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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
PATTERSON ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2504748
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
4510 Lamesa Highway
Snyder, Texas 79549
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
If this Form relates to the registration of a class of debt securities
and is effective upon filing pursuant to General Instruction A.(c)(1), please
check the following box. / /
If this Form relates to the registration of a class of debt securities
and is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. / /
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
(Title of class)
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Item 1. Description of Securities to Be Registered.
On January 2, 1997, the Board of Directors of Patterson
Energy, Inc., a Delaware corporation (the "Company"),declared a dividend
distribution of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock, par value $.01 per share (the "Common
Shares"), of the Company. The dividend is payable to the stockholders of record
on January 17, 1997 (the "Record Date"), and with respect to Common Shares
issued thereafter until the Distribution Date (as defined below) and, in certain
circumstances, with respect to Common Shares issued after the Distribution Date.
Except as set forth below, each Right, when it becomes exercisable, entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Participating Preferred Stock, $.01 par value (the "Preferred Shares"),
of the Company at a price of $166 per one one-hundredth of a Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Continental Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent"), dated as of January 2, 1997.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares upon the
earliest to occur of (i) a person or group of affiliated or associated persons
having acquired beneficial ownership of 15% or more of the outstanding Common
Shares (except pursuant to a Permitted Offer, as hereinafter defined); or (ii)
10 days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (as hereinafter defined) (the earliest of such
dates being called the "Distribution Date"). A person or group whose acquisition
of Common Shares causes a Distribution Date pursuant to clause (i) above is an
"Acquiring Person." The date that a person or group becomes an Acquiring Person
is the "Shares Acquisition Date."
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 Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Shares
issued after 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 and
will expire at the close of business on January 2, 2007, unless earlier redeemed
by the Company as described below.
In the event that any person becomes an Acquiring Person
(except pursuant to a tender or exchange offer which is for all outstanding
Common Shares at a price and on terms which a majority of certain members of the
Board of Directors determines to be adequate and in the best interests of the
Company, its stockholders and other relevant constituencies, other than such
Acquiring Person, its affiliates and associates (a "Permitted Offer")), each
holder of a Right will thereafter have the right (the "Flip-In Right") to
receive upon exercise the number of Common Shares or, in the discretion of the
Board of Directors of the Company, of one one-hundredths of a Preferred Share
(or, in certain circumstances, other securities of the Company) having a value
(immediately prior to such triggering event) equal to two times the Purchase
Price. Notwithstanding the foregoing, following the occurrence of the event
described above, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void.
In the event that, at any time following the Shares
Acquisition Date, (i) the Company is acquired in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Shares immediately prior to the consummation of the transaction are not the
holders of all of the surviving company's voting power, or (ii) more than 50% of
the Company's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, any other person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the Purchase Price. The
holder of a Right will continue to have the Flip-Over Right whether or not such
holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of Preferred
Shares, Common Shares or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular quarterly cash dividends) or of subscription rights
or warrants (other than those referred to above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in
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Common Shares or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $0.01 per share but, if greater, will
be entitled to an aggregate dividend per share of 100 times the dividend
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 $1.00 per share; thereafter, and after the holders of the Common Shares
receive a liquidation payment of $0.01 per share, the holders of the Preferred
Shares and the holders of the Common Shares will share the remaining assets in
the ratio of 100 to 1 (as adjusted) for each Preferred Share and Common Share so
held, respectively. 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. In the event that the amount
of accrued and unpaid dividends on the Preferred Shares is equivalent to six
full quarterly dividends or more, the holders of the Preferred Shares shall have
the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of the Common Shares until all cumulative
dividends on the Preferred Shares have been paid through the last quarterly
dividend payment date or until non-cumulative dividends have been paid regularly
for at least one year.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are one one-hundredth or integral multiples of one
one-hundredth of a Preferred Share, which may, at the election of the Company,
be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Shares on the last
trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person
becoming an Acquiring Person or (ii) the expiration of the Rights, and under
certain other circumstances, the Company may redeem the Rights in whole, but not
in part, at a price of $0.01 per Right (the "Redemption Price"), which
redemption shall be effective upon the action of the Board of Directors.
Additionally, following the Shares Acquisition Date, the Company may redeem the
then outstanding Rights in whole, but not in part, at the Redemption Price
provided that such redemption is in connection with a merger or other business
combination transaction or series of transactions involving the Company in which
all holders of Common Shares are treated alike but not involving an Acquiring
Person or its affiliates or associates.
All of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
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Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Company, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to this Registration Statement
on Form 8-A. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
Item 2. Exhibits.
1. Restated Certificate of Incorporation of Patterson Energy, Inc.(1)
2. Rights Agreement, dated as of January 2, 1997, between Patterson
Energy, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent,
which includes, as Exhibit A thereto, the Form of Certificate of Designation, as
Exhibit B thereto, the Form of Right Certificate, and as Exhibit C thereto, the
Form of Summary of Rights.
3. Certificate of Designation of Restated Certificate of Incorporation
of Patterson Energy, Inc.
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(1) Incorporated by reference to Item 6 "Exhibits and Reports on Form 8-K"
to Form 10-Q for the quarterly period ended June 30, 1996.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized, as of the 10th
day of January, 1997.
Patterson Energy, Inc.
By: /s/ Cloyce A. Talbott
------------------------------------------
Cloyce A. Talbott
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Description Page
1 Restated Certificate of Incorporation of Patterson
Energy, Inc.(1)
2 Rights Agreement, dated as of January 2, 1997, 8
between Patterson Energy, Inc. and Continental Stock
Transfer & Trust Company, as Rights Agent, which
includes, as Exhibit A thereto, the Form of
Certificate of Designation, as Exhibit B thereto, the
Form of Right Certificate, and, as Exhibit C thereto,
the Form of Summary of Rights.
3 Certificate of Designation of Restated Certificate of 64
Incorporation of Patterson Energy, Inc.
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(1) Incorporated by reference to Item 6 "Exhibits and Reports on Form 8-K"
to Form 10-Q for the quarterly period ended June 30, 1996.
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EXHIBIT 2
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PATTERSON ENERGY, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Rights Agent
RIGHTS AGREEMENT
Dated as of January 2, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Certain Definitions.......................................................... -1-
Section 2. Appointment of Rights Agent.................................................. -5-
Section 3. Issue of Right Certificates.................................................. -5-
Section 4. Form of Right Certificate.................................................... -7-
Section 5. Countersignature and Registration............................................ -7-
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates...................... -8-
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................ -9-
Section 8. Cancellation and Destruction of Right Certificates........................... -11-
Section 9. Reservation and Availability of Preferred Shares............................. -11-
Section 10. Preferred Shares Record Date................................................. -12-
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights........... -12-
Section 12. Certificate of Adjusted Purchase Price or Number of Shares................... -19-
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power......... -20-
Section 14. Fractional Rights and Fractional Shares...................................... -22-
Section 15. Rights of Action............................................................. -23-
Section 16. Agreement of Right Holders................................................... -24-
Section 17. Right Certificate Holder Not Deemed a Stockholder............................ -25-
Section 18. Concerning the Rights Agent.................................................. -25-
</TABLE>
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<TABLE>
<S> <C>
Section 19. Merger or Consolidation or Change of Name of Rights Agent.................... -25-
Section 20. Duties of Rights Agent....................................................... -26-
Section 21. Change of Rights Agent....................................................... -28-
Section 22. Issuance of New Right Certificates........................................... -29-
Section 23. Redemption and Termination................................................... -29-
Section 24. Exchange..................................................................... -31-
Section 25. Notice of Certain Events..................................................... -32-
Section 26. Notices...................................................................... -33-
Section 27. Supplements and Amendments................................................... -33-
Section 28. Determination and Actions by the Board of Directors.......................... -34-
Section 29. Successors................................................................... -35-
Section 30. Benefits of This Agreement................................................... -35-
Section 31. Severability................................................................. -35-
Section 32. Governing Law................................................................ -35-
Section 33. Counterparts................................................................. -35-
Section 34. Descriptive Headings......................................................... -35-
Exhibit A - Form of Certificate of Designation
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights
</TABLE>
-ii-
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RIGHTS AGREEMENT
Rights Agreement, dated as of January 2, 1997, between
PATTERSON ENERGY, INC., a Delaware company (the "Company"), and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY, a New York corporation, (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding at the Close of
Business on January 17, 1997 (the "Record Date"), each Right representing the
right to purchase one one-hundredth of a Preferred Share (as hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right 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 hereinafter defined); provided, however, that Rights may
be issued with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or that,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding (other than as a result of a Permitted Offer) or was such a
Beneficial Owner of 15% or more of the then outstanding Common Shares at any
time after the date hereof, whether or not such person continues to be the
Beneficial Owner of 15% or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (A) the term "Acquiring Person" 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, (iv) any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan, or (v) any Person, who or which together with all
Affiliates and Associates of such Person becomes the Beneficial Owner of 15% or
more of the then outstanding Common Shares as a result of the acquisition of
Common Shares directly from the Company, and (B) no Person shall be deemed to be
an "Acquiring Person" either (X) as a result of the acquisition of Common Shares
by the Company which, by reducing the number of Common Shares
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outstanding, increases the proportional number of shares beneficially owned by
such Person together with all Affiliates and Associates of such Person; except
that if (i) a Person would become an Acquiring Person (but for the operation of
this subclause (X) as a result of the acquisition of Common Shares by the
Company, and (ii) after such share acquisition by the Company, such Person, or
an Affiliate or Associate of such Person, becomes the Beneficial Owner of any
additional Common Shares, then such Person shall be deemed an Acquiring Person,
or (Y) if (i) within eight days after such Person would otherwise have become an
Acquiring Person (but for the operation of this subclause (Y), such Person
notifies the Board of Directors that such Person did so inadvertently, and (ii)
within two Business Days after such notification, such Person is the Beneficial
Owner of less than 15% of the outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended
and as in effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(d) A person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" or have "beneficial ownership" of any
securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other
than these Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to
any agreement, arrangement or understanding; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
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(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(d)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of
beneficial ownership to the contrary, the phrase "then outstanding,"
when used with reference to a Person's beneficial ownership of
securities of the Company, shall mean the number of such securities
then issued and outstanding together with the number of such securities
not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, a
Sunday, a U.S. federal holiday, or a date on which banks in New York state may
be closed.
(f) "Close of Business" on any given date shall mean 5:00
p.m., New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York time, on the next succeeding
Business Day.
(g) "Common Shares," when used with reference to the Company,
shall mean the shares of common stock, par value $.01 per share, of the Company.
"Common Shares," when used with reference to any Person other than the Company,
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
(h) "Continuing Director" shall mean (i) any member of the
Board of Directors of the Company, while such Person is a member of the Board of
Directors, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board prior to the date of this
Agreement, or (ii) any Person who subsequently becomes a member of the Board of
Directors, while such Person is a member of the Board of Directors, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, if
such Person's nomination for election or election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.
(i) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
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(j) "Final Expiration Date" shall have the meaning set forth
in Section 7 hereof.
(k) "Interested Stockholder" shall mean any Acquiring Person
or any Affiliate or Associate of an Acquiring Person or any other Person in
which any such Acquiring Person, Affiliate or Associate has an interest, or any
other Person acting directly or indirectly on behalf of or in concert with any
such Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at least
a majority of the members of the Board of Directors who are not officers of the
Company and who are not Acquiring Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person, to be adequate (taking into account all
factors that such Directors deem relevant including, without limitation, prices
that could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and otherwise in the best
interests of the Company and its stockholders (other than a Person or a
Transaction Person or any Affiliate or Associate thereof on whose basis the
offer is being made) taking into account all factors that such directors may
deem relevant.
(m) "Person" shall mean any individual, firm, company or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A
Participating Preferred Stock, with a par value of $.01 per share of the Company
having the relative rights, preferences and limitations set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) hereof.
(r) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to the Exchange Act) by the Company
or an Acquiring Person that an Acquiring Person has become an Acquiring Person;
provided, that, if such Person is determined not to have become an Acquiring
Person pursuant to Section 1(a)B(Y) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
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(s) "Subsidiary" of any Person shall mean any company or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(t) "Transaction Person" with respect to a Transaction shall
mean (x) any Person who (i) is or will become an Acquiring Person if the
Transaction were to be consummated, and (ii) directly or indirectly proposed or
nominated a director of the Company which director is in office at the time of
consideration of the Transaction, or (y) an Affiliate or Associate of such a
Person.
(u) "Transaction" shall mean any merger, consolidation or sale
of assets described in Section 13(a) hereof or any acquisition of Common Shares
of the Company which would result in a Person becoming a Transaction Person.
(v) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Shares Acquisition Date or
(ii) the tenth business day (or such later date as may be determined by action
of the Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) of, or of the first public announcement
of the intention of any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) to commence, a tender or exchange offer the consummation of which
would result in any Person becoming the Beneficial Owner of Common Shares
aggregating 15% or more of the then outstanding Common Shares (including any
such date which is after the date of this Agreement and prior to the issuance of
the Rights; the earlier of such dates being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates also shall be
deemed to be Right Certificates) and not be separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable only in connection
with the transfer of Common
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Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign and the Company will send
or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter,
the Company will send a copy of a Summary of Rights, in substantially the form
of Exhibit C hereto (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 Record
Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with a copy
of the Summary of Rights attached thereto. Until the Distribution Date (or the
earlier of the Redemption Date and the Final Expiration Date), the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, also shall
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date and the Final Expiration Date
shall have impressed on, printed on, written on or otherwise affixed to them a
legend in substantially the following form:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
Patterson Energy, Inc. and Continental Stock Transfer & Trust
Company, a New York corporation (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 Patterson Energy, 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. Patterson Energy, 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 issued to any Person
who becomes an Acquiring Person (as defined in the Rights
Agreement) shall become null and void.
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<PAGE> 10
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate also shall 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.
Section 4. Form of Right Certificate.
(a) The Right Certificates (and the forms of election to
purchase Common Shares and of 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 Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Right Certificates 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 hundredths of a Preferred Share set
forth therein (the "Purchase Price"), but the number of such shares and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or has become an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement).
Accordingly, this Right Certificate and the Rights represented
hereby are null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, any of its Vice Presidents,
or its Treasurer, either manually or by facsimile
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<PAGE> 11
signature, and shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such 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 Certificate 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 office designated for such purpose, 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 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 4(b), Section 7(e) and Section 14 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates (other than
Right Certificates representing Rights that have become void pursuant to Section
11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may
be transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, 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, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall, subject to Section 4(b), Section
7(e) and Section 14 hereof, countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
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
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<PAGE> 12
Certificate if mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of
any Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certificate 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 (or other securities, as the case may be) as to which the
Rights are exercised, at or prior to the earliest of (i) the Close of Business
on January 2, 2007 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price for each one-one hundredth of a
Preferred Share (or other securities, as the case may be) pursuant to the
exercise of a Right shall initially be $166, shall be subject to adjustment from
time to time as provided in the next sentence and in Sections 11 and 13(a)
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below. Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case, each
Common Share outstanding following such subdivision, combination or
consolidation shall continue to have a Right associated therewith and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price 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 adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the 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 hereof by certified
check, cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) requisition from any transfer agent of
the Preferred Shares
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<PAGE> 13
certificates for the number of one-one hundredths of a Preferred Share (or other
securities, as the case may be) to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates, 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, 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 (including Common Shares) of the Company
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities are available for distribution by the
Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a
holder pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(d) 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 to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) event, any
Rights beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) 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 a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder
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<PAGE> 14
of Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of 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 Preferred Shares.
The Company covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights and,
after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of
a Section 11(a)(ii) Event, Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved from such issuance to be listed
on such exchange 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 (or Common Shares
and/or other securities, as the case may be) delivered upon exercise of Rights
shall, at the time of delivery of the certificates
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<PAGE> 15
for such shares or other securities (subject to payment of the Purchase Price),
be duly and validly authorized and issued and fully paid and non-assessable
shares or securities.
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 or depositary receipts for the Preferred Shares or
Common Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates of Preferred Shares or Common Shares and/or other securities
upon the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the Rights provided by Section 11(a)(ii).
The Company will also take such action as may be appropriate under the blue sky
laws of the various states.
Section 10. Preferred Shares Record Date. Each person in whose
name any certificate for Preferred Shares 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 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 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 on, and such certificate shall be dated,
the next succeeding Business Day on which the applicable transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Common Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the
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<PAGE> 16
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a smaller
number of Preferred Shares or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving company), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of 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, such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with
its Affiliates and Associates, shall become an Acquiring Person, then
proper provision shall be made so that each holder of a Right (except
as provided below and in Section 7(e) hereof) shall, for a period of 60
days after the later of (x) the occurrence of any such event and (y)
the effective date of an appropriate registration statement under the
Act pursuant to Section 9 hereof, have a right to receive, upon
exercise thereof at a price equal to the then current Purchase Price,
in accordance with the terms of this Agreement, such number of Common
Shares (or, in the discretion of the Board of Directors, one
one-hundredth of a Preferred Share) 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 was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and dividing that product by (y) 50% of the then
current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to as 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 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii);
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<PAGE> 17
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued (and unreserved) Common
Shares to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) and the Rights become so exercisable
(and the Board has determined to make the Rights exercisable into
fractions of a Preferred Share), notwithstanding any other provision of
this Agreement, to the extent necessary and permitted by applicable
law, each Right shall thereafter represent the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, (x) a number of (or fractions of) Common
Shares (up to the maximum number of Common Shares which may permissibly
be issued) and (y) one-one hundredth of a Preferred Share or a number
of, or fractions of other equity securities of the Company (or, in the
discretion of the Board of Directors, debt) which the Board of
Directors of the Company has determined to have the same aggregate
current market value (determined pursuant to Section 11(d)(i) and (ii)
hereof, to the extent applicable), as one Common Share (such number of,
or fractions of, Preferred Shares, debt, or other equity securities or
debt of the Company being referred to as a "capital stock equivalent"),
equal in the aggregate to the number of Adjustment Shares; provided,
however, if sufficient Common Shares and/or capital stock equivalents
are unavailable, then the Company shall, to the extent permitted by
applicable law, take all such action as may be necessary to authorize
additional Common Shares or capital stock equivalents for issuance upon
exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Company is unable to
cause sufficient Common Shares and/or capital stock equivalents to be
available for issuance upon exercise in full of the Rights, then each
Right shall thereafter represent the right to receive the Adjusted
Number of Shares upon exercise at the adjusted Purchase Price (as such
terms are hereinafter defined). As used herein, the term "Adjusted
Number of Shares" shall be equal to that number of (or fractions of)
Common Shares (and/or capital stock equivalents) equal to the product
of (x) the number of Adjustment Shares and (y) a fraction, the
numerator of which is the number of Common Shares (and/or capital stock
equivalents) available for issuance upon exercise of the Rights and the
denominator of which is the aggregate number of Adjustment Shares
otherwise issuable upon exercise in full of all Rights (assuming there
were a sufficient number of Common Shares available) (such fraction
being referred to as the "Proration Factor"). The "Adjusted Purchase
Price" shall mean the product of the Purchase Price and the Proration
Factor. The Board of Directors may, but shall not be required to,
establish procedures to allocate the right to receive Common Shares and
capital stock equivalents upon exercise of the Rights among holders of
Rights.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a
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<PAGE> 18
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as
determined pursuant to Section 11(d)) 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 shares) so to be offered (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at such
current 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 shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in 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. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distributions made in connection with a consolidation or merger in which the
Company is the continuing or surviving company) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscriptions rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price (as determined pursuant to
Section 11(d) hereof) of the Preferred Shares on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
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<PAGE> 19
(d) 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(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares or (B) any
subdivision, combination or reclassification of such Security, and prior to the
expiration of 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 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 so listed or admitted, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or, if on any such
date the Security is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Security selected by the Board of Directors of the Company. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Shares are
not publicly held or so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by 100. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent.
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(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Purchase Price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a share as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of the capital stock of the Company other than Preferred
Shares, thereafter the number of other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-one hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) 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
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one-one 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 one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(h), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at
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<PAGE> 21
the option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Company, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.
(i) 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 and the number of one-one hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of one-one
hundredth of a Preferred Share, of Common Shares or of other securities 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 one-one hundredth of a
Preferred Share, Common Shares or other securities at such adjusted Purchase
Price.
(k) 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, Common Shares or other securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares, Common Shares
or other 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.
(l) 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 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 Section 11(b), hereafter
made by the Company to holders of its Preferred Shares shall not be taxable to
such stockholders.
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(m) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which does not violate Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which does not violate Section 11(n) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Person (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
does not violate Section 11(n) hereof), if (x) at the time of or immediately
after such consolidation, merger, sale or transfer there are any charter or
bylaw provisions or any rights, warrants or other instruments or securities
outstanding or agreements in effect or other actions taken which would
materially diminish or otherwise eliminate the benefits intended to be afforded
by the Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such other Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this Section 11(m).
(n) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action the purpose of which
is to, or if at the time such action is taken it is reasonably foreseeable that
the effect of such action is to, materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
(o) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares and 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 hereof. The Rights Agent shall not be deemed to have knowledge of any such
adjustment unless and until it shall have received such certificate.
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<PAGE> 23
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, on or following the Shares Acquisition
Date, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of Common Stock are not treated alike, any other Person, (y) the
Company shall consolidate with, or merge with, any Interested Stockholder or, if
in such merger or consolidation all holders of Common Stock are not treated
alike, any other Person, and the Company shall be the continuing or surviving
company of such consolidation or merger (other than, in a case of any
transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Interested Stockholder or
stockholders or, if in such transaction all holders of Common Stock are not
treated alike, any other Person (other than the Company or any Subsidiary of the
Company in one or more transactions each of which does not violate Section 11(n)
hereof), then, and in each such case (except as provided in Section 13(d)
hereof), proper provision shall be made so that (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement and in lieu of Preferred
Shares, such number of freely tradeable Common Shares of the Principal Party (as
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable (without taking into
account any adjustment previously made pursuant to Section 11(a)(ii)) and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights.
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<PAGE> 24
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which Common Shares of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation (including, if applicable, the Company if it is
the surviving company); and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided,
however, that in any of the foregoing cases, (1) if the Common Shares
of such Person are not at such time and have not been continuously over
the preceding 12-month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of
another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in
case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Shares of two or more of which are and have been
so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Shares having the greatest
aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules
set forth in (1) and(2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the
Principal Parties in each such chain shall bear the obligations set
forth in this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized Common Shares which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Final Expiration Date;
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<PAGE> 25
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The rights
under this Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to a
Permitted Offer (or a wholly-owned Subsidiary of any such Person or Persons);
(ii) the price per Common Share offered in such transaction is not less than the
price per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
offered in such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) 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(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported on 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
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<PAGE> 26
no such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by the Board Of Directors of the
Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are the one one-hundredth or
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 one one-hundredth or 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 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 one
one-hundredth or 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 market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of one of the transactions or
events specified in Section 11 giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractions of such Common Shares, capital stock
equivalents or other securities. In lieu of fractional shares or units of such
Common Shares, capital stock equivalents or other securities, the Company may
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this Section 14(c), the current
market value shall be determined in the manner set forth in Section 11(d) hereof
for the Trading Day immediately prior to the date of such exercise and, if such
capital stock equivalent is not traded, each such capital stock equivalent shall
have the value of one one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect
of this Agreement, excepting the rights of action given to the Rights Agent
under Sections 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date,
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<PAGE> 27
the registered holders of the Common Shares); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares), may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this 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) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) subject to Section 6 and Section 7(f) hereof, 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 the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary.
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in a Right or other person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
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<PAGE> 28
Section 17. Right Certificate Holder Not Deemed a Stockholder.
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 stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such 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 and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. 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 in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom directly or indirectly. The indemnity provided herein shall survive
the expiration of the Rights and the termination of this Agreement.
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any company into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any company
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any company succeeding to the stock
transfer or corporate trust business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided that such company would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case
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<PAGE> 29
at that time any of the Right Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
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 or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except
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<PAGE> 30
its countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 7(e) hereof)
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 11 or 13 or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after receipt
of the certificate described in Section 12 hereof that such change or adjustment
is required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be issued pursuant to this Agreement or any
Right Certificate or as to whether any Preferred Shares or Common Shares will,
when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions. 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 under this Agreement and the date on and/or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
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<PAGE> 31
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or the Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Shares or
the Preferred Shares 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 Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(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 (1) a company organized and doing business under the laws of the United
States or of the State of Texas or the State of New York (or of any other state
of the United States so long as such company is authorized to do business as a
banking institution in the State of Texas), in good standing, having an office
in the State of Texas or the State of New York, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million; or (2) an Affiliate of a company described in (1) above.
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 this purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
or the Preferred Shares, 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.
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Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or 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 Agreement.
In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date, the Company (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, or upon the exercise,
conversion or exchange of securities, notes or debentures 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) the Company shall not be obligated to issue any such Right
Certificates if, and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued, and (ii) no Right Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
Section 23. Redemption and Termination.
(a) (i) The Board of Directors of the Company may, at its
option, redeem all but not less than all of the then outstanding Rights
at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"), at any
time prior to the earlier of (x) the occurrence of a Section 11(a)(ii)
Event, or (y) the Final Expiration Date. The Company may, at its
option, pay the Redemption Price either in Common Shares (based on the
"current per share market price," as defined in Section 11(d) hereof,
of the Common Shares at the time of redemption) or cash; provided that
if the Company elects to pay the Redemption Price in Common Shares, the
Company shall not be required to issue any fractional Common Shares and
the number of Common Shares issuable to each holder of Rights shall be
rounded down to the next whole share.
(ii) In addition, the Board of Directors of the
Company may, at its option, at any time following the occurrence of a
Section 11(a)(ii) Event and the expiration of any period during which
the holder of Rights may exercise the rights under Section 11(a)(ii)
but prior to any Section 13 Event redeem all but not less than all of
the then outstanding Rights at the Redemption Price (x) in connection
with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or
earning power aggregating 50% or more of the earning power
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<PAGE> 33
of the Company and its subsidiaries (taken as a whole) in which all
holders of Common Shares are treated alike and not involving (other
than as a holder of Common Shares being treated like all other such
holders) an Interested Stockholder or (y)(aa) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 15% of the
Common Shares, and (bb) at the time of redemption no other Persons are
Acquiring Persons.
(b) Notwithstanding the provisions of Section 23(a), in the
event that a majority of the Board of Directors of the Company is comprised of
persons elected at a meeting of stockholders who were not nominated by the Board
of Directors in office immediately prior to such meeting, then (i) the Rights
may not be redeemed for a period of 180 days following the effectiveness of such
election if such redemption is reasonably likely to have the purpose or effect
of facilitating a Transaction with a Transaction Person and (ii) the Rights may
not be redeemed following such 180-day period, if such redemption is reasonably
likely to have the purpose or effect of facilitating a Transaction with a
Transaction Person and if during such 180- day period, the Company enters into
any agreement, arrangement or understanding with any Transaction Person which is
reasonably likely to have the purpose or effect of facilitating a Transaction
with any Transaction Person. If the Board of Directors of the Company authorizes
a redemption of the Rights in either of the circumstances set forth in clauses
23(a)(i) or 23(a)(ii) above, then there must be Continuing Directors then in
office and such authorization shall require only the concurrence of a majority
of such Continuing Directors if: (i) such authorization occurs on or after the
time a Person becomes an Acquiring Person, or (ii) such authorization occurs on
or after the date of a change (resulting from a proxy or consent solicitation)
in a majority of the directors in office at the commencement of such
solicitation if any Person who is a participant in such solicitation has stated
(or, if upon the commencement of such solicitation, a majority of the Board of
Directors of the Company has determined in good faith) that such Person (or any
of its Affiliates or Associates) intends to take, or may consider taking, any
action which would result in such Person becoming an Acquiring Person or which
would cause the occurrence of a Triggering Event.
(c) In the case of a redemption permitted under Section
23(a)(i), immediately upon the date for redemption set forth (or determined in
the manner specified in) in a resolution of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. In the case of a redemption permitted only under Section
23(a)(ii), evidence of which shall have been filed with the Rights Agent, the
right to exercise the Rights will terminate and represent only the right to
receive the Redemption Price upon the later of ten Business Days following the
giving of such notice and the expiration of any period during which the rights
under Section 11(a)(ii) may be exercised. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten days after such date for redemption set forth in a resolution of
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the Board of Directors ordering the redemption of the Rights, the Company shall
mail a notice of redemption to all the holders of the then outstanding Rights 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 and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
(d) The Company may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent of the Common Shares, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Company.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 11(a)(ii) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors 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 of 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.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of 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
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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 Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Shares (or equivalent preferred shares,
as such term is defined in Section 11(b) hereof) for some or all of the Common
Shares exchangeable for Rights, at the initial rate of one one-hundredth of a
Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common
Shares or Preferred Shares issued but not outstanding or authorized but unissued
to permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional Common Shares or Preferred Shares for issuance upon exchange of the
Rights.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which does not
violate Section 11(n) hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer) in
one or more transaction, of 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
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which does not violate Section 11(n) hereof), (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Preferred Shares, if any such date is to be
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<PAGE> 36
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Company
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii) hereof; and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also to Common Shares and/or, if appropriate, other
securities of the Company.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Patterson Energy, Inc.
4510 Lamesa Highway
Snyder, Texas 79549
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
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:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing Common Shares. From and
after the Distribution Date, the Company and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
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any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Right Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment, provided that such supplement or
amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares. Notwithstanding
anything contained in this Rights Agreement to the contrary, in the event that a
majority of the Board of Directors of the Company is comprised of (i) persons
elected at a meeting of stockholders and who were not nominated by the Board of
Directors in office immediately prior to such meeting, and/or (ii) successors of
such persons elected to the Board of Directors for the purpose of either
facilitating a Transaction with a Transaction Person or circumventing directly
or indirectly the provisions of this Section 27, then for a period of 180 days
following the effectiveness of such action, this Rights Agreement shall not be
amended or supplemented in any manner reasonably likely to have the purpose or
effect of facilitating a Transaction with a Transaction Person.
Section 28. Determination and Actions by the Board of
Directors. The Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates). For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the
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holders of the Right Certificates and all other parties, and (y) not subject the
Board to any liability to the holders of the Right Certificates.
Section 29. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or company 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 Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
Attest: PATTERSON ENERGY, INC.
By /s/ James C. Brown By: /s/ Cloyce A. Talbott
------------------------------ -----------------------------------------
James C. Brown Cloyce A. Talbott
Secretary Chairman and Chief Executive Officer
Attest: CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
By /s/ Thomas Jennings By: /s/ William F. Seegraber
------------------------------ -----------------------------------------
Thomas Jennings William F. Seegraber
Assistant Secretary Vice President
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EXHIBIT A
Form of
Certificate of Designation
of
Restated Certificate of Incorporation
of
Patterson Energy, Inc.
It is hereby certified that:
1. The name of the corporation is Patterson Energy, Inc.
(hereinafter called the "Corporation");
2. The Restated Certificate of Incorporation of the
Corporation (the "Restated Certificate of Incorporation"), is hereby amended so
that the designation and number of shares of the class and series acted upon in
the following resolution and the relative rights, preferences and limitations of
such class and series, are as stated in such resolution; and
3. The following resolution was duly adopted by the Board of
Directors of the Corporation as required by Section 151 of the Delaware General
Corporation Law at a meeting duly called and held on January 2, 1997;
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation in accordance with the provisions
of the Restated Certificate of Incorporation, the Board of Directors hereby
creates a series of Series A Preferred Stock, $.01 par value, of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof (in addition to the provisions set
forth in the Restated Certificate of Incorporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Section 1. Designation, Par Value and Amount. The shares of
such series shall be designated as "Series A Participating Preferred Stock"
(hereinafter referred to as "Series A Participating Preferred Stock"), the
shares of such series shall be without par value, and the number of shares
constituting such series shall be 100,000; provided, however, that, if more than
a total of 100,000 shares of Series A Participating Preferred Stock shall be
issuable upon the exercise of Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of January 2, 1997, between the Corporation and
Continental Stock Transfer & Trust Company, a New York corporation, as Rights
Agent (as amended from time to time) (the "Rights Agreement"), the
A-1
<PAGE> 41
Board of Directors of the Corporation, pursuant to Section 151 of the Delaware
General Corporation Law, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged and filed providing for the total
number of shares of Series A Participating Preferred Stock authorized to be
issued to be increased (to the extent that the Restated Certificate of
Incorporation then permits) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of the Rights.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of assets
legally available for the purpose, quarterly dividends payable in cash on the
last business day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Participating Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of (a)
$.01 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, par
value $.01 per share, of the Corporation (the "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
Participating Preferred Stock.
(B) The Corporation shall declare a dividend or distribution
on the Series A Participating Preferred Stock as provided in paragraph (A) above
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 $.01 per share on the
Series A Participating 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 Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Participating Preferred Stock
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<PAGE> 42
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
Participating 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 Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 15 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(A) Except as provided in paragraph C of this Section 3 and
subject to the provision for adjustment hereinafter set forth, each share of
Series A Participating Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If, on the date used to determine stockholders of
record for any meeting of stockholders for the election of directors, a default
in preference dividends (as defined in subparagraph (v) below) on the Series A
Participating Preferred Stock shall exist, the holders of the Series A
Participating Preferred Stock shall have the right, voting as a class as
described in subparagraph (ii) below, to elect two directors (in addition to the
directors elected by holders of Common Stock of the Corporation). Such right may
be exercised (a) at any meeting of stockholders for the election of directors or
(b) at a meeting of the holders of shares of Voting Preferred Stock (as
hereinafter defined), called for the purpose in accordance with the By-laws of
the Corporation, until all such cumulative dividends (referred to above) shall
have been paid in full or until noncumulative dividends have been paid regularly
for at least one year.
(ii) The right of the holders of Series A
Participating Preferred Stock to elect two directors, as described
above, shall be exercised as a class concurrently with the rights of
holders of any other series of Preferred Stock upon which voting rights
to elect such directors have been conferred and are then exercisable.
The Series A Participating Preferred Stock and any additional series of
Preferred Stock which the Corporation may issue and which may provide
for the right to vote with the foregoing series of Preferred Stock are
collectively referred to herein as "Voting Preferred Stock."
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<PAGE> 43
(iii) Each director elected by the holders of shares
of Voting Preferred Stock shall be referred to herein as a "Preferred
Director." A Preferred Director so elected shall continue to serve as
such director for a term of one year, except that upon any termination
of the right of all of such holders to vote as a class for Preferred
Directors, the term of office of such directors shall terminate. Any
Preferred Director may be removed by, and shall not be removed except
by the vote of the holders of record of a majority of the outstanding
shares of Voting Preferred Stock then entitled to vote for the election
of directors. present (in person or by proxy) and voting together as a
single class (a) at a meeting of the stockholders, or (b) at a meeting
of the holders of shares of such Voting Preferred Stock, called for the
purpose in accordance with the Bylaws of the Corporation, or (c) by
written consent signed by the holders of a majority of the then
outstanding shares of Voting Preferred Stock then entitled to vote for
the election of directors, taken together as a single class.
(iv) So long as a default in any preference dividends
on the Series A Participating Preferred Stock shall exist or the
holders of any other series of Voting Preferred Stock shall be entitled
to elect Preferred Directors, (a) any vacancy in the office of a
Preferred Director may be filled (except as provided in the following
clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case
of the removal of any Preferred Director, the vacancy may be filled by
the vote or written consent of the holders of a majority of the
outstanding shares of Voting Preferred Stock then entitled to vote for
the election of directors, present (in person or by proxy) and voting
together as a single class, at such time as the removal shall be
effected. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever (x) no default in preference dividends on
the Series A Participating Preferred Stock shall exist and (y) the
holders of other series of Voting Preferred Stock shall go longer be
entitled to elect such Preferred Directors, then the number of
directors constituting the Board of Directors of the Corporation shall
be reduced by two.
(v) For purposes hereof, a "default in preference
dividends" on the Series A Participating Preferred Stock shall be
deemed to have occurred whenever the amount of cumulative and unpaid
dividends on the Series A Participating Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed to
exist thereafter until, but only until, all cumulative dividends on all
shares of the Series A Participating Preferred Stock then outstanding
shall have been paid through the last Quarterly Dividend Payment Date
or until, but only until, non-cumulative dividends have been paid
regularly for at least one year.
(E) Except as set forth herein (or as otherwise required by
applicable law), holders of Series A Participating Preferred Stock shall have no
general or special voting rights and their consent shall not be required for
taking any corporate action.
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<PAGE> 44
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating 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 Participating 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 Participating Preferred Stock, except dividends paid ratably
on the Series A Participating 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 (except as provided in (iv) below) shares of any stock
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Participating 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 Participating
Preferred Stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
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.
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<PAGE> 45
Section 5. Reacquired Shares. Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall he 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 Restated Certificate of Incorporation. in any
other Certificate of Designation creating a series of Preferred Stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Subject to the prior and superior rights of holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to rights upon
liquidation, dissolution or winding up (voluntary or otherwise), no distribution
shall be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of
Series A Participating Preferred Stock shall have received $1.00 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Capital Adjustment") equal to the quotient obtained by dividing (i) the Series
A Liquidation Preference by (ii) 100 (the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the
Capital Adjustment in respect of all outstanding shares of Series A
Participating Preferred Stock and Common Stock, respectively, holders of Series
A Participating Preferred Stock and holders of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
Series A Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Capital Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Participating Preferred Stock shall at the
A-6
<PAGE> 46
same time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged.
Section 8. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Participating Preferred Stock, voting separately
as a class.
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation by its Chairman of the Board and attested
by its Secretary as of January 10, 1997.
---------------------------------------------
Cloyce A. Talbott, Chairman and
Chief Executive Officer
Attest:
- ------------------------------
James C. Brown
Secretary
A-7
<PAGE> 47
EXHIBIT B
Form of Right Certificate
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER JANUARY 2, 2007, OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT ONE CENT PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
PATTERSON ENERGY, 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 January 2, 1997 (the "Rights Agreement"), between
Patterson Energy, Inc., a Delaware company (the "Company"), and Continental
Stock Transfer & Trust Company, a New York corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 p.m., New York time, on
January 2, 2007, unless the Rights evidenced hereby shall have been previously
redeemed by the Company, at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-hundredth of
a fully paid nonassessable share of Series A Participating Preferred Stock, $.01
par value per share (the "Preferred Shares"), of the Company, at a purchase
price of $166 per one one-hundredth of a Preferred Share (the "Purchase Price"),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase 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 hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of January 2, 1997, based on
the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring
B-1
<PAGE> 48
Person, Associate or Affiliate who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such, such Rights shall become null and void
and no holder hereof shall have any right with respect to such Rights from and
after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number of one one-hundredths of a Preferred Share or other securities 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, including Triggering Events (as such term is defined in the
Rights Agreement).
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 executive offices of
the Company.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office 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 Preferred Shares or other securities as the
Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right (subject to adjustment as provided in the Rights
Agreement) payable in cash, or (ii) may be exchanged in whole or in part for
Common Shares.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
one one-hundredth or integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of 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 stockholder of the Company or any right to vote for the election of
directors
B-2
<PAGE> 49
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company. Dated as of _______________, 19___.
ATTEST: PATTERSON ENERGY, INC.
___________________________________ By:_____________________________________
Countersigned:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY, as Rights Agent
By:________________________________
Authorized Officer
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<PAGE> 50
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, 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: _______________, 19___
______________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being sold, assigned or transferred by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Right Agreement) and (2)
after due inquiry and to the best knowledge of the undersigned, the undersigned
did not acquire the Rights evidenced by this Right Certificate from any Person
who is or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).
______________________________
Signature
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<PAGE> 51
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if registered holder desires to
exercise the Right Certificate.)
To: PATTERSON ENERGY, INC.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
securities pursuant to the Rights Agreement) issuable upon the exercise of such
Rights and requests that certificates for such Preferred Shares (or other
securities) 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
Dated: ______________, 19__ ________________________________________
(Please print name and address)
________________________________________
________________________________________
Signature
Signature Guaranteed:
B-5
<PAGE> 52
Form of Reverse Side of Right Certificate -- continued
CERTIFICATE
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
________________________________________
Signature
NOTICE
The signature in the foregoing Forms of Assignment and Election 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 the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the Beneficial Owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
<PAGE> 53
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On January 2, 1997, the Board of Directors of Patterson
Energy, Inc., a Delaware corporation (the "Company"),declared a dividend
distribution of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock, par value $.01 per share (the "Common
Shares"), of the Company. The dividend is payable to the stockholders of record
on January 17, 1997 (the "Record Date"), and with respect to Common Shares
issued thereafter until the Distribution Date (as defined below) and, in certain
circumstances, with respect to Common Shares issued after the Distribution Date.
Except as set forth below, each Right, when it becomes exercisable, entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Participating Preferred Stock, $.01 par value (the "Preferred Shares"),
of the Company at a price of $166 per one one-hundredth of a Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Continental Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent"), dated as of January 2, 1997.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares upon the
earliest to occur of (i) a person or group of affiliated or associated persons
having acquired beneficial ownership of 15% or more of the outstanding Common
Shares (except pursuant to a Permitted Offer, as hereinafter defined); or (ii)
10 days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (as hereinafter defined) (the earliest of such
dates being called the "Distribution Date"). A person or group whose acquisition
of Common Shares causes a Distribution Date pursuant to clause (i) above is an
"Acquiring Person." The date that a person or group becomes an Acquiring Person
is the "Shares Acquisition Date."
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 Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date (and to each
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<PAGE> 54
initial record holder of certain Common Shares issued after the Distribution
Date), and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on January 2, 2007, unless earlier redeemed
by the Company as described below.
In the event that any person becomes an Acquiring Person
(except pursuant to a tender or exchange offer which is for all outstanding
Common Shares at a price and on terms which a majority of certain members of the
Board of Directors determines to be adequate and in the best interests of the
Company, its stockholders and other relevant constituencies, other than such
Acquiring Person, its affiliates and associates (a "Permitted Offer")), each
holder of a Right will thereafter have the right (the "Flip-In Right") to
receive upon exercise the number of Common Shares or, in the discretion of the
Board of Directors of the Company, of one one-hundredths of a Preferred Share
(or, in certain circumstances, other securities of the Company) having a value
(immediately prior to such triggering event) equal to two times the Purchase
Price. Notwithstanding the foregoing, following the occurrence of the event
described above, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void.
In the event that, at any time following the Shares
Acquisition Date, (i) the Company is acquired in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Shares immediately prior to the consummation of the transaction are not the
holders of all of the surviving company's voting power, or (ii) more than 50% of
the Company's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, any other person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the Purchase Price. The
holder of a Right will continue to have the Flip-Over Right whether or not such
holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of Preferred
Shares, Common Shares or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred
C-2
<PAGE> 55
Shares of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $0.01 per share but, if greater, will
be entitled to an aggregate dividend per share of 100 times the dividend
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 $1.00 per share; thereafter, and after the holders of the Common Shares
receive a liquidation payment of $0.01 per share, the holders of the Preferred
Shares and the holders of the Common Shares will share the remaining assets in
the ratio of 100 to 1 (as adjusted) for each Preferred Share and Common Share so
held, respectively. 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. In the event that the amount
of accrued and unpaid dividends on the Preferred Shares is equivalent to six
full quarterly dividends or more, the holders of the Preferred Shares shall have
the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of the Common Shares until all cumulative
dividends on the Preferred Shares have been paid through the last quarterly
dividend payment date or until non-cumulative dividends have been paid regularly
for at least one year.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are one one-hundredth or integral multiples of one
one-hundredth of a Preferred Share, which may, at the election of the Company,
be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Shares on the last
trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person
becoming an Acquiring Person or (ii) the expiration of the Rights, and under
certain other circumstances, the Company may redeem the Rights in whole, but not
in part, at a price of $0.01 per Right (the "Redemption Price"), which
redemption shall be effective upon the action of the Board of Directors.
Additionally, following the Shares Acquisition Date, the Company may redeem the
then outstanding Rights in whole, but not in part, at the Redemption Price
provided that such redemption is in connection with a merger or other business
combination transaction or series
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<PAGE> 56
of transactions involving the Company in which all holders of Common Shares are
treated alike but not involving an Acquiring Person or its affiliates or
associates.
All of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Company, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A dated as of January 10, 1997. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated herein by
reference.
C-4
<PAGE> 1
EXHIBIT 3
Certificate of Designation
of
Restated Certificate of Incorporation
of
Patterson Energy, Inc.
It is hereby certified that:
1. The name of the corporation is Patterson Energy, Inc.
(hereinafter called the "Corporation");
2. The Restated Certificate of Incorporation of the
Corporation (the "Restated Certificate of Incorporation"), is hereby amended so
that the designation and number of shares of the class and series acted upon in
the following resolution and the relative rights, preferences and limitations of
such class and series, are as stated in such resolution; and
3. The following resolution was duly adopted by the Board of
Directors of the Corporation as required by Section 151 of the Delaware General
Corporation Law at a meeting duly called and held on January 2, 1997;
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation in accordance with the provisions
of the Restated Certificate of Incorporation, the Board of Directors hereby
creates a series of Series A Preferred Stock, $.01 par value, of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof (in addition to the provisions set
forth in the Restated Certificate of Incorporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Section 1. Designation, Par Value and Amount. The shares of
such series shall be designated as "Series A Participating Preferred Stock"
(hereinafter referred to as "Series A Participating Preferred Stock"), the
shares of such series shall be without par value, and the number of shares
constituting such series shall be 100,000; provided, however, that, if more than
a total of 100,000 shares of Series A Participating Preferred Stock shall be
issuable upon the exercise of Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of January 2, 1997, between the Corporation and
Continental Stock Transfer & Trust Company, a New York corporation, as Rights
Agent (as amended from time to time) (the "Rights Agreement"), the
<PAGE> 2
Board of Directors of the Corporation, pursuant to Section 151 of the Delaware
General Corporation Law, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged and filed providing for the total
number of shares of Series A Participating Preferred Stock authorized to be
issued to be increased (to the extent that the Restated Certificate of
Incorporation then permits) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of the Rights.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of assets
legally available for the purpose, quarterly dividends payable in cash on the
last business day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Participating Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of (a)
$.01 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, par
value $.01 per share, of the Corporation (the "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
Participating Preferred Stock.
(B) The Corporation shall declare a dividend or distribution
on the Series A Participating Preferred Stock as provided in paragraph (A) above
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 $.01 per share on the
Series A Participating 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 Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Participating Preferred Stock
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<PAGE> 3
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
Participating 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 Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 15 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(A) Except as provided in paragraph C of this Section 3 and
subject to the provision for adjustment hereinafter set forth, each share of
Series A Participating Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If, on the date used to determine stockholders of
record for any meeting of stockholders for the election of directors, a default
in preference dividends (as defined in subparagraph (v) below) on the Series A
Participating Preferred Stock shall exist, the holders of the Series A
Participating Preferred Stock shall have the right, voting as a class as
described in subparagraph (ii) below, to elect two directors (in addition to the
directors elected by holders of Common Stock of the Corporation). Such right may
be exercised (a) at any meeting of stockholders for the election of directors or
(b) at a meeting of the holders of shares of Voting Preferred Stock (as
hereinafter defined), called for the purpose in accordance with the By-laws of
the Corporation, until all such cumulative dividends (referred to above) shall
have been paid in full or until noncumulative dividends have been paid regularly
for at least one year.
(ii) The right of the holders of Series A
Participating Preferred Stock to elect two directors, as described
above, shall be exercised as a class concurrently with the rights of
holders of any other series of Preferred Stock upon which voting rights
to elect such directors have been conferred and are then exercisable.
The Series A Participating Preferred Stock and any additional series of
Preferred Stock which the Corporation may issue and which may provide
for the right to vote with the foregoing series of Preferred Stock are
collectively referred to herein as "Voting Preferred Stock."
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<PAGE> 4
(iii) Each director elected by the holders of shares
of Voting Preferred Stock shall be referred to herein as a "Preferred
Director." A Preferred Director so elected shall continue to serve as
such director for a term of one year, except that upon any termination
of the right of all of such holders to vote as a class for Preferred
Directors, the term of office of such directors shall terminate. Any
Preferred Director may be removed by, and shall not be removed except
by the vote of the holders of record of a majority of the outstanding
shares of Voting Preferred Stock then entitled to vote for the election
of directors. present (in person or by proxy) and voting together as a
single class (a) at a meeting of the stockholders, or (b) at a meeting
of the holders of shares of such Voting Preferred Stock, called for the
purpose in accordance with the Bylaws of the Corporation, or (c) by
written consent signed by the holders of a majority of the then
outstanding shares of Voting Preferred Stock then entitled to vote for
the election of directors, taken together as a single class.
(iv) So long as a default in any preference dividends
on the Series A Participating Preferred Stock shall exist or the
holders of any other series of Voting Preferred Stock shall be entitled
to elect Preferred Directors, (a) any vacancy in the office of a
Preferred Director may be filled (except as provided in the following
clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case
of the removal of any Preferred Director, the vacancy may be filled by
the vote or written consent of the holders of a majority of the
outstanding shares of Voting Preferred Stock then entitled to vote for
the election of directors, present (in person or by proxy) and voting
together as a single class, at such time as the removal shall be
effected. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever (x) no default in preference dividends on
the Series A Participating Preferred Stock shall exist and (y) the
holders of other series of Voting Preferred Stock shall go longer be
entitled to elect such Preferred Directors, then the number of
directors constituting the Board of Directors of the Corporation shall
be reduced by two.
(v) For purposes hereof, a "default in preference
dividends" on the Series A Participating Preferred Stock shall be
deemed to have occurred whenever the amount of cumulative and unpaid
dividends on the Series A Participating Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed to
exist thereafter until, but only until, all cumulative dividends on all
shares of the Series A Participating Preferred Stock then outstanding
shall have been paid through the last Quarterly Dividend Payment Date
or until, but only until, non-cumulative dividends have been paid
regularly for at least one year.
(E) Except as set forth herein (or as otherwise required by
applicable law), holders of Series A Participating Preferred Stock shall have no
general or special voting rights and their consent shall not be required for
taking any corporate action.
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<PAGE> 5
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating 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 Participating 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 Participating Preferred Stock, except dividends paid ratably
on the Series A Participating 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 (except as provided in (iv) below) shares of any stock
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Participating 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 Participating
Preferred Stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
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.
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<PAGE> 6
Section 5. Reacquired Shares. Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall he 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 Restated Certificate of Incorporation. in any
other Certificate of Designation creating a series of Preferred Stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Subject to the prior and superior rights of holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to rights upon
liquidation, dissolution or winding up (voluntary or otherwise), no distribution
shall be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of
Series A Participating Preferred Stock shall have received $1.00 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Capital Adjustment") equal to the quotient obtained by dividing (i) the Series
A Liquidation Preference by (ii) 100 (the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the
Capital Adjustment in respect of all outstanding shares of Series A
Participating Preferred Stock and Common Stock, respectively, holders of Series
A Participating Preferred Stock and holders of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
Series A Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Capital Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Participating Preferred Stock shall at the
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<PAGE> 7
same time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged.
Section 8. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Participating Preferred Stock, voting separately
as a class.
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation by its Chairman of the Board and attested
by its Secretary as of January 10, 1997.
/s/ Cloyce A. Talbott
---------------------------------------------
Cloyce A. Talbott, Chairman and
Chief Executive Officer
Attest:
/s/ James C. Brown
- -----------------------------------
James C. Brown
Secretary
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