<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 25, 1996
WHOLESOME & HEARTY FOODS, INC.
(Exact Name of Registrant as Specified in its Charter)
OREGON 0-20330 93-0886359
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
975 S.E. SANDY BLVD., SUITE 201
PORTLAND, OREGON 97214
(Address of Principal Executive Offices) (Zip Code)
(503) 238-0109
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Index to Exhibits appears at page 6.
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Item 5. Other Events.
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Adoption of Shareholder Rights Plan.
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On April 25, 1996, the Board of Directors of Wholesome & Hearty Foods,
Inc. (the "Company") declared a dividend of one right (a "Right")for each share
of common stock, no par value (the "Common Shares"), of the Company outstanding
at the close of business on May 20, 1996 (the "Record Date"). As long as the
Rights are attached to the Common Shares, the Company will issue one Right
(subject to adjustment) with each new Common Share so that all such shares will
have attached Rights. When exercisable, each Right will entitle the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the "Preferred Shares") at a price of
$47.00 per one one-hundredth of a Preferred Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement, dated as of April 25, 1996, as the same may be amended from
time to time (the "Rights Agreement"), between the Company and First Chicago
Trust Company of New York as Rights Agent (the "Rights Agent"). The Company has
agreed that, from and after the Distribution Date, the Company will reserve
250,000 Preferred Shares initially for issuance upon exercise of the Rights.
Until the earlier to occur of (i) the 10th day after a public
announcement that any person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the Common Shares or (ii) the 10th day after the
commencement or announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the Common Shares (the earlier of (i) and (ii)
being called the "Distribution Date," whether or not either such date occurs
prior to the Record 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. An Acquiring Person will not include Paul F. Wenner,
together with his affiliates and associates, including, without limitation, the
Paul F. Wenner Charitable Foundation Trust, so long as he or they do not acquire
an additional 5% of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, 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 close of business on the Record Date
upon transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption, exchange, termination or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares, with or without a
copy of this Summary of Rights, 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.
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The Rights are not exercisable until the Distribution Date. The
Rights will expire on April 25, 2006, subject to the Company's right to extend
such date (the "Final Expiration Date"), unless earlier redeemed or exchanged by
the Company or terminated.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled to a minimum preferential quarterly dividend payment of $1.00 per share
but will be entitled to an aggregate dividend of 100 times the dividend, if any,
declared per Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $100.00 per share but will be entitled to an aggregate payment of 100 times
the payment made per Common Share. Each Preferred Share will have 100 votes and
will vote 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 100 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Share's dividend, liquidation and voting
rights, the value of one one-hundredth of a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common Share.
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 or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
In the event that a Person becomes an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Shares approved by
the Board) or if the Company were the surviving corporation in a merger with an
Acquiring Person or any affiliate or associate of an Acquiring Person and the
Common Shares were not changed or exchanged, each holder of a Right, other than
Rights that are or were acquired or beneficially owned by the 15% stockholder
(which Rights will thereafter be void), will thereafter have the right to
receive upon exercise that number of Common Shares having a market value of two
times the then current Purchase Price of the Right. With certain exceptions, in
the event that the Company were acquired in a merger or other business
combination transaction or more than 50% of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the then current Purchase Price of the Right.
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At any time after a Person becomes an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Shares approved by
the Board) and prior to the acquisition by such Acquiring Person of 50% or more
of the outstanding Common Shares, the Board of Directors may cause the Company
to acquire the Rights (other than Rights owned by an Acquiring Person which have
become void), in whole or in part, in exchange for that number of Common Shares
having an aggregate value equal to the Spread (the excess of the value of the
Common Shares issuable upon exercise of a Right after a Person becomes an
Acquiring Person over the Purchase Price) per Right (subject to adjustment).
The Rights may be redeemed in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price") by the Board of Directors at any time
prior to the first date that a Person has become an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Shares approved by
the Board). The redemption of the Rights by the Board of Directors may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. The Company may, at its option,
pay the Redemption Price in cash, Common Shares (based on the current per share
market price at the time of the redemption) or any other form of consideration
deemed appropriate by the Board of Directors. Immediately upon the action of
the Board of Directors of the Company electing to redeem the Rights, the Company
shall make an announcement thereof, and upon such election, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the Company and the Rights Agent may amend or supplement the
Rights Agreement without the approval of any holders of Right Certificates to
cure any ambiguity, to correct or supplement any provision contained therein
which may be defective or inconsistent with any other provisions therein, to
shorten or lengthen any time period under the Rights Agreement (so long as,
under certain circumstances, a majority of Continuing Directors approve such
shortening or lengthening) or so long as the interests of the holders of Right
Certificates (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person) are not adversely affected thereby, to make any other
provisions in regard to matters or questions arising thereunder which the
Company and the Rights Agent may deem necessary or desirable, including but not
limited to extending the Final Expiration Date. The Company may at any time
prior to such time as any Person becomes an Acquiring Person amend the Rights
Agreement to lower the thresholds described above to not less than the greater
of (i) any percentage greater than 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%.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the time that
any Person becomes an Acquiring Person, and any person who is subsequently
elected to the Board if such person is
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recommended or approved by a majority of the Continuing Directors. Continuing
Directors do not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing.
The Rights will cause substantial dilution to a person or group that
acquires 15% or more of the Company's stock on terms not approved by the
Company's Board of Directors. The Rights should not interfere with any merger
or other business combination approved by the Board of Directors at any time
prior to the first date that a Person or group has become an Acquiring Person.
The Rights Agreement specifying the terms of the Rights and the text
of the press release announcing the declaration of the Rights are incorporated
herein by reference as exhibits to this Current Report. The foregoing
description of the Rights is qualified in its entirety by reference to such
exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits.
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4. Rights Agreement, dated as of April 25, 1996, between Wholesome &
Hearty Foods, Inc. and First Chicago Trust Company of New York, which
includes the form of Certificate of Designations of the Series A
Junior Participating Preferred Stock of Wholesome & Hearty Foods, Inc.
as Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Shares as Exhibit C.
99.1 Text of Press Release, dated April 26, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 8, 1996 WHOLESOME & HEARTY FOODS,INC.
By: /s/ RICHARD C. DIETZ
------------------------------
Name: Richard C. Dietz
Title: Executive Vice President,
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Page
----------- ------- ----
4. Rights Agreement, dated as of April 25, 1996, between 7
Wholesome & Hearty Foods, Inc. and First Chicago Trust
Company of New York, which includes the form of
Certificate of Designations of the Series A Junior
Participating Preferred Stock of Wholesome & Hearty
Foods, Inc. as Exhibit A, the form of Right Certificate
as Exhibit B and the Summary of Rights to Purchase
Preferred Shares as Exhibit C.
99.1 Text of Press Release, dated April 26, 1996. 59
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EXHIBIT 4
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WHOLESOME & HEARTY FOODS, INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
as Rights Agent
Rights Agreement
Dated as of April 25, 1996
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RIGHTS AGREEMENT
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This Rights Agreement, dated as of April 25, 1996, is by and between
Wholesome & Hearty Foods, Inc., an Oregon corporation (the "Company"), and First
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Chicago Trust Company of New York, a Delaware corporation, as Rights Agent (the
"Rights Agent").
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RECITALS
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The Board of Directors of the Company has authorized and declared a
dividend of one right (a "Right") for each Common Share (as defined in Section
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1.6) of the Company outstanding at the close of business on May 20, 1996 (the
- - ---
"Record Date") and has authorized the issuance of one Right (subject to
- - ------------
adjustment as provided herein) 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 (as such terms are
defined in Sections 3.1 and 7.1), each Right initially representing the right to
------------ ---
purchase one one-hundredth of a share of Series A Junior Participating Preferred
Stock (the "Preferred Shares") of the Company having the rights, powers and
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preferences set forth in the form of Certificate of Designations attached hereto
as Exhibit A, upon the terms and subject to the conditions hereinafter set
forth.
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 Rights
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Agreement, the following terms have the meanings indicated:
1.1 "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 15% or more of the Common Shares
of the Company then outstanding, but shall not include: (i) the Company; (ii)
any Subsidiary of the Company; (iii) any employee benefit plan of the Company or
of any Subsidiary of the Company or any entity holding shares of capital stock
of the Company for or pursuant to the terms of any such plan, in its capacity as
an agent or trustee for any such plan; or (iv) any Exempt Person, unless such
Exempt Person after the date hereof becomes the Beneficial Owner of more than
the Exempt Percentage of the Common Shares of the Company then outstanding.
"Exempt Percentage" shall mean, with respect to any Exempt Person, the aggregate
of the percentage of the outstanding Common Shares of the Company that such
Exempt Person beneficially owned on April 25, 1996, plus 5%. "Exempt Person"
shall mean Paul F. Wenner, together with all of his Affiliates and Associates,
including, without limitation, the Paul F. Wenner Charitable Foundation Trust.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of the
Company then outstanding; provided, however, that if a Person shall become the
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Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding solely by reason of share purchases by the Company and shall, after
such share
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purchases 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
Section 1.1, has become such inadvertently, and such Person divests as promptly
- - -----------
as practicable a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, as defined pursuant to the foregoing provisions
of this Section 1.1, then such Person shall not be deemed to be an "Acquiring
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Person" for any purposes of this Agreement (so long as such Person does not
become an Acquiring Person after such divestiture).
1.2 "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations, as in
effect on the date of this Rights Agreement, under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
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1.3 A Person shall be deemed the "Beneficial Owner" of and shall be
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deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether
such right is exercisable immediately, or only after the passage of time,
compliance with regulatory requirements, fulfillment of a condition or
otherwise) pursuant to any agreement, arrangement or understanding, whether
or not in writing (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
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Beneficial Owner of, or to beneficially own, (1) 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 (2) securities which
such Person or any of such Person's Affiliates or Associates may acquire,
does or do acquire or may be deemed to have the right to acquire, pursuant
to any merger or other acquisition agreement between the Company and such
Person (or one or more of his Affiliates or Associates) if such agreement
has been approved by the Board of Directors of the Company prior to such
Person's becoming an Acquiring Person; or (B) the right to vote pursuant to
any agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the Beneficial Owner
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of, or to beneficially own, any security under this clause (B) 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
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proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of 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 (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to Section 1.3(ii)(B)) or disposing of any
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securities of the Company.
1.4 "Business Day" shall mean any day other than a Saturday, Sunday,
------------
or a day on which banking institutions in the State of Oregon are authorized or
obligated by law or executive order to close.
1.5 "close of business" on any given date shall mean 5:00 p.m.,
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Oregon time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 p.m., Oregon time, on the next succeeding
Business Day.
1.6 "Common Shares" when used with reference to the Company shall
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mean the shares of common stock, no par value, of the Company. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such other
Person or, if such Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person, and which has
issued and outstanding such capital stock, equity securities or equity interest.
1.7 "Continuing Director" shall mean (i) any member of the Board of
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Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or an
employee, director, representative, nominee or designee of any Acquiring Person
or of any such Affiliate or Associate, and was a member of the Board prior to
the time that any Person becomes an Acquiring Person, or (ii) any Person (during
such period in which such Person is a member of the Board) who, after the time
that any Person becomes an Acquiring Person, becomes a member of the Board and
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or an employee, director, representative, nominee or designee of an
Acquiring Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors.
1.8 "Person" shall mean any individual, partnership, joint venture,
------
limited liability company, firm, corporation, unassociated association, trust or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
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1.9 "Shares Acquisition Date" shall mean the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that an Acquiring Person has become such or that discloses information
which reveals the existence of an Acquiring Person.
1.10 "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 interests is owned, of record or beneficially, directly or indirectly,
by such Person.
1.11 A "Trigger Event" shall be deemed to have occurred upon any
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Person becoming an Acquiring Person. Notwithstanding the foregoing, a Trigger
Event shall not be deemed to have occurred if the event causing the ownership
thresholds set forth in Section 1.1 to be crossed is an acquisition of Common
Shares made pursuant to a cash tender offer made pursuant to the rules and
regulations under the Exchange Act and filed with the Securities and Exchange
Commission on Schedule 14D-1 (or any successor form) for all outstanding Common
Shares not beneficially owned by the Person making such offer (or by its
Affiliates or Associates) so long as the Board of Directors of the Company
determines, after receiving advice from one or more investment banking firms,
that such offer is (i) at a price and on terms which are fair to stockholders
(taking into account all factors which such members of the Board deem relevant,
including without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize maximum
value) and (ii) otherwise in the best interests of the Company and its
stockholders; provided, however, that there must be Continuing Directors then in
------------------
office and any such determination shall require the concurrence of a majority of
such Continuing Directors.
1.12 The following terms shall have the meanings defined for such
terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- --------
<S> <C>
Adjustment Shares 11.1.2
common stock equivalent 11.1.3
Company Recitals
current per share market price 11.4
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.2
Exchange Consideration 27.1
Exempt Percentage 1.1
Exempt Person 1.1
Final Expiration Date 7.1
Nasdaq 9
Preferred Shares Recitals
Purchase Price 4
Record Date Recitals
</TABLE>
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<TABLE>
<S> <C>
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.1
Rights Agent Recitals
Security 11.4
Spread 11.1.3
Substitution Period 11.1.3
Summary of Rights 3.2
Trading Day 11.4.1
</TABLE>
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, 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. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall determine. Contemporaneously with such appointment, if any, the
Company shall notify the Rights Agent thereof.
Section 3. Issuance of Right Certificates.
--------- ------------------------------
3.1 Rights Evidenced by Share Certificates. Until the earlier of (i)
--------------------------------------
the 10th day after the Shares Acquisition Date or (ii) the 10th day after the
date of the commencement of, or first public announcement of the intent of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding shares of capital stock of the Company for or pursuant to the terms of
any such plan, in its capacity as an agent or trustee for 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 15% or
more of the then outstanding Common Shares of the Company (the earlier of (i)
and (ii) being herein referred to as the "Distribution Date," whether or not
either such date occurs prior to the Record Date), (x) the Rights (unless
earlier expired, redeemed or terminated) will be evidenced (subject to the
provisions of Section 3.2) by the certificates for Common Shares registered in
-----------
the names of the holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying Common
Shares. As soon as practicable after the Distribution Date, the Rights Agent
will send, by first-class, 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, one or more certificates for
Rights, in substantially the form of Exhibit B hereto (a "Right Certificate"),
-----------------
evidencing one Right (subject to adjustment as provided herein) for each Common
Share so held. As of the Distribution Date, the Rights will be evidenced solely
by such Right Certificates.
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3.2 Summary of Rights. On the Record Date or as soon as practicable
-----------------
thereafter, the Company will send or cause to be sent a copy of a Summary of
Rights to Purchase Preferred Shares, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to
-----------------
each record holder of Common Shares as of the close of business on the Record
Date at the address of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of the close of
business on the Record Date, until the Distribution Date (or the earlier
Redemption Date or Final Expiration Date), the Rights will be evidenced by such
certificates for Common Shares registered in the names of the holders thereof
together with a copy of the Summary of Rights and the registered holders of the
Common Shares shall also be registered holders of the associated Rights. Until
the Distribution Date (or the earlier Redemption Date or Final Expiration Date),
the surrender for transfer of any certificate for Common Shares outstanding at
the close of business on the Record Date, with or without a copy of the Summary
of Rights, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
3.3 New Certificates After Record Date. Certificates for Common
----------------------------------
Shares which become outstanding (whether upon issuance out of authorized but
unissued Common Shares, issuance out of treasury or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date, shall
be deemed also to be certificates for Rights, and shall have impressed, printed,
stamped, written or otherwise affixed onto them the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Wholesome & Hearty Foods,
Inc. and First Chicago Trust Company of New York, dated as of April 25,
1996, as the same may be amended from time to time (the "Rights
------
Agreement"), the terms of which are hereby incorporated herein by reference
---------
and a copy of which is on file at the principal executive offices of
Wholesome & Hearty Foods, Inc. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
Wholesome & Hearty Foods, Inc. will mail to the holder of this certificate
a copy of the Rights Agreement without charge after receipt of a written
request therefor. AS DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS WHICH ARE
HELD BY OR HAVE BEEN HELD BY ACQUIRING PERSONS OR ASSOCIATES OR AFFILIATES
THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Redemption Date or Final Expiration Date), the
Rights associated with the Common Shares represented by such certificates shall
be evidenced by such certificates, with or without a copy of the Summary of
Rights, and the surrender for transfer of any such certificates 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
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.
6
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<PAGE>
Section 4. Form of Right Certificates. The Right Certificates (and
--------- --------------------------
the forms of election to purchase Preferred Shares, certification and assignment
to be printed on the reverse thereof) shall be substantially the same as Exhibit
B hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or trading system on which the Rights may from time to time be
listed or quoted, or to conform to usage. Subject to the terms and conditions
hereof, the Right Certificates, whenever issued, shall be dated as of the Record
Date, and shall show the date of countersignature by the Rights Agent, and on
their face shall entitle the holders thereof to purchase such number of one one-
hundredths of a Preferred Share as shall be set forth therein at the price per
one one-hundredth of a Preferred Share set forth therein (the "Purchase Price"),
--------------
but the number of such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
--------- ---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board of
Directors, Chief Executive Officer, President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or any
Assistant Secretary of the Company, either manually or by facsimile signature.
The Right Certificates shall be manually countersigned by an authorized
signatory of the Rights Agent, but it shall not be necessary for the same
signatory to countersign all of the Right Certificates hereunder. No Right
Certificate shall be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, and issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office in Jersey City, New Jersey 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. Subject
- - ---------------------------------------------------------------------
to the provisions of Section 11.1.2 and Section 14, 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 or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
7
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<PAGE>
Rights that have become void pursuant to Section 11.1.2 or that have been
--------------
exchanged pursuant to Section 27) may be transferred, split up or combined or
----------
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a Preferred
Share as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up
or combine or exchange any Right Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender, together with any required
form of assignment and certificate duly completed, the Right Certificate or
Right Certificates to be transferred, split up or combined or exchanged at the
office of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate or Right
Certificates until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate or Right Certificates and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment from the holders of Right
Certificates of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up or combination or
exchange of such Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
--------- ------------------------------------------------------
Rights.
- - ------
7.1 Exercise of Rights. Subject to Section 11.1.3 and except as
------------------ --------------
otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby 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 and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each one one-
hundredth of a Preferred Share as to which the Rights are exercised, at or prior
to the earliest of (i) the close of business on April 25, 2006 (the "Final
-----
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
- - ---------------
Section 23 (the "Redemption Date"), (iii) the closing of any merger or other
- - ---------- ---------------
acquisition transaction involving the Company pursuant to an agreement of the
type described in Section 1.3(ii)(A)(2), at which time the Rights are deemed
---------------------
terminated, or (iv) the time at which the Rights are exchanged as provided in
Section 27.
- - ----------
8
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<PAGE>
7.2 Purchase Price. The Purchase Price for each one one-hundredth of
--------------
a Preferred Share pursuant to the exercise of a Right shall initially be $47.00,
shall be subject to adjustment from time to time as provided in Sections 11, 13
---------------
and 26 and shall be payable in lawful money of the United States of America in
--
accordance with paragraph 7.3.
7.3 Payment Procedures. Upon receipt of a Right Certificate
------------------
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the Purchase Price for
the shares 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, by certified or cashier's check or money order payable to the order
- - ---------
of the Company, the Rights Agent shall thereupon promptly (i)(A) requisition
from any transfer agent of the Preferred Shares (or make available, if the
Rights Agent is the transfer agent) 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 total number of Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one one-
hundredths of a Preferred Share as are 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
hereby directs the depositary agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of the issuance of fractional shares in accordance with Section 14, (iii)
----------
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section 11.1.3, the
--------------
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
7.4 Partial Exercise. In case the registered holder of any Right
----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14.
----------
7.5 Full Information Concerning Ownership. Notwithstanding anything
-------------------------------------
in this Rights 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 Rights upon the occurrence of any purported exercise as set forth in
this Section 7 unless the certificate contained in the form of election to
---------
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with 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.
9
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<PAGE>
Section 8. Cancellation and Destruction of Right Certificates. All
--------- --------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered 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 Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. The
--------- ---------------------------------------------
Company covenants and agrees that from and after the Distribution Date it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares (and, following the occurrence of a Trigger Event, out of its
authorized and unissued Common Shares or other securities or out of its shares
held in its treasury) the number of Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) that will
be sufficient to permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) issuable upon the exercise
of Rights may be listed on any national securities exchange or traded in the
over-the-counter market and quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq"), the Company shall use its
------
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
or so traded in such over-the-counter market, upon official notice of issuance
upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates for Preferred Shares (or Common Shares and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until any such tax shall have been paid
(any such tax
10
Page 17 of 61
<PAGE>
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 and/or other securities,
as the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
------------------
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
---------- --------------------------------------------------------
of Rights. The Purchase Price, the number of shares covered by each Right and
- - ---------
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
----------
11.1 Post Execution Events.
---------------------
11.1.1 Corporate Dividends, Reclassifications, Etc. In the event the
-------------------------------------------
Company shall at any time after the date of this Rights 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 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 11.1,
------------
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 Preferred Shares transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both Section 11.1.1 and
--------------
Section 11.1.2, the adjustment provided for in this Section 11.1.1 shall be in
- - -------------- --------------
addition to, and shall be made prior to, the adjustment required pursuant to,
Section 11.1.2.
- - --------------
11.1.2 Acquiring Person Events; Triggering Events. Subject to
------------------------------------------
Sections 23.1 and 27 of this Agreement, in the event
- - ------------- --
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Rights Agreement,
directly or
11
Page 18 of 61
<PAGE>
indirectly, shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of
such merger or combination and the Common Shares of the Company shall
remain outstanding and not be changed into or exchanged for stock or other
securities of any other Person or the Company or cash or any other
property, or
(B) that a Trigger Event occurs,
then, from and after the first occurrence of such event, each holder of a Right,
except as provided below, shall thereafter have a right to receive, upon
exercise thereof at a price per Right equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2), in
--------------
accordance with the terms of this Rights Agreement, such number of Common Shares
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2) and (y)
--------------
dividing that product by 50% of the current per share market price of the Common
Shares (determined pursuant to Section 11.4) on the first of the date of the
------------
occurrence of, or the date of the first public announcement of, one of the
events listed above in this Section 11.1.2 (the "Adjustment Shares"); provided,
-------------- ----------------- ---------
however, that if the transaction that would otherwise give rise to the foregoing
- - --------
adjustment is also subject to the provisions of Section 13, then only the
----------
provisions of Section 13 shall apply and no adjustment shall be made pursuant to
----------
this Section 11.1.2; provided, further, that the Purchase Price and the number
-------------- ------------------
of Adjustment Shares shall thereafter be subject to further adjustment pursuant
to Section 11.1.1 hereof. Notwithstanding the foregoing, upon the occurrence of
--------------
either of the events listed above in this Section 11.1.2, any Rights that are or
--------------
were acquired or beneficially owned by (1) an Acquiring Person or any Associate
or Affiliate thereof, (2) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (3) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of this Section 11.1.2, shall
--------------
become void, and any holder (whether or not such holder is an Acquiring Person
or an Associate or Affiliate of an Acquiring Person) of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Rights Agreement or otherwise. The Company shall not enter into any transaction
of the type described in this Section 11.1.2 if at the time of such transaction
--------------
there are any rights, warrants, instruments or securities outstanding or any
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. Any Right Certificate issued pursuant to Section 3 or Section 22 that
--------- ----------
represents Rights beneficially owned by: (1) an Acquiring Person or any
Associate or Affiliate thereof, (2) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (3) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a
12
Page 19 of 61
<PAGE>
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of this Section 11.1.2, and any Right
--------------
Certificate issued pursuant to Section 6, 7.4 or 22 or this Section 11 upon
-------------- -- ----------
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall contain the following legend (provided,
---------
however, that the Rights Agent shall not be responsible for affixing such legend
- - --------
unless it has actual knowledge as to the foregoing circumstances or the Company
has notified the Rights Agent in writing thereof):
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE HELD OR HAVE BEEN
HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON OR AN AFFILIATE OR
AN ASSOCIATE OF AN ACQUIRING PERSON OR A NOMINEE THEREOF. THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY HAVE BECOME NULL AND
VOID AS SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT.
--------------
The Company shall use all reasonable efforts to insure that the
provisions of this Section 11.1.2 are complied with, but shall have no liability
--------------
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to any Acquiring Person or its
Affiliates, Associates or transferees hereunder.
11.1.3 Insufficient Shares. In the event that upon the occurrence of
-------------------
one or more of the events listed in Section 11.1.2 above there shall not be
--------------
sufficient Common Shares authorized but unissued, or held by the Company as
treasury shares, to permit the exercise in full of the Rights in accordance with
the foregoing Section 11.1.2, the Company shall take all such action as may be
--------------
necessary to authorize additional Common Shares for issuance upon exercise of
the Rights, provided, however, that if the Company determines that it is unable
------------------
to cause the authorization of a sufficient number of additional Common Shares,
then, in the event the Rights become exercisable, the Company, with respect to
each Right and to the extent necessary and permitted by applicable law and any
agreements or instruments in effect on the date hereof to which it is a party,
shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), over (2) the
-------------
Purchase Price (such excess, 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) Common Shares or 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 Common Shares)
(each such share of preferred stock constituting a "common stock equivalent")),
-----------------------
(4) debt securities of the Company, (5) other assets or (6) any combination of
the foregoing having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, that if
------------------
the Company shall not have made adequate provision to deliver value
13
Page 20 of 61
<PAGE>
pursuant to clause (B) above within thirty (30) days following the first
occurrence of one of the events listed in Section 11.1.2 above, 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 in the aggregate are equal to the
Spread. If the Board of Directors of the Company shall determine in good faith
that it is unlikely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended and re-extended to the extent necessary, but not
more than ninety (90) days following the first occurrence of one of the events
listed in Section 11.1.2 above, in order that the Company may seek stockholder
--------------
approval for the authorization of such additional shares (such period as may be
extended, the "Substitution Period"). To the extent that the Company determines
-------------------
that some action need be taken pursuant to the first and/or second sentences of
this Section 11.1.3, the Company (x) shall provide that such action shall apply
--------------
uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11.1.3, the
--------------
value of a Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) on the date of the first occurrence of one
------------
of the events listed in Section 11.1.2 above and the value of any "common stock
--------------
equivalent" shall be deemed to have the same value as the Common Shares on such
date.
11.2 Dilutive Rights Offering. 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 forty-five (45)
calendar days after such record date) to subscribe for or purchase Preferred
Shares (or securities having the same rights, privileges and preferences as the
Preferred Shares ("equivalent preferred stock")) or securities convertible into
--------------------------
Preferred Shares or equivalent preferred stock at a price per share of Preferred
Shares or per share of equivalent preferred stock (or having a conversion or
exercise price per share, if a security convertible into or exercisable for
Preferred Shares or equivalent preferred stock) less than the current per share
market price of the Preferred Shares (as defined in Section 11.4) on such record
------------
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
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 stock to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current per share 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 equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be
14
Page 21 of 61
<PAGE>
binding on the Rights Agent and the holders of the Rights. Preferred Shares
owned by or held for the account of the Company or any Subsidiary of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
11.3 Distributions. 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, cash, securities or assets (other than a regular periodic cash
dividend at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A) hereof)) or convertible
-----------------
securities, or subscription rights or warrants (excluding those referred to in
Section 11.2), the Purchase Price to be in effect after such record date shall
- - ------------
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current per
share market price of the Preferred Shares (as defined in Section 11.4) on such
------------
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets,
securities 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. 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.
11.4 Current Per Share Market Value.
------------------------------
11.4.1 General. For the purpose of any computation hereunder, the
-------
"current per share market price" of any security (a "Security" for the purpose
--------
of this Section 11.4.1) on any date shall be deemed to be the average of the
--------------
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
------------------
price of the Security is determined during any period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the ex-
dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
"current 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
15
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<PAGE>
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 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. If on any such date no such
market maker is making a market in the Security, the fair value of the Security
on such date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on which the
-----------
principal national securities exchange on which the 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. If the Security is not publicly held or not 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 or, if at the
time of such determination there is an Acquiring Person, by a majority of the
Continuing Directors then in office, or if there are no Continuing Directors, by
a nationally recognized investment banking firm selected by the Board of
Directors, which shall have the duty to make such determination in a reasonable
and objective manner, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
11.4.2 Preferred Shares. Notwithstanding Section 11.4.1, for the
---------------- --------------
purpose of any computation hereunder, the "current per share market price" of
the Preferred Shares shall be determined in the same manner as set forth above
in Section 11.4.1 (other than the last sentence thereof). If the current per
--------------
share market price of the Preferred Shares cannot be determined in the manner
described in Section 11.4.1, the "current per share market price" of the
--------------
Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the current per share market
price of the Common Shares. If neither the Common Shares nor the Preferred
Shares is publicly held or so listed or traded, "current per share market price"
of the Preferred Shares shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, or, if at the time of such
determination there is an Acquiring Person, by a majority of the Continuing
Directors then in office, or if there are no Continuing Directors, by a
nationally recognized investment banking firm selected by the Board of Directors
of the Company, which shall have the duty to make such determination in a
reasonable and objective manner, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
For purposes of this Agreement, the "current per share market price" of one one-
hundredth of a Preferred Share shall be equal to the "current per share market
price" of one Preferred Share divided by 100.
11.5 Insignificant Changes. No adjustment in the Purchase Price
---------------------
shall be required unless such adjustment would require an increase or decrease
of at least 1% in such
16
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<PAGE>
price. Any adjustments which by reason of this Section 11.5 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-millionth of a Preferred Share or the nearest ten-
thousandth of a Common Share, as the case may be.
11.6 Shares Other Than Preferred Shares. If as a result of an
----------------------------------
adjustment made pursuant to Section 11.1, 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 Sections 11.1
-------------
through 11.3, inclusive, and the provisions of Sections 7, 9, 10 and 13 with
---- ----------------- --
respect to the Preferred Shares shall apply on like terms to any such other
shares.
11.7 Rights Issued Subsequent to Adjustment. All Rights originally
--------------------------------------
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8 Effect of Adjustments. Unless the Company shall have exercised
---------------------
its election as provided in Section 11.9, upon each adjustment of the Purchase
------------
Price as a result of the calculations made in Sections 11.2 and 11.3, each Right
------------- ----
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one one-
hundredths of a Preferred Share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
11.9 Adjustment in Number of Rights. 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-hundredths
of a Preferred Share issuable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one one-hundredths of a 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 ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least ten (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
17
Page 24 of 61
<PAGE>
Section 11.9, 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, 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 may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
11.10 Right Certificates Unchanged. Irrespective of any adjustment
----------------------------
or change in the Purchase Price or the number of one one-hundredths 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 per
share and the number of one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued hereunder.
11.11 Par Value Limitations. Before taking any action that would
---------------------
cause an adjustment reducing the Purchase Price below one one-hundredth 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.
11.12 Deferred Issuance. 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 upon the occurrence of the event requiring such
adjustment.
11.13 Reduction in Purchase Price. 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 determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares
at less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or exchangeable
for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Preferred Shares
- - ----------
shall not be taxable to such stockholders.
18
Page 25 of 61
<PAGE>
11.14 Company not to Diminish Benefits of Rights. The Company
------------------------------------------
covenants and agrees that after the Distribution Date it will not, except as
permitted by Section 26, take (or permit any Subsidiary to take) any action if
----------
at the time such action is taken it is reasonably foreseeable that such action
will substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
11.15 Adjustment of Rights Associated with Common Shares.
--------------------------------------------------
Notwithstanding anything contained in this Agreement to the contrary, in the
event that the Company shall at any time after the date hereof and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding Common
Shares payable in Common Shares, (ii) effect a subdivision or consolidation of
the outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares), or (iii) combine the outstanding
Common Shares into a greater or lesser number of Common Shares, then in any such
case, the number of Rights associated with each Common Share then outstanding,
or issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction, the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. The adjustments
provided for in this Section 11.15 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 Adjusted Purchase Price or Number of
---------- ---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13, 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 in accordance with Section 25.
----------
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
---------- ------------------------------------------------------
Earning Power.
- - -------------
13.1 General. In the event that, from and after the first occurrence
-------
of a Trigger Event, directly or indirectly, (A) the Company shall consolidate
with, or merge with and into, any other Person and the Company shall not be the
continuing or surviving corporation, (B) 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
stock or other securities of the Company or any other Person or cash or any
other property, or (C) the Company shall sell, exchange, mortgage or otherwise
transfer (or one or more of its Subsidiaries shall sell, exchange, mortgage or
otherwise transfer), in one or more transactions,
19
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<PAGE>
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons, then, and in each such case, proper provision shall be made so that (i)
each holder of a Right (except as provided in Section 11.1.2 and as otherwise
--------------
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price per Right equal to the then current Purchase Price multiplied
by the number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
---------------------------------------
11.12), in accordance with the terms of this Rights Agreement and in lieu of
- - -----
Preferred Shares, such number of Common Shares of such other Person (including
the Company as successor thereto or as the surviving corporation) as shall be
equal to the result obtained by (x) multiplying the then current Purchase Price
by the number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
---------------------------------------
11.12) and (y) dividing that product by 50% of the then current per share market
- - -----
price of the Common Shares of such other Person (determined pursuant to Section
-------
11.4) on the date of consummation of such consolidation, merger, sale or
- - ----
transfer; provided, that the price per Right so payable and the number of Common
--------
Shares of such Person so purchasable shall thereafter be adjusted in accordance
with Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12 by reason of such
--------------------------------------- -----
subsequent events covered thereby occurring in respect of such Person; (ii) the
issuer of such Common Shares 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 Rights Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such issuer; and (iv) such
- - --------
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9) 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 its Common Shares thereafter deliverable upon the exercise of
the Rights. 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 Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
provisions of this Section 13 shall similarly apply to successive mergers or
----------
consolidations or sales or other transfers.
13.2 Approved Acquisitions. Notwithstanding anything contained
---------------------
herein to the contrary, in the event of any merger or other acquisition
transaction involving the Company pursuant to a merger or other acquisition
agreement between the Company and any Person (or one or more of such Person's
Affiliates or Associates) which agreement has been approved by the Board of
Directors of the Company prior to any Person becoming an Acquiring Person, this
Rights Agreement and the rights of holders of Rights hereunder shall be
terminated in accordance with Section 7.1.
-----------
20
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<PAGE>
Section 14. Fractional Rights and Fractional Shares.
---------- ---------------------------------------
14.1 Cash in Lieu of Fractional Rights. The Company shall not be
---------------------------------
required to issue fractions of Rights or to distribute Right Certificates which
evidence fractional Rights. In lieu of such fractional Rights, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Right. For the
purposes of this Section 14.1, 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 on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
14.2 Cash in Lieu of Fractional Shares. The Company shall not be
---------------------------------
required to issue fractions of Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share) upon exercise of
the Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share). Fractions of Preferred Shares in integral multiples of
one one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, that such agreement shall
--------
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current per share market price of one
Preferred Share. For purposes of this Section 14.2, the current per share
------------
market price of a Preferred Share shall be the closing price of a Preferred
Share (as determined pursuant to the second sentence of Section 11.4.2) for the
--------------
Trading Day immediately prior to the date of such exercise.
14.3 Waiver of Right to Receive Fractional Rights or Shares. The
------------------------------------------------------
holder of a Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise of a Right,
except as permitted by this Section 14.
----------
21
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<PAGE>
Section 15. Rights of Action. All rights of action in respect of
---------- ----------------
this Rights Agreement, except the rights of action given to the Rights Agent
under Section 18, 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 this Rights Agreement, and may institute and maintain any suit,
action or proceeding against the Company to enforce this Rights Agreement, or
otherwise enforce or 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 Rights 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 Rights Agreement and shall be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person (including, without limitation, the
Company) subject to this Rights Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
---------- --------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) as of and after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer with all required certifications
completed; and
(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 Certificates 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.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
---------- -------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the 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 shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24), or to receive dividends or
----------
22
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<PAGE>
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------- ---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder in accordance with a fee schedule to be mutually agreed upon 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 Rights Agreement and the exercise and performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, or expense, incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Rights Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or the Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------- ---------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Rights
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. In case at the time such successor Rights Agent shall succeed to
- - ----------
the agency created by this Rights 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 Rights Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name
23
Page 30 of 61
<PAGE>
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 Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
---------- ----------------------
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
20.1 Legal Counsel. The Rights Agent may consult with legal counsel
-------------
selected by it (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.
20.2 Certificates as to Facts or Matters. Whenever in the
-----------------------------------
performance of its duties under this Rights 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 of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer, the Secretary or any Assistant Treasurer or Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
20.3 Standard of Care. The Rights Agent shall be liable hereunder
----------------
only for its own negligence, bad faith or willful misconduct.
20.4 Reliance on Rights Agreement and Right Certificates. The Rights
---------------------------------------------------
Agent shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Rights Agreement or in the Right Certificates (except
as to 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.
20.5 No Responsibility as to Certain Matters. The Rights Agent shall
---------------------------------------
not be under any responsibility in respect of the validity of this Rights
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
Rights Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights becoming
void pursuant to Section 11.1.2) or any adjustment required under the provisions
--------------
of Sections 3, 11, 13, 23 or 27 or responsible for the manner, method or amount
---------------------- --
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or
24
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<PAGE>
reservation of any Preferred Shares to be issued pursuant to this Rights
Agreement or any Right Certificate or as to whether any Preferred Shares will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
20.6 Further Assurance by Company. 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 Rights
Agreement.
20.7 Authorized Company Officers. 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 of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Rights Agreement, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for these instructions. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken or
omitted. The Rights Agent shall not be liable to the Company for any action
taken or omitted in accordance with a proposal included in any such application
on or after the date specified therein (which date shall not be less than three
business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking of any such action (or the effective date
in the case of omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
20.8 Freedom to Trade in Company Securities. The Rights Agent and
--------------------------------------
any shareholder, director, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Rights Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
20.9 Reliance on Attorneys and Agents. 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, omission, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, omission, default, neglect or misconduct,
provided that reasonable care was exercised in the selection and continued
- - --------
employment thereof.
25
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<PAGE>
20.10 Rights Holders List. At any time and from time to time after
-------------------
the Distribution Date, upon the request of the Company, the Rights Agent shall
promptly deliver to the Company a list, as of the most recent practicable date
(or as of such earlier date as may be specified by the Company), of the holders
of record of Rights.
Section 21. Change of Rights Agent. The Rights Agent or any
---------- ----------------------
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon thirty (30) days' notice in writing mailed to the Company
and to each transfer agent of the Common Shares and/or Preferred Shares, as
applicable, by registered or certified mail. The Company shall promptly notify
the holders of the Right Certificates by first-class mail of any such
resignation. The Company may remove the Rights Agent or any successor Rights
Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and/or Preferred Shares, as applicable, by registered or certified
mail, and to the holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the resigning, removed, or incapacitated Rights Agent shall remit to the
Company, or to any successor Rights Agent designated by the Company, all books,
records, funds, certificates or other documents or instruments of any kind then
in its possession which were acquired by such resigning, removed or
incapacitated Rights Agent in connection with its services as Rights Agent
hereunder, and shall thereafter be discharged from all duties and obligations
hereunder. Following notice of such removal, resignation or incapacity, the
Company shall appoint a successor to such Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (A) a corporation
organized and doing business under the laws of the United States or of the State
of New York (or any other state of the United States so long as such corporation
is authorized to do business as a banking institution in the State of New York
in good standing, having a principal office in the State of New York, 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 or (B) an affiliate of a corporation described
in clause (A) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and/or Preferred Shares, as applicable, and mail a notice
thereof in writing to the registered holders of the Right Certificates. Failure
to give any notice provided for in this Section 21, however, or any defect
----------
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
26
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<PAGE>
Section 22. Issuance of New Right Certificates. Notwithstanding any
---------- ----------------------------------
of the provisions of this Rights 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 to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement. In addition, in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the exchange, termination or expiration of the Rights, the
Company (a) shall, with respect to Common Shares so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, granted
or awarded as of the Distribution Date, or upon exercise, conversion or exchange
of securities hereinafter issued by the Company, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of Directors of the Company,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) 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, (ii) 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 and (iii) at the time of a
determination by the Board of Directors to cause the Company to issue a Right
Certificate under clause (b) above, there must be Continuing Directors then in
office and any such determination shall require the approval of at least a
majority of such Continuing Directors.
Section 23. Redemption.
---------- ----------
23.1 Right to Redeem. The Board of Directors of the Company may, at
---------------
its option, at any time prior to the occurrence of a Trigger Event, redeem all
but not less than all of the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend, recapitalization 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 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 Company may, at its option,
pay the Redemption Price in cash, Common Shares (based on the current per share
market price at the time of the redemption) or any other form of consideration
deemed appropriate by the Board of Directors. Anything contained in this Rights
Agreement to the contrary notwithstanding, the Rights shall not be exercisable
following a transaction or event described in Section 11.1.2 prior to the
--------------
expiration of the Company's right of redemption hereunder. In the event that,
pursuant to the last sentence of Section 1.1, the Board of Directors determines
that a person has become an Acquiring Person inadvertently, and such person
divests Common Shares in accordance with such sentence, then the Company's right
of redemption hereunder shall be deemed to have not expired as a result of such
inadvertent acquisition.
23.2 Redemption Procedures. Immediately upon the action of the Board
---------------------
of Directors of the Company ordering the redemption of the Rights, and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right
27
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<PAGE>
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Within ten (10) days after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give, or
cause the Rights Agent to 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. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. 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 27, and other than in connection with the purchase, acquisition or
- - ----------
redemption of Common Shares prior to the Distribution Date.
Section 24. Notice of Certain Events. In case the Company shall
---------- ------------------------
propose at any time after the Distribution Date (a) to pay any dividend payable
in stock of any class to the holders of Preferred Shares or to make any other
distribution to the holders of Preferred Shares (other than a regular periodic
cash dividend at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividends, or a stock dividend on, or a
subdivision, combination or reclassification of the Common Shares), or (b) to
offer to the holders of Preferred Shares rights or warrants to subscribe for or
to purchase any additional Preferred Shares or shares of stock of any class or
any other securities, rights or options, or (c) to effect any reclassification
of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), or (d) 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% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person (other than
pursuant to a merger or other acquisition agreement of the type described in
Section 1.3(ii)(A)(2)), or (e) to effect the liquidation, dissolution or winding
- - ---------------------
up of the Company, or (f) to declare or pay any dividend on the Common Shares
payable in Common Shares or to effect a 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 the Rights Agent and to each holder of a Right Certificate, in
accordance with Section 25, a notice of such proposed action, which shall
----------
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the Preferred Shares
and/or Common 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 (a) or (b) above at least
ten (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 ten (10) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the Preferred Shares and/or
Common Shares, whichever shall be the earlier.
28
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<PAGE>
In case any event set forth in Section 11.1.2 of this Rights Agreement
--------------
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 25, a notice of the occurrence of such
----------
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11.1.2, and (ii) all references in this
--------------
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
- - ----------
Shares and/or, if appropriate, other securities.
Notwithstanding anything in this Rights Agreement to the contrary,
prior to the Distribution Date a filing by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Rights
Agreement and no other notice need be given.
Section 25. Notices. Notices or demands authorized by this Rights
---------- -------
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:
Wholesome & Hearty Foods, Inc.
975 S.E. Sandy Boulevard, Suite 201
Portland, Oregon 97214
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
----------
Rights 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:
First Chicago Trust Company of New York
P.O. Box 2507, Suite 4660
Jersey City, New Jersey 07303-2507
Attention: Tenders & Exchanges Administration
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution
---------- --------------------------
Date and subject to the last sentence of this Section 26, the Company and the
----------
Rights Agent may, if the Company so directs, supplement or amend any provision
of this Rights Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the last sentence of this Section 26, the Company and the Rights Agent may from
----------
time to time supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates (i) to cure any ambiguity or to correct or
supplement any
29
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<PAGE>
provision contained herein which may be defective or inconsistent with any other
provisions herein, (ii) to shorten or lengthen any time period hereunder (which
shortening or lengthening, after the time a Person becomes an Acquiring Person,
shall be effective only if there are Continuing Directors and shall require the
approval of at least a majority of such Continuing Directors) or (iii) so long
as the interests of the holders of the Right Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person) are not
adversely affected thereby, to make any other changes or provisions in regard to
matters or questions arising hereunder which the Company and the Rights Agent
may deem necessary or desirable, including but not limited to extending the
Final Expiration Date. 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 26, the Rights Agent shall execute
----------
such supplement or amendment. Without limiting the foregoing, at any time prior
to such time as any Person becomes an Acquiring Person, the Company and the
Rights Agent may amend this Agreement to lower the thresholds set forth in
Sections 1.1 and 3.1 to not less than the greater of (i) any percentage greater
- - ------------ ---
than 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 for or pursuant
to the terms of any such plan) and (ii) 10%.
Section 27. Exchange.
---------- --------
27.1 Exchange of Common Shares for Rights. The Board of Directors of
------------------------------------
the Company may, at its option, at any time after the occurrence of a Trigger
Event, exchange Common Shares for all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11.1.2) by exchanging that number of
--------------
Common Shares having an aggregate value equal to the Spread (with such value
being based on the current per share market price (as determined pursuant to
Section 11.4) on the date of the occurrence of a Trigger Event) per Right,
- - ------------
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such amount per Right being
hereinafter referred to as the "Exchange Consideration"). Notwithstanding the
----------------------
foregoing, (i) the Board of Directors 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 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% or more of the Common Shares then outstanding and (ii)
the Board shall not be empowered to effect an exchange for more than that number
of Rights for which there are sufficient Common Shares authorized but unissued,
or held by the Company as treasury shares, to permit the exchange for Rights.
27.2 Exchange Procedures. Immediately upon the action of the Board
-------------------
of Directors of the Company ordering the exchange for any Rights pursuant to
Section 27.1 and without any further action and without any notice, the right to
- - ------------
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the
30
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<PAGE>
Exchange Consideration. 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 of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of 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 the Rights which have become void
pursuant to the provisions of Section 11.1.2) held by each holder of Rights.
--------------
27.3 No Fractional Shares Upon Exchange. The Company shall not be
----------------------------------
required to issue fractions of Common Shares or to distribute certificates which
evidence fractional Common Shares. In lieu of such fractional Common Shares,
the Company shall pay to the registered holders of the Right Certificates, with
regard to which such fractional Common Shares would otherwise be issuable, in an
amount in cash equal to the same fraction of the current market value of a whole
Common Share. For the purposes of this Section 27.3, the current market value
------------
of a whole Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) for the Trading Day immediately prior to
------------
the date of exchange pursuant to this Section 27.
----------
Section 28. Successors. All the covenants and provisions of this
---------- ----------
Rights Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this
---------- ---------------------------------
Rights Agreement shall be construed to give to any Person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Rights Agreement; but this Rights
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, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
---------- ------------
restriction of this Rights 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 Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 31. Governing Law. This Rights Agreement and each Right
---------- -------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Oregon 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.
31
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<PAGE>
Section 32. Counterparts. This Rights Agreement may be executed in
---------- ------------
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Heading. Descriptive headings of the several
---------- -------------------
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
[Signature Page to Follow]
32
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
WHOLESOME & HEARTY FOODS, INC.
By: /s/ RICHARD C. DIETZ
-----------------------------------
Name: Richard C. Dietz
Title: Executive Vice President,
Chief Financial Officer
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ RALPH PERSICO
------------------------------------
Name: Ralph Persico
Title: Customer Service Officer
33
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<PAGE>
Exhibit A
---------
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
WHOLESOME & HEARTY FOODS, INC.
(Pursuant to Section 60.134 of the
Oregon Revised Statutes)
_____________________________
Wholesome & Hearty Foods, Inc., a corporation organized and existing under
the Revised Statutes of the State of Oregon (hereinafter called the
"Corporation."), hereby certifies that the following resolution was adopted by
- - -------------
the Board of Directors of the Corporation as required by Section 60.134 of the
Oregon Business Corporation Act at a meeting duly called and held on April 25,
1996.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
------------------
the "Board") in accordance with the provisions of the Articles of Incorporation,
-----
the Board of Directors hereby creates a series of Preferred Stock, no par value
(the "Preferred Stock") of the Corporation, and hereby states the designation
---------------
and number of shares, and fixes the relative rights, preferences, and
limitations thereof as follows:
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") and the number of shares constituting the Series A Preferred
- - ---------------
Stock shall be 250,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
--------
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
1
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<PAGE>
Section 2. Dividends and Distributions.
- - --------- ---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
no par value (the "Common Stock") of the Corporation, and of any other
------------
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of April, July,
October, and January in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
-------------------------------
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with 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. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
---------
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of
2
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<PAGE>
issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares
at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock entitled
to receive payment of 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.
Section 3. Voting Rights. The holders of shares of Series A Preferred
--------- -------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by 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 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
3
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<PAGE>
of Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on 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 junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or 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 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 cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Certificate of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------- --------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of
4
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<PAGE>
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 $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of 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 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. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------- --------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
--------- -------------
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
--------- ----
the payment of dividends and the distribution of assets, junior to all series of
any other class of the
5
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<PAGE>
Corporation's Preferred Stock, except to the extent that any such other series
specifically provides that it shall rank on a parity with or junior to the
Series A Preferred Stock.
Section 10. Amendment. The Articles of Incorporation of the Corporation
---------- ---------
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
6
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<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its _______________________________ this ___ day of
__________, 1996.
______________________________
Name:
Title:
7
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<PAGE>
EXHIBIT B
---------
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER APRIL 25, 2006 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO AN
AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(2) OF THE RIGHTS
AGREEMENT. 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.
UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS
----------------------------------------------------------------------
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, OR ITS
--------------------------------------------------------------------
AFFILIATES OR ASSOCIATES, OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
---------------------------------------------------------------------
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE HELD
--------------------
OR HAVE BEEN HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON OR AN
ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON OR A NOMINEE THEREOF. THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY HAVE BECOME NULL AND
VOID AS SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT.]
Right Certificate
WHOLESOME & HEARTY FOODS, INC.
This certifies that [__________________], or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of April 25, 1996, as the same may be amended
from time to time (the "Rights Agreement"), between Wholesome & Hearty Foods,
----------------
Inc., an Oregon corporation (the "Company"), and First Chicago Trust Company of
-------
New York, a Delaware corporation, as Rights Agent (the "Rights Agent"), to
------------
purchase from the Company at any time after the Distribution Date and prior to
5:00 P.M. (Oregon time) on April 25, 2006, at the offices of the Rights Agent,
or its successors as Rights Agent, designated for such purpose, one one-
hundredth of a fully paid, nonassessable share of Series A Junior Participating
Preferred Stock, no par value (the "Preferred Shares") of the Company, at a
----------------
purchase price of $47.00 per one one-hundredth of a share, subject to adjustment
(the "Purchase Price"), upon presentation and surrender of this Right
--------------
Certificate with the Form of Election to Purchase and certification duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-hundredths of a Preferred Share which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of May 20, 1996 based on the Preferred Shares
as constituted at such date. Capitalized terms used in this Right Certificate
without definition shall have the meanings
1
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<PAGE>
ascribed to them in the Rights Agreement. As provided in the Rights Agreement,
the Purchase Price and the number of Preferred Shares which may be purchased
upon the exercise of the Rights evidenced by this Right Certificate are subject
to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal offices of the Company and the
Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the offices of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of one one-hundredths of a Preferred Share 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 Board of
Directors may, at its option, (i) redeem the Rights evidenced by this Right
Certificate at a redemption price of $.01 per Right at any time prior to the
occurrence of a Trigger Event or (ii) exchange Common Shares for the Rights
evidenced by this Certificate, in whole or in part, after the occurrence of a
Trigger Event.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
If any term, provision, covenant or restriction of the Rights
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the
2
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<PAGE>
remainder of the terms, provisions, covenants and restrictions of the Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
This Right Certificate shall not be valid or binding 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 _______________.
WHOLESOME & HEARTY FOODS, INC.
By By
--------------------------- ----------------------------
Name: Name:
Title: Title:
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By
---------------------------
Name:
Title:
3
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<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _________________________________________ hereby sells,
assigns and transfers unto _____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address
of transferee)
this Right Certificate and the Rights evidenced thereby, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint __________________________ Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: __________________
--------------------------------------
Signature
Signature Guaranteed:
- - -------------------------------
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
4
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<PAGE>
- - --------------------------------------------------------------------------------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof; and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] 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.
Dated: __________________
-----------------------------------
Signature
5
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<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To: WHOLESOME & HEARTY FOODS, INC.
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
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 member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
1
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<PAGE>
- - --------------------------------------------------------------------------------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof; and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned
[ ] 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.
Dated:
---------------
------------------------------
Signature
- - --------------------------------------------------------------------------------
NOTICE
------
The signature in the foregoing Form of Assignment and Form of Election to
Purchase 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 set forth above in the Form of Assignment
or Form of Election to Purchase is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Right Certificate to be an
Acquiring Person or an Affiliate or Associate hereof and, in the case of an
Assignment, will affix a legend to that effect on any Right Certificates issued
in exchange for this Right Certificate.
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<PAGE>
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On April 25, 1996 the Board of Directors of Wholesome & Hearty Foods,
Inc. (the "Company") declared a dividend of one Right for each share of common
-------
stock, no par value (the "Common Shares"), of the Company outstanding at the
-------------
close of business on May 20, 1996 (the "Record Date"). As long as the Rights
-----------
are attached to the Common Shares, the Company will issue one Right (subject to
adjustment) with each new Common Share so that all such shares will have
attached Rights. When exercisable, each Right will entitle the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the "Preferred Shares") at a price of
----------------
$47.00 per one one-hundredth of a Preferred Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
- - ---------------
Rights Agreement, dated as of April 25, 1996, as the same may be amended from
time to time (the "Rights Agreement"), between the Company and First Chicago
----------------
Trust Company of New York as Rights Agent (the "Rights Agent").
------------
Until the earlier to occur of (i) the 10th day after a public
announcement that any person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
- - -----------------
ownership of 15% or more of the Common Shares or (ii) the 10th day after the
commencement or announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the Common Shares (the earlier of (i) and (ii)
being called the "Distribution Date," whether or not either such date occurs
-----------------
prior to the Record 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. An Acquiring Person will not include Paul F. Wenner,
together with his affiliates and associates, including, without limitation, the
Paul F. Wenner Charitable Foundation Trust, so long as he or they do not acquire
an additional 5% of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, 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 close of business on the Record Date
upon transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption, exchange, termination or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares, with or without a
copy of this Summary of Rights, 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.
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<PAGE>
The Rights are not exercisable until the Distribution Date. The Rights
will expire on April 25, 2006, subject to the Company's right to extend such
date (the "Final Expiration Date"), unless earlier redeemed or exchanged by the
---------------------
Company or terminated.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled to a minimum preferential quarterly dividend payment of $1.00 per share
but will be entitled to an aggregate dividend of 100 times the dividend, if any,
declared per Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $100.00 per share but will be entitled to an aggregate payment of 100 times
the payment made per Common Share. Each Preferred Share will have 100 votes and
will vote 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 100 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Share's dividend, liquidation and voting
rights, the value of one one-hundredth of a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common Share.
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 or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
In the event that a Person becomes an Acquiring Person (except pursuant
to certain cash offers for all outstanding Common Shares approved by the Board)
or if the Company were the surviving corporation in a merger with an Acquiring
Person or any affiliate or associate of an Acquiring Person and the Common
Shares were not changed or exchanged, each holder of a Right, other than Rights
that are or were acquired or beneficially owned by the 15% stockholder (which
Rights will thereafter be void), will thereafter have the right to receive upon
exercise that number of Common Shares having a market value of two times the
then current Purchase Price of the Right. With certain exceptions, in the event
that the Company were acquired in a merger or other business combination
transaction or more than 50% of its assets or earning power were sold, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value of two times the
then current Purchase Price of the Right.
2
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<PAGE>
At any time after a Person becomes an Acquiring Person (except pursuant
to certain cash offers for all outstanding Common Shares approved by the Board)
and prior to the acquisition by such Acquiring Person of 50% or more of the
outstanding Common Shares, the Board of Directors may cause the Company to
acquire the Rights (other than Rights owned by an Acquiring Person which have
become void), in whole or in part, in exchange for that number of Common Shares
having an aggregate value equal to the Spread (the excess of the value of the
Common Shares issuable upon exercise of a Right after a Person becomes an
Acquiring Person over the Purchase Price) per Right (subject to adjustment).
The Rights may be redeemed in whole, but not in part, at a price of $.01
per Right (the "Redemption Price") by the Board of Directors at any time prior
----------------
to the first date that a Person has become an Acquiring Person (except pursuant
to certain cash offers for all outstanding Common Shares approved by the Board).
The redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish. The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the current per share market
price at the time of the redemption) or any other form of consideration deemed
appropriate by the Board of Directors. Immediately upon the action of the Board
of Directors of the Company electing to redeem the Rights, the Company shall
make an announcement thereof, and upon such election, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company beyond those as an existing shareholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the Company and the Rights Agent may amend or supplement the
Rights Agreement without the approval of any holders of Right Certificates to
cure any ambiguity, to correct or supplement any provision contained therein
which may be defective or inconsistent with any other provisions therein, to
shorten or lengthen any time period under the Rights Agreement (so long as,
under certain circumstances, a majority of Continuing Directors approve such
shortening or lengthening) or so long as the interests of the holders of Right
Certificates (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person) are not adversely affected thereby, to make any other
provisions in regard to matters or questions arising thereunder which the
Company and the Rights Agent may deem necessary or desirable, including but not
limited to extending the Final Expiration Date. The Company may at any time
prior to such time as any Person becomes an Acquiring Person amend the Rights
Agreement to lower the thresholds described above to not less than the greater
of (i) any percentage greater than 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%.
The term "Continuing Directors" means any member of the Board of
--------------------
Directors of the Company who was a member of the Board prior to the time that
any Person becomes an Acquiring Person, and any person who is subsequently
elected to the Board if such person is
3
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<PAGE>
recommended or approved by a majority of the Continuing Directors. Continuing
Directors do not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
4
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<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Matthew J. Palmer, (503) 238-0109
Richard Dietz, (503) 238-0109
WHOLESOME & HEARTY DECLARES DIVIDEND DISTRIBUTION
OF PREFERRED SHARE PURCHASE RIGHTS
PORTLAND, Ore. (April 26, 1996) -- The board of directors of Wholesome &
Hearty Foods, Inc. (NASDAQ:WHFI) yesterday declared a dividend distribution of
one preferred share purchase right on each outstanding share of Wholesome &
Hearty common stock. Each right will entitle shareholders to buy one one-
hundredth of a share of newly created Series A Junior Participating Preferred
Stock of the company at an exercise price of $47. The rights will be
exercisable if a person or group acquires 15% or more of the company's common
stock or announces a tender offer for 15% or more of the common stock. The
Wholesome & Hearty board will be entitled to redeem the rights at $.01 per
right at any time before a person has acquired 15% or more of the outstanding
common stock.
The rights are not being distributed in response to any specific effort
to acquire control of the company. The rights are designed to assure that all
Wholesome & Hearty shareholders receive fair and equal treatment in the event
of any proposed takeover of the company and to guard against partial tender
offers, open market accumulations and other abusive tactics to gain control of
Wholesome & Hearty without paying all shareholders a control premium.
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Wholesome & Hearty
April 26, 1996
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If a person acquires 15% or more of the outstanding common stock of
Wholesome & Hearty, each right will entitle its holder to purchase, at the
Right's then-current exercise price, a number of common shares of Wholesome &
Hearty having a market value at that time of twice the right's exercise price.
Rights held by the 15% holder will become void and will not be exercisable to
purchase shares at the bargain purchase price. If Wholesome & Hearty is
acquired in a merger or other business combination transaction which has not
been approved by the board of directors, each Right will entitle its holder to
purchase, at the right's then-current exercise price, a number of the
acquiring company's common shares having a market value at that time of twice
the Right's exercise price.
"The rights are intended to enable all Wholesome & Hearty shareholders to
realize the long-term value of their investment in the company. They do not
prevent a takeover, but should encourage anyone seeking to acquire the company
to negotiate with the board of directors prior to attempting a takeover. Over
1,000 other public companies have adopted rights plans in recent years," said
E. Kay Stepp, chairman of the board of directors of Wholesome & Hearty.
The rights provide an exception to the foregoing 15% thresholds for an
existing stockholder which currently beneficially owns approximately 25% of
the outstanding common stock of the company. With respect to that stockholder,
the rights will be exercisable if such stockholder acquires or announces a
tender offer for more than 5% of the company's common stock in addition to
what he currently owns.
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April 26, 1996
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The dividend distribution will be payable to shareholders of record
on May 20, 1996. The rights will expire in ten years. The rights
distribution is not taxable to shareholders.
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