SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-A
REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
MFRI, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 36-3922969
(State of Incorporation (IRS Employer Identification
or Organization) No.)
7720 LEHIGH AVENUE 60714
NILES, ILLINOIS (zip code)
(Address of principal
executive offices)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
<TABLE>
<CAPTION>
<S> <C>
TITLE OF EACH CLASS Name of Each Exchange on Which
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
</TABLE>
Common Stock Purchase Rights
<PAGE>
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Pursuant to a Rights Agreement dated as of September 15, 1999 (the "Rights
Agreement") between MFRI, Inc. (the "Company") and Harris Trust and Savings
Bank, as Rights Agent (the "Rights Agent") the Company's Board of Directors has
declared a dividend of one right ("Right") to purchase one share of the
Company's Common Stock, par value $.01 per Share ("Common Stock"), for each
outstanding share of Common Stock of the Company. The dividend is payable on
September 24, 1999 to stockholders of record as of the close of business on
September 22, 1999 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company one share of Common Stock at an exercise
price of $25.00 Share (the "Purchase Price"), subject to adjustment.
The following summary of the principal terms of the Rights Agreement is a
general description only and is subject to the detailed terms and conditions of
the Rights Agreement. A copy of the Rights Agreement is attached as Exhibit 4.1
to this Report and each is incorporated herein by reference.
RIGHTS EVIDENCED BY COMMON STOCK CERTIFICATES
The Rights will not be exercisable until the Distribution Date (defined
below). Certificates for the Rights ("Rights Certificates") will not be sent to
stockholders and the Rights will attach to and trade only together with the
Common Stock. Accordingly, Common Stock certificates outstanding on the Record
Date will evidence the Rights related thereto, and Common Stock certificates
issued after the Record Date will contain a notation incorporating the Rights.
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender or transfer of any certificates for
Common Stock, outstanding as of the Record Date, even without notation or a
copy of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.
DISTRIBUTION DATE
The Rights will separate from the Common Stock, Rights Certificates will
be issued and the Rights will become exercisable upon the earlier of: (i) 10
business days following the first date of public announcement (the "Stock
Acquisition Date") that a person or group of affiliated or associated persons
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding Common Stock in a transaction not approved by the Board
of Directors (an "Acquiring Persons"), or (ii) 10 business days following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding common stock
in a transaction not approved by the Board of Directors. The earlier of such
dates is referred to as the "Distribution Date. "
ISSUANCE OF RIGHTS CERTIFICATES; EXPIRATION OF RIGHTS
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date. All Common Stock issued prior to the Distribution Date will be issued
with Rights. Common Stock issued after the Distribution Date may be issued with
Rights if such shares are issued (i) upon the conversion of any convertible
securities issued after adoption of the Rights Agreement, or (ii) pursuant to
the exercise of stock options or under employee benefit plans or arrangements
unless such issuance would result in (or create a risk that) such options,
plans or arrangements would not qualify for otherwise available special tax
treatment. Except as otherwise determined by the Board of Directors, no other
Common Stock issued after the Distribution Date will be issued with Rights. The
Rights will expire on the earliest of (i) September 15, 2009 (the "Final
Expiration Dates), (ii) redemption or exchange of the Rights as described
below, or (iii) consummation of an acquisition of the Company satisfying
certain conditions by a person who acquired stock pursuant to a transaction
approved by the Board of Directors, as described below.
INITIAL EXERCISE OF THE RIGHTS
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise of the Rights and the payment of $25.00 per Share, one share of Common
Stock. In the event that the Company does not have sufficient Common Stock
available for all Rights to be exercised, or the Board decides that such action
is necessary and not contrary to the interest of Rights holders, the Company
may instead substitute cash, assets or debt securities for the Common Stock for
which the Rights would have been exercisable under this provision or as
described below.
RIGHT TO BUY COMPANY COMMON STOCK
Unless the Rights are earlier redeemed, in the event that an Acquiring
Person becomes the beneficial owner of 15% or more of the Company's Common
Stock then outstanding (other than pursuant to a transaction approved by the
Board of Directors), then proper provision will be made so that each holder of
a Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person, which will thereafter be void) will
thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances as determined by the Board of Directors, cash, other
property or other securities) having a value equal to two times the Purchase
Price. Rights are not exercisable following the occurrence of an event
described above until such time as the Rights are no longer redeemable by the
Company as set forth below.
The definition of Acquiring Persons does not include, among other
specified exclusions, Heartland Advisors, Inc, who, on September 15, 1999 (the
"Rights Dividend Declaration Date"), is the beneficial owner of more than 15%
of the outstanding shares of common stock of the Company unless and until it
later becomes the beneficial owner of 22% or more of the then outstanding
shares of common stock of the Company.
RIGHT TO BUY ACQUIRING COMPANY STOCK
Similarly, unless the Rights are earlier redeemed, in the event that,
after the Stock Acquisition Date, except in a transaction approved by the Board
of Directors, (i) the Company is acquired in a merger or other business
combination transaction, or (ii) 50% or more of the Company's assets or earning
power are sold (other than in transactions in the ordinary course of business),
proper provision must be made so that each holder of a Right which has not
theretofore been exercised (other than Rights beneficially owned by the
Acquiring Person, which will thereafter be void) will thereafter have the right
to receive, upon exercise, shares of common stock of the acquiring company
having a value equal to two times the Purchase Price.
BOARD APPROVAL
The Rights will not become exercisable if the tender offer or acquisition
of 15% or more of the Company's outstanding Common Stock has been approved by a
majority of the Board of Directors of the Company.
EXCHANGE PROVISION
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
the Acquiring Person), in whole or in part, at an exchange ratio of one share
of Common Stock per Right.
REDEMPTION
At anytime on or prior to the close of business on the earlier of (i) the
10th business day following the Stock Acquisition Date, or (ii) the Final
Expiration Date, the Company may redeem the Rights in whole, but not in part,
at a price of $0.01 per Right. Notwithstanding the foregoing, the Board of
Directors of the Company may not redeem the Rights within 90 days after the
date of election of any new directors to the Company's Board when new directors
shall comprise the majority of members thereof.
ADJUSTMENTS TO PREVENT DILUTION
The Purchase Price payable, the number of Rights, and the number of shares
of Common Stock or other securities issuable upon exercise of the Rights are
subject to adjustment from time to time in connection with dilutive issuances
by the Company as set forth in the Rights Agreement.
CASH PAID INSTEAD OF ISSUING FRACTIONAL SHARES
No fractional portion less than integral multiples of one share of Common
Stock will be issued upon exercise of Rights and in lieu thereof, an adjustment
in cash will be made based on the market price of the Common Stock on the last
trading date prior to the date of exercise.
NO STOCKHOLDERS' RIGHTS PRIOR TO EXERCISE
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Stock), including, without limitation, the
right to vote or to receive dividends.
AMENDMENT OF RIGHTS AGREEMENT
The provisions of the Rights Agreement may be supplemented or amended by
the Board of Directors in any manner prior to the close of business on the
Distribution Date without the approval of Rights holders. 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 to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to adjust the
time period governing redemptions shall be made at such time as the Rights are
not redeemable.
CERTAIN ANTI-TAKEOVER EFFECTS
The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of a
coercive attempt by an acquirer to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their stock.
The Rights are not intended to prevent a takeover of the Company and will
not do so. The Rights may be redeemed by the Company at $0.01 per Right within
10 business days (or such later date as may be determined by a majority of the
Board of Directors) after the accumulation of 15% or more of the Company's
stock by a single acquirer or group. Similarly, the Rights will terminate upon
the closing of an acquisition approved by the Board of Directors. Accordingly,
the Rights should not interfere with any merger or business combination
approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial strength
of the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per share,
should not be taxable to the Company or to its stockholders, and will not
change the way in which the Company's stock is presently traded. The Company's
Board of Directors believes that the Rights represent a sound and reasonable
means of addressing the complex issues of corporate policy created by corporate
takeovers.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed coercive and undesirable by
the Board of Directors. The Rights may cause substantial dilution to a person
or group that attempts to acquire the Company on terms or in a manner not
approved by the Company's Board of Directors, except pursuant to an offer
conditioned upon the negation, purchase or redemption of the Rights.
A copy of the Rights Agreement, including the form of Rights Certificate
and the Summary of Rights attached thereto as Exhibits A and B, respectively,
is filed as an Exhibit to this Report and is incorporated herein by reference.
A copy of the Rights Agreement is available to stockholders free of charge from
the Company.
ITEM 2. EXHIBITS.
4.1 Rights Agreement dated as of September 15, 1999 between MFRI, Inc.
and Harris Trust and Savings Bank including the form of Rights Certificate and
the Summary of Rights attached thereto as Exhibits A and B, respectively.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
MFRI, INC.
Date: September 24, 1999 By: /S/ MICHAEL D. BENNETT
Michael D. Bennett, Vice President,
Secretary and Treasurer
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
EXHIBIT NO. EXHIBIT
4.1 Rights Agreement dated as of September 15, 1999 between MFRI, Inc.
and Harris Trust and Savings Bank, as Rights Agent, including the
form of Rights Certificate and the Summary of Rights attached thereto
as Exhibits A and B, respectively.
</TABLE>
<PAGE>
Exhibit 4.1
MFRI, INC.
AND
HARRIS TRUST AND SAVINGS BANK
(RIGHTS AGENT)
DATED AS OF SEPTEMBER 15, 1999
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of September 15, 1999 (the "Agreement"),
between MFRI, INC., a Delaware corporation (the "Company"), and HARRIS TRUST
AND SAVINGS BANK, an Illinois banking corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on September 15, 1999, (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on September 22,
1999 (the "Record Date"), and authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of Section ll(p)
hereof) for each share of Common Stock of the Company issued between the Record
Date (whether originally issued or delivered from the Company's treasury) and
the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one (1) of a share of Common Stock for each
whole share of Common Stock held upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, but shall not
include:
(i) the Company,
(ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan,
(iv) any Person who becomes an Acquiring Person solely as a
result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of shares of Common Stock by the
Company, unless and until such Person shall thereafter purchase or
otherwise become the Beneficial Owner of additional shares of Common
Stock constituting 1% or more of the shares of Common Stock
outstanding at the time that such Person becomes the Beneficial Owner
of 15% or more of the then outstanding shares of Common Stock,
(v) any Person described in Rule 13d-l(b)(l) under the Exchange
Act who is eligible to report beneficial ownership of Common Stock on
Schedule 13G, unless such Person (1) becomes required to file a
Statement on Schedule 13D with respect to its Beneficial Ownership of
Common Stock or (2) acquires Beneficial Ownership (whether or not
required to be reported on Schedule 13D or Schedule 13G) of 22% or
more of the then outstanding shares of Common Stock, or
(vi) Heartland Advisors, Inc. (and any successor thereto, but no
purchaser or assignee thereof or purchaser or assignee of any Common
Stock of the Company held by Heartland), but only so long as
Heartland does not become the Beneficial Owner of 22% or more of the
Common Stock of the Company then outstanding. Notwithstanding the
foregoing, Heartland shall not become an "Acquiring Person" as the
result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by Heartland to 22%
or more of the Common Stock then outstanding; provided, however, that
if Heartland shall become the Beneficial Owner of 22% or more of the
Common Stock then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become
the Beneficial Owner of any additional Common Stock, then Heartland
shall be deemed an "Acquiring Person." If the Board of Directors of
the Company determines in good faith that Heartland has inadvertently
exceeded the 22% threshold and if Heartland divests itself as
promptly as practicable of beneficial ownership of a sufficient
number shares of Common Stock so that Heartland would no longer be an
Acquiring Person, then Heartland shall not be deemed to be or have
become an "Acquiring Person" for any purpose in this Agreement.
Notwithstanding the foregoing, "Acquiring Person" shall not include
any Person whose ownership of 15% or more of the shares of Common Stock
then outstanding results from any action, transaction or series of
transactions approved in advance by the Company's Board of Directors
(provided that such Person shall become an Acquiring Person if such Person
shall thereafter purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting 1% or more of the
outstanding shares of Common Stock unless otherwise approved in advance by
the Board; provided however, (A) any transfer of shares by such Person to
a third party (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any trustee in respect thereof
acting in such capacity) who after such transfer owns 15% or more of the
shares then outstanding will cause the Rights to become exercisable at the
time and in the manner provided for herein, and (B) any institution of a
tender or exchange offer that is not approved in advance by the Company's
Board of Directors by any Person will trigger the exercisability of the
Rights, notwithstanding the above.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants, options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered pursuant
to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights
from and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a)
or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has
any agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the provision to
subparagraph (ii) of this paragraph (c)) or disposing of any voting
securities of the Company; provided, however, that nothing in this
paragraph (c) shall cause a Person engaged in the business as an
underwriter of securities to be deemed the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until
the expiration of forty (40) days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Illinois are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 p.m.,
Chicago, Illinois time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 p.m., Chicago, Illinois time, on
the next succeeding Business Day.
(f) "Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(g) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth Business Day after the Stock Acquisition Date and
(ii) the Close of Business on the tenth Business Day (or such later date
as the Board of Directors shall determine) after the date that a tender or
exchange offer that is not approved in advance by the Company's Board of
Directors by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established
by the Company for or pursuant to the terms of any such plan) is first
published or sent or given within the meaning of Rule 14d-2 (a) under the
Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Exchange Ratio" shall have the meaning set forth in Section 23
hereof.
(j) "Expiration Date" shall mean the earlier of (i) the Final
Expiration Date, or (ii) the time at which the Rights are redeemed as
provided in Section 24 hereof.
(k) "Final Expiration Date" shall mean the Close of Business on
September 15, 2009.
(l) "Original Rights" shall have the meaning set forth in
Section 1(c) hereof.
(m) "Principal Party" shall have the meaning set forth in Section 13
hereof.
(n) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(o) "Purchase Price" shall have the meaning set forth in Section 4 or
Section 11 hereof, as the case may be.
(p) "Record Date" shall have the meaning set forth in the recitals at
the beginning of this Agreement.
(q) "Rights" shall have the meaning set forth in the recitals at the
beginning of this Agreement.
(r) "Rights Certificates" shall mean one or more rights certificates,
in substantially the form of Exhibit A hereto.
(s) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(t) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A) or (B) hereof.
(u) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(v) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(w) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such; provided, however, if such person has first been
determined not to have become an Acquiring Person pursuant to Section 1(a)
hereof, then no Stock Acquisition Date shall be deemed to have occurred.
(x) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is Beneficially
Owned, directly or indirectly, by such Person, or otherwise controlled by
such Person.
(y) "Summary of Rights" shall mean the summary of rights to purchase
Common Stock, in substantially the form of Exhibit B hereto.
(z) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(aa) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such concurrent Rights Agents as it may
deem necessary or desirable. Contemporaneously with any such appointment the
Company shall notify the Rights Agent thereof.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Effective on or after the Record Date, one Right shall be
associated with each share of Common Stock outstanding on the Record Date.
Each additional share of Common Stock issued after the Record Date through
the first to occur of the Distribution Date or the Expiration Date and
each additional share of Common Stock with which Rights are issued after
the Distribution Date but before the Expiration Date, will be subject to
adjustment as provided in Section 11 below. Until the Distribution Date,
(i) the Rights will be evidenced (subject to the provisions of 3(b)
hereof) by the certificates for the Common Stock registered in the names
of the holders of the Common Stock (which certificates for Common Stock
shall be deemed also to be certificates for Rights) and not by separate
certificates, and (ii) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock (including a
transfer to the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send, at the expense of the Company, by
first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more
Rights Certificates, evidencing one Right for each share of Common Stock
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Right
Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that
Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights, by first-class, postage
prepaid mail, to each record holder of shares of Common Stock as of the
Close of Business on the Record Date, at the address of such holder shown
on the records of the Company.
(c) Certificates issued for shares of Common Stock (including,
without limitation, certificates issued upon transfer, exchange or
replacement of shares of Common Stock) after the Record Date but before
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between MFRI,
Inc. and Harris Trust and Savings Bank, as Rights Agent, dated as of
September 15, 1999 (the "Rights Agreements), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal offices of MFRI, 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. MFRI, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void."
With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date and (ii) the Expiration
Date, the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone and registered
holders of Common Stock shall also be the registered holders of the
associated Rights, and the transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.
(d) If the Company purchases or acquires any Common Stock after the
Record Date but before the Distribution Date, any Rights associated with
that Common Stock shall be deemed canceled so that the Company shall not
be entitled to exercise any Rights associated with the Common Stock which
are no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record
Date and on their face shall entitle the holders thereof to purchase such
number of shares of Common Stock (or fractions thereof) as shall be set
forth therein at the price set forth therein (such exercise price per full
share of Common Stock, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificates issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant
to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person
or to any Persons with whom such Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights
or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following additional legend:
"The Rights represented by this Rights Certificates are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) of such
Agreement."
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto
the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by
the Rights Agent, either manually or by facsimile signature, and shall not
be valid for any purpose unless so countersigned. In case any officer of
the Company who shall have signed any of the Rights Certificates shall
cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be
such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on the
Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a
like number of shares of Common Stock (or, following a Triggering Event,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment
on the reverse side of such Rights Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign
and deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of
the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions
on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 24(a) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form
of election to purchase and the certificate on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices of
the Rights Agent designated for such purpose, together with payment of the
aggregate Purchase Price with respect to the total number of shares of
Common Stock (or other securities, cash or other assets, as the case may
be) as to which such surrendered Rights are then exercisable, at or prior
to the earlier of (i) the Final Expiration Date, or (ii) the Expiration
Date.
(b) The Purchase Price for each full share of Common Stock pursuant
to the exercise of a Right shall initially be $25.00, and shall be subject
to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to the Rights so exercised,
of the Purchase Price per share of Common Stock (or other securities, cash
or other assets, as the case may be) to be purchased as set forth below
and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly
(i)(A) requisition from any transfer agent of the Common Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of shares of Common Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Common Stock issuable upon
exercise of the Rights hereunder with a depository agent, requisition from
the depository agent depository receipts representing such number of
shares (or fractions of shares) of Common Stock as are to be purchased (in
which case certificates for the shares (or fractions of shares) of Common
Stock represented by such receipts shall be deposited by the transfer
agent with the depository agent) and the Company will direct the
depository agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depository receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate
registered in such name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to or upon the
order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) may be made (x) in cash or by certified bank
check or bank draft payable to the order of the Company, or (y) by
delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of
Common Stock equal to the then Purchase Price divided by the closing price
(as determined pursuant to Section 11(d) hereof) per share of Common Stock
on the Trading Day immediately preceding the date of such exercise. In
the event that the Company is obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate. The Company
reserves the right to require prior to the occurrence of a Triggering
Event that upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Common Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon
the order of, the registered holder of such Rights Certificates,
registered in such name or names as may be designated by such holder,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has
any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise.
The Company shall use all reasonable efforts to insure that the provisions
of this Section 7(e) and Section 4(b) hereof are complied with, but shall
have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in
the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) and Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) Except as permitted pursuant to Section 11(a)(iii) hereof, the
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock or
shares of Common Stock held in the Treasury, the number of shares of
Common Stock that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in
full of all outstanding Rights. In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized
but unissued to permit the exercise or exchange of Rights, the Company
covenants and agrees that it will take all such action as may be necessary
to authorize additional shares of Common Stock for issuance upon the
exercise or exchange of Rights; provided, however, that if the Company is
unable to cause the authorization of additional shares, then the Company
shall, or in lieu of seeking any such authorization, the Company may, to
the extent necessary and permitted by applicable law and any agreements or
instruments in effect prior to the Distribution Date to which it is party,
(1) upon surrender of a Right, pay cash equal to the Purchase Price in
lieu of issuing shares of Common Stock and requiring payment therefor, or
(2) upon due exercise of a Right and payment of the Purchase Price for
each share of Common Stock as to which such Right is exercised, distribute
a combination of shares of Common Stock and cash and/or debt securities
having an aggregate value equal to the value of the shares of Common Stock
which otherwise would have been issuable, which value shall be determined
by a nationally recognized investment banking firm selected by the Board.
To the extent that any legal or contractual restrictions (pursuant to
agreements or, instruments in effect prior to the Distribution Date to
which it is party) prevent the Company from paying the full amount payable
in accordance with the foregoing sentence, the Company shall pay to
holders of the Rights as to which such payments are being made all amounts
which are not then restricted on a pro rata basis as such payments become
permissible under such legal or contractual restrictions until such
payments have been paid in full.
(b) So long as the shares of Common Stock issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange or quoted on an automated quotation system, the Company shall use
its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange or quoted on such automated quotation system upon official notice
of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(ii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities 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 such Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable
for such securities, and (B) the date of the expiration of the Rights.
The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90)
days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained,
the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price),
be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Common Stock upon the
exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of shares of
Common Stock in respect of a name other than that of, the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for shares of Common Stock (or other securities, as
the case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificates at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
Section 10. COMMON STOCK RECORD DATE. Each person in whose name any
certificate for shares of Common Stock is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
shares of Common Stock represented thereby on, and such certificate shall be
dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Stock transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Stock transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock,
(C) combine the outstanding Common Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Common Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of
shares of Common Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and
at a time when the Common Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a) and 13(a), the adjustment
provided for in this Section 11(a) shall be in addition to and shall
be made prior to, any adjustment required pursuant to Section 13(a)
hereof.
(ii) In the event
(A) (1) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this
Agreement, directly or indirectly, shall merge into the Company
or otherwise combine with the Company and the Company shall be
the continuing or surviving corporation of such merger or
combination and the Common Stock of the Company shall remain
outstanding and unchanged, or (2) subject to the right of
redemption granted in Section 24 hereof, any Person (other than
the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall, at any time
after the Rights Dividend Declaration Date, become an Acquiring
Person, other than pursuant to any transaction set forth in
Section 13(a) hereof, or pursuant to an offer for all
outstanding shares of Common Stock at a price and upon such
terms and conditions as a majority of the Board of Directors
determines to be in the best interests of the Company and its
stockholders, other than such Acquiring Person, its Affiliates
and its Associates, or
(B) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions
involving the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of Section
13(a) apply (whether or not with or into or otherwise involving
an Acquiring Person) which has the effect, directly or
indirectly, of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries which is
directly or indirectly beneficially owned by any Acquiring
Person or any Associate or Affiliate of any Acquiring Person,
then, promptly following the occurrence of a Section ll(a)(ii)
Event, the Company and, to the extent necessary or appropriate,
the Acquiring Person and its Affiliates and Associates, shall
make proper provision so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have
the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement,
in lieu of that number of shares of Common Stock (or fraction
thereof), such number of shares of Common Stock as shall equal
the result obtained by multiplying (x) the product of the then
current Purchase Price divided by 50% of the current market
price (determined pursuant to Section ll(d) hereof) per share of
Common Stock on the date of such first occurrence by (y) the
then number of shares of Common Stock for which a Right was
exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section ll(a), the Company shall: (A) determine the excess of
(1) the value of the Adjustment Shares issuable upon the exercise of
a Right (the "Current Value") over (2) the Purchase Price (such
excess, the "Spreads), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company ("common stock equivalents"),
(4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board
of Directors of the Company; provided, however, if the Company shall
not have made adequate provision to deliver the value pursuant to
clause (B) above within thirty (30) days following the later of (x)
the first occurrence of a Section ll(a)(ii) Event and (y) the date on
which the Company's right of redemption pursuant to Section 24(a)
expires (the later of (x) and (y) being referred to herein as the
"Section ll(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of Rights and
without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If
the Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the
Section ll(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To
the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section
ll(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section ll(a)(iii), the value of the
Common Stock shall be the current market price (as determined
pursuant to Section ll(d) hereof) per share of the Common Stock on
the Section ll(a)(ii) Trigger Date and the value of any common stock
equivalents shall be deemed to have the same value as the Common
Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Common Stock (or shares having the
same rights, privileges and preferences as the shares of Common Stock
("Equivalent Common Stock")) or securities convertible into Common Stock
or Equivalent Common Stock at a price per share of Common Stock or per
share of Equivalent Common Stock (or having a conversion price per share,
if a security convertible into Common Stock or Equivalent Common Stock)
less than the current market price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on such record date, the
Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on such record date, plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock and/or Equivalent Common Stock so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price,
and the denominator of which shall be the number of shares of Common Stock
outstanding on such record date, plus the number of additional shares of
Common Stock and/or Equivalent Common Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by
delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and the holders of the Rights. Shares of Common Stock
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in
the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Common Stock,
but including any dividend payable in stock other than Common Stock) or
subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator
of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on such record date, less
the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Common Stock and the
denominator of which shall be such current market price (as determined
pursuant to Section 11(d) hereof) per share of Common Stock. Such
adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the
Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the "current market price" per
share of Common Stock on any day shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided,
however, that in the event that the current market price per share of the
Common Stock is determined during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock of securities
convertible into shares of such Common Stock (other than the Rights), or
(B) any subdivision, combination or reclassification of such Common Stock,
and prior to the expiration of the requisite thirty (30) Trading Day or
ten (10) Trading Day period, as set forth above, after the ex-dividend
date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case,
the "current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading by the
NASDAQ National Market System or, if the shares of Common Stock are not
listed or admitted to trading on the NASDAQ National Market System, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System (NASDAQ) or such other system then in
use, or, if on any such date the shares of Common Stock are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by the Board
of Directors of the Company shall be used. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for
the transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed
or traded, "current market price" per share shall mean the fair value per
share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share of Common Stock. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the
date of the transaction which mandates such adjustment, or (ii) or the
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Common
Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Common Stock
contained in Sections ll(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Common Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the shares of Common Stock
(or fractions thereof) purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as provided
in Section 13(i), upon each adjustment of the Purchase Price as a result
of the calculations made in Sections ll(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of shares of Common Stock (calculated to the nearest ten-
thousandth) obtained by (i) multiplying (x) the number of shares of Common
Stock (or fraction thereof) covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment
of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of shares of
Common Stock (or fraction thereof) for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-one-hundredth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Common Stock issuable upon the exercise of the
Rights, the Rights Certificates issued may continue to express the
Purchase Price and the number of shares of Common Stock which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of
shares of Common Stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully
paid and nonassessable such number of shares of Common Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the number of one one-hundredths of a share of Common Stock
and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of shares of Common Stock and
other capital stock or securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or
securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11, as
and to the extent that in their good faith judgment the Board of Directors
of the Company shall determine to be advisable in order that any
(i) consolidation or subdivision of the Common Stock, (ii) issuance wholly
for cash of any shares of Common Stock at less than the current market
price, (iii) issuance wholly for cash of shares of Common Stock or
securities which by their terms are convertible into or exchangeable for
shares of Common Stock, (iv) stock dividends, or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Common Stock shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any
of its Subsidiaries in one or more transactions each of which complies
with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the 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.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 24 or Section 27 hereof,
take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend
on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a smaller number
of shares, the number of Rights associated with each share of Common Stock
then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any
such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to
such event by a fraction the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following the occurrence of
such event.
(q) Notwithstanding anything in the foregoing to the contrary, the
provisions of this Section 11 shall not apply to or be triggered by
(i) any announcement, commencement or consummation of a transaction
approved in advance by the Company's Board of Directors, or (ii) the
execution, delivery or performance of a merger agreement (or similar
agreement) approved in advance by the Company's Board of Directors.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate, and (c) mail or cause the Rights
Agent to mail a brief summary thereof to each holder of a Rights Certificate
(or, if prior to the Distribution Date, to each holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained, and shall not be obligated or responsible for
calculating any adjustment nor shall it be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.
Notwithstanding the foregoing, the failure of the Company to prepare the
certificate or make such filings or give such notices as are required hereunder
shall not adversely affect, suspend, modify or change the validity or enforce
ability of this Agreement or the Rights.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and
into, any other Person in a transaction not approved in advance by the
Company's Board of Directors, and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person
shall consolidate with, or merge with or into, the Company in a
transaction not approved in advance by the Company's Board of Directors,
and the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related
transactions in a transaction not approved in advance by the Company's
Board of Directors, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons, then, and in each such case, the
Company and the Principal Party (as such term is herein defined) and its
Affiliates and Associates shall make proper provision so that: (i) each
holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely transferable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by multiplying (1) the product of
the then current Purchase Price divided by 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common
Stock of such Principal Party on the date of consummation of such
Section 13 Event by (2) the number of shares of Common Stock for which a
Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such
shares (or fraction thereof) for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event); (ii) such
Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply
only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any
such transactions as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in
relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13
Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or
consolidation (or whichever company survives), and if no
securities are so issued, the Person that is the other party to
such merger or consolidation; and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the
party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common
Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is
a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Stock having the greatest
aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number
of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Securities Act 1933 (the "Act"), with respect to the Rights and
the securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof,
or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable.
The closing price of the Rights for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NASDAQ National
Market System or, if the Rights are not listed or admitted to trading on
the NASDAQ National Market System, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights
are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the rights
selected by the board of directors of the company. If on any such date no
such market maker is making a market in the rights the fair value of the
rights on such date as determined in good faith by the board of directors
of the company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may elect to (i) utilize a depository
arrangement to allow for the combination of Rights into full shares of
Common Stock or (ii) pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of shares of Common
Stock. For purposes of this Section 14(b), the current market value of
shares of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading
Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person (including, without limitation, the Company) subject to
this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) After the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate forms and certificates fully executed;
(c) Subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder in accordance with
a fee schedule to be mutually agreed upon and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of
liability in the premises. The costs and expenses of enforcing this right
of indemnification shall also be paid by the Company. The indemnification
provided for hereunder shall survive the expiration of the Rights and
termination of this Agreement.
(b) In no case will the Rights Agent be liable for special, indirect,
incidental or consequential loss or damage of any kind whatsoever, even if
the Rights Agent has been advised of the likelihood of such loss or
damage.
(c) The Rights Agent may conclusively rely upon, and shall be
protected and shall incur no liability for or in respect of any action
taken, suffered or omitted by it in connection with its administration of
this Agreement in reliance upon, any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or
Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided,
however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and
in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions (and no implied duties or obligations of the Rights Agent shall be
read into this Agreement), all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, if
reasonable or necessary, the Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring
Person and the determination of "current market prices) be proved or
established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall
it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of Common Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Vice President,
the Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Agreement, and it
shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. 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 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 any such application on or after the date specified
in such application (which date shall not be less than ten 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 subject to the
proposed action or omission and/or specifying the action to take 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.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct; provided, however,
reasonable care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability
is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be,
has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without first
consulting with the Company.
(l) At any time and from time to time after the Distribution Date,
upon the request of the Company, the Rights Agent shall promptly deliver
to the Company a list, as of the most recent practicable date (or as of
such earlier date as may be specified by the Company), of the holders of
record of Rights.
(m) The Rights Agent shall not be required to take notice or be
deemed to have any notice of any fact, event or determination (including,
without limitation, any dates or events defined in this Agreement or the
designation of any Person as an Acquiring Person, Affiliate or Associate)
under this Agreement unless and until the Rights Agent shall be
specifically notified in writing by the Company of such fact, event or
determination.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and, at
the expense of the Company, to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the resigning,
removed, or incapacitated Rights Agent shall remit to the Company, or to any
successor Rights Agent designated by the Company, all books, records, funds,
certificates and other documents and instruments of any kind then in its
possession which were acquired or created by such resigning, removed or
incapacitated Rights Agent in connection with its services as Rights Agent
hereunder, and shall thereafter be discharged from all further duties and
obligations hereunder. Following notice of such removal, resignation or
incapacity, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Rights Certificate (who shall, with such notice, submit
his Rights Certificate for inspection by the Company), then any registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be either
(a) a corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which either has or is an affiliate of a corporation which has at the time of
its appointment as Rights Agent a combined capital and surplus of at least
$50,000,000, or (b) an affiliate of such corporation. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the registration or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and/or the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or warrants or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors, of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall
be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.
Section 23. EXCHANGE.
(a) The Company's Board of Directors may, at their 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 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring 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 any such subsidiary or any entity holding shares of
Common Stock for or pursuant to any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of
Shares of Common Stock aggregating 50% or more of the shares of Common
Stock then outstanding.
(b) Immediately upon the action of the Company's Board of Directors
ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 23 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. The Company shall mail promptly a notice of any such exchange
to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of exchange will state
the method by which the exchange of the shares of Common Stock 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 7(e) hereof) held by
each holder of Rights.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the
purposes of this paragraph (d), the current market value of a whole share
of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 23.
Section 24. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at their option, at
any time prior to the earlier of (i) the close of business on the tenth
business day following the Stock Acquisition Date or (ii) the Final
Expiration Date, redeem all but not less than all of the then outstanding
Rights at a redemption price of $0.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, reverse stock split,
reclassification, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as
the "Redemption Price); provided, however, that if, following the
occurrence of a Stock Acquisition Date and following the expiration of the
right of redemption hereunder but prior to any Triggering Event, (i) a
Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of shares of Common Stock in one transaction or
series of transactions, not directly or indirectly involving the Company
or any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event such that such Person is thereafter a Beneficial Owner of
10% or less of the outstanding shares of Common Stock, and (ii) there are
no other Persons, immediately following the occurrence of the event
described in clause (i), who are Acquiring Persons, then the right of
redemption shall be reinstated and thereafter be subject to the provisions
of this Section 24. Notwithstanding anything contained in this Agreement
to the contrary, subject to Section 27 hereof, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until
such time as the Company's right of redemption hereunder has expired. The
Company may, at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the "current market price," as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by the Board of
Directors.
(b) Immediately upon the action of the Company's Board of Directors
ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. 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 24, and other than in connection
with the purchase of Common Stock before the Distribution Date.
(c) Notwithstanding the provisions of Section 24(a) hereof, in the
event that a majority of the Board is elected by stockholder action by
written consent, or is comprised of Persons elected at a meeting of
stockholders who were not nominated by the Board in office immediately
prior to such meeting, then for a period of ninety (90) days following the
effectiveness of such election the Rights shall not be redeemed if such
redemption is reasonably likely to have the purpose or effect of allowing
any Person to become an Acquiring Person or otherwise facilitating the
occurrence of a Triggering Event or a transaction with an Acquiring
Person.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class
to the holders of Common Stock or to make any other distribution to the
holders of Common Stock (other than a regular quarterly cash dividend out
of earnings or retained earnings of the Company), or (ii) to offer to the
holders of Common Stock rights or warrants to subscribe for or to purchase
any additional shares of Common Stock or shares of stock of any class or
any other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or
(iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale of other
transfer), in one transaction or a series of related transactions, of more
than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purposes
of such stock dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock, if any
such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Common
Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Common Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section ll(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section ll(a)(ii)
hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by registered
or certified mail, postage prepaid, addressed (until another address is filed
in writing with the Rights Agent) as follows:
MFRI, Inc.
7720 Lehigh Avenue
Niles, Illinois 60714
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by registered or certified mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
HARRIS TRUST AND SAVINGS BANK
311 West Monroe
Chicago, Illinois 60606
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Notices given by registered or certified mail under this Section 26 shall
be deemed given effective upon receipt.
Section 27. SUPPLEMENTS AND AMENDMENTS. Before the Distribution Date,
the Company and the Rights Agent shall, if a majority of the Board of Directors
so directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 27, the Company and the Rights Agent shall, if a majority of the
Board of Directors so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder for any or all purposes (for
example, the Company may shorten or lengthen the period during which the Rights
may be redeemed without changing the Distribution Date), (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable, or (v) lower the threshold set forth in Section 1(a) to
not less than 10%. Notwithstanding the previous sentence, in no event shall
any such supplement or amendment adopted after the Distribution Date adversely
affect the interests of the holders of Rights (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person). In addition, this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of the second sentence of this Section 27, (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 (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person). 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 this Section 27, the
Rights Agent shall sign such supplement or amendment. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall
be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price or the number of shares of Common Stock for which a Right is
exercisable; provided, however, that at any time before the Distribution Date,
the Board of Directors may amend this Agreement to increase the Purchase Price
or to extend the Final Expiration Date. Before the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock. Notwithstanding anything in this
Agreement to the contrary, no supplement or amendment that changes the rights
and duties of the Rights Agent under this Agreement will be effective against
the Rights Agent without the execution of such supplement or amendment by the
Rights Agent.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. 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 to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board to any
liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 24
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board of
Directors.
Section 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
MFRI, INC.
By: /S/DAVID UNGER
Name: David Unger
Title: Chairman, President and
Chief Executive Officer
HARRIS TRUST AND SAVINGS BANK, AS RIGHTS AGENT
By: /S/ARLENE KAMINSKI
Name: Arlene Kaminski
Title: Vice President
<PAGE>
Exhibit A
FORM OF ELECTION TO PURCHASE
(a) (To be executed if holder desire to exercise Rights represented by the
Rights Certificate.)
To: MFRI, INC.
The undersigned hereby irrevocably elects to exercise
_____________________Rights represented by this Rights Certificate to purchase
the shares of Common Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security or other identifying number:
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:
Please print name and address:
Dated: ______________________________
Signature
SIGNATURE GUARANTEED:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate
[ ] are
[ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated:____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On September 15, 1999, the Board of Directors of MFRI, Inc. (the
"Company") declared a dividend distribution of one right for each outstanding
share of common stock to stockholders of record at the close of business on
September 22, 1999. Each Right entitles the registered holder to purchase from
the Company one share of common stock, at a Purchase Price of $25.00 full share
of common stock, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Harris Trust and Savings Bank, as Rights Agent.
Initially, the Rights will be attached to all common stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the common stock and a
Distribution Date will occur upon the earlier of (i) 10 business days after a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Persons") has acquired, or obtained the right to acquire, after
September 15, 1999 beneficial ownership of 15% or more of the outstanding
shares of common stock (the "Stock Acquisition Date"), except under certain
limited circumstances as described below, or (ii) 10 business days (or such
later date as the Board of Directors shall determine) following the
commencement of a tender or exchange offer that would result in a person or
group beneficially owning 15% or more of such outstanding shares of common
stock. Until the Distribution Date, (i) the Rights will be evidenced by the
common stock certificates and will be transferred with and only with such
common stock certificates, (ii) new common stock certificates issued after
September 22, 1999 will contain a notation incorporating the Rights Agreement
by reference, and (iii) the surrender for transfer of any certificates for
common stock outstanding will also constitute the transfer of the Rights
associated with the common stock represented by such certificates. Pursuant to
the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of common
stock will be issued.
The definition of Acquiring Persons does not include, among certain other
specified exclusions, Heartland Advisors Inc., who , on September 15, 1999 (the
"Rights Dividend Declaration Date"), is the beneficial owner of more than 15%
of the shares of common stock of the Company unless it becomes the beneficial
owner of 22% or more of the then outstanding shares of common stock of the
Company.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on September 15, 2009 unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the common stock as of the close of business
on the Distribution Date, and thereafter, the separate Rights Certificates
alone will represent the Rights. Except as otherwise determined by the Board
of Directors, only shares of common stock issued prior to the Distribution Date
will be issued with Rights.
If (i) the Company is the surviving corporation in a merger or other business
combination with an Acquiring Person and its common stock remains outstanding
and unchanged, (ii) any Acquiring Person acquires beneficial ownership of more
than 15% of the outstanding shares of common stock (except pursuant to (A)
certain consolidations or mergers involving the Company or sales or transfers
of the combined assets or earning power the Company and its subsidiaries or (B)
an offer for all outstanding shares of common stock at a price and upon terms
and conditions which a majority of the Board of Directors determines to be in
the best interests of the Company and its stockholders) or (iii) there occurs a
reclassification of securities, a recapitalization of the Company or any of
certain business combinations or other transactions (other than certain
consolidations and mergers involving the Company and sales or transfers of the
combined assets or earning power of the Company and its subsidiaries) involving
the Company or any of its subsidiaries which has the effect of increasing by
more than 1% the proportionate share of any class of the outstanding equity
securities of the Company or any of its subsidiaries beneficially owned by an
Acquiring Person, each holder of a Right (other than the Acquiring Person and
certain related parties) will thereafter have the right to receive, upon
exercise, common stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. However, Rights are not exercisable following the occurrence of
any of the events described above until such time as the Rights are no longer
redeemable by the Company as described below. Notwithstanding any of the
foregoing following the occurrence of any of the events described in this
paragraph, all Rights that are, or under certain circumstances specified in the
Rights Agreement were, beneficially owned by any Acquiring Person will be null
and void.
For example, at an exercise price of $25.00 per share of common stock, each
Right not owned by an Acquiring Person (or by certain related parties or
transferees) following an event set forth in the preceding paragraph would
entitle its holder to purchase $50.00 worth of common stock for $25.00.
Assuming that the common stock had a per share market price of $10.00 at such
time, the holder of valid Rights would be entitled to purchase five shares of
common stock for $25.00, which equates to $5.00 per share.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation or merger pursuant to which all or
part of the outstanding shares of common stock are changed into or exchanged
for stock or other securities of any other person or cash or any other property
or (iii) more than 50% of the combined assets or earning power of the Company
and its subsidiaries is sold or transferred (in each case other than certain
consolidations with, mergers with and into, or sales of assets or earning power
by or to subsidiaries of the Company as specified in the Rights Agreement),
each holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Rights. The events described in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding 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 common stock, (ii) if
holders of the common stock are granted certain rights or warrants to subscribe
for common stock or securities convertible into common stock at less than the
current market price of the common stock, or (iii) upon the distribution to
holders of the common stock of evidences of indebtedness, cash (excluding
regular quarterly cash dividends), assets (other than dividends payable in
common stock) or of subscription rights or warrants (other than those referred
to in (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least 1% of the Purchase Price. No
fractional shares of common stock are required to be issued and, in lieu
thereof, the Company may make an adjustment in cash based on the market price
of the common stock on the trading data immediately prior to the date of
exercise.
At any time after any person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding
shares of common stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person or group, which will become
void), in whole or in part, for shares of common stock at an exchange ratio of
one share of common stock per Right (subject to adjustment).
At any time until ten business days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (payable in cash, shares of common stock or other consideration
deemed appropriate by the Board of Directors). Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$0.01 redemption price. Notwithstanding the foregoing, the Rights generally
may not be redeemed for 90 days following a change in a majority of the Board
as a result of a proxy contest.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for common stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above or in the event that
the Rights are redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
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 and as an
Exhibit to a report on Form 8-K each dated September 22, 1999. A copy of the
Rights Agreement is available free of charge from the Rights Agent. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
