-2
<PAGE> 49
Company which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company, including, without limitation, any right to vote for the election
of directors or upon any other matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or other distributions or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in accordance with the
provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of: ____________________________
[CORPORATE SEAL]
ATTEST: CLIFFS DRILLING COMPANY
By: By:
------------------------------------- ------------------------------
Name: Name:
------------------------------- -----------------------
Title: Title:
------------------------------ -----------------------
Countersigned:
HARRIS TRUST AND SAVINGS BANK
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
B-3
<PAGE> 50
[On Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
_______________________________________ hereby sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee) _ this Right Certificate,
________________________________________________________________________________
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _____________________________________________
Attorney, to transfer the within Right Certificate on the books of the
Dated:
-------------------
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate / / is / / is not being sold,
assigned or transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
it / / did / / did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
------------------------------
Signature
Dated:
------------------
B-4
<PAGE> 51
[On Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to
exercise the Rights represented by the Right Certificate.)
To: CLIFFS DRILLING COMPANY
The undersigned hereby irrevocably elects to exercise
_______________________ Rights represented by this Right Certificate to purchase
the Preferred Shares (or other shares) issuable upon the exercise of such
Rights and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated:
-------------------- -----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
B-5
<PAGE> 52
[On Reverse Side of Right Certificate -- continued]
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate / / is / / is not being exercised by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
it / / did / / did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
------------------------------
Signature
Dated:
------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the Certification of Status set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
B-6
<PAGE> 53
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 21, 1997, the Board of Directors of Cliffs Drilling Company (the
"Company") authorized and declared a dividend of one Right (a "Right") for each
outstanding share of Common Stock, par value $0.01 per share ("Common Stock"),
of the Company (the "Common Shares"). The dividend is payable on June 17, 1997
(the "Record Date") to the holders of record of the Common Shares at the close
of business on that date. In addition, the Company has authorized the issuance
of one Right with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined). When exercisable each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, no par value, of the Company (the
"Preferred Shares"), at a price of $150.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15 percent or more of
the outstanding Common Shares and (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) following the commencement of, or first public announcement
of an intention to commence, a tender offer or exchange offer the consummation
of which would result in the beneficial ownership by a person or group of
affiliated or associated persons of 15 percent or more of the outstanding
Common Shares (the earlier of such dates being herein referred to as the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common Shares, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding on or
after the Record Date, even without such notation or a copy of this Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such
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certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on June 17, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
subject to redemption by the Company. Each Preferred Share will be entitled to
a minimum preferential quarterly dividend payment of $.01 per share but will be
entitled to an aggregate dividend of 1000 multiplied times the dividend
declared per Common Share. In the event of liquidation, the holder of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $1.00 per share but will be entitled to an aggregate payment of 1000
multiplied times the payment made per Common Share. Each Preferred Share will
have 1000 votes, voting together with the Common Shares. Finally, in the event
of any merger, consolidation or other transaction in which Common Shares are
exchanged, each Preferred Share will be entitled to receive 1000 multiplied
times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
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<PAGE> 55
In the event that the Company is acquired in a merger or other business
combination transaction or 50 percent or more of its consolidated assets or
earning power are sold after a person or group of affiliated or associated
persons has become an Acquiring Person, proper provision will be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number
of shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right. In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter be null and void and nontransferable), will
thereafter have the right to receive upon exercise that number of Common Shares
of the Company having a market value of two times the exercise price of the
Right.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such person
or group of 50 percent or more of the outstanding Common Shares, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group which will have become null and void and nontransferable),
in whole or in part, at an exchange ratio of one Common Share, or one
one-thousandth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. The Company may, but shall not be required to,
issue fractions of a Preferred Share (other than one one-thousandth of a
Preferred Share or any integral multiple thereof, which may, at the election of
the Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the close of business on the tenth day following a
public announcement that an Acquiring Person has become such an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The time at which the Rights are redeemed by the Company is herein
referred to as the "Redemption Date." Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including without
limitation an amendment to lower certain thresholds described above to not less
than the greater of (i) the sum of 0.001 percent and the largest percentage of
the outstanding Common Shares then known by the
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<PAGE> 56
Company to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10 percent, except that from and after such time as
any person or group of affiliated or associated persons becomes an Acquiring
Person no such amendment may adversely affect the interests of the holders of
the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Preferred Shares shall rank, with respect to the payment of
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Company, junior to all other series of preferred stock of the
Company, if any, unless the Board of Directors of the Company shall
specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of any
such other series and the qualifications, limitations and restrictions thereof.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
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