<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission file number: 1-12754
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1659062
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1900 Gulf Street, Lamar, Missouri 64759-1899
(Address of principal executive offices) (ZIP Code)
(417) 682-3322
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of May 12, 1999, 16,048,988 shares of Common Stock of O'Sullivan
Industries Holdings, Inc., par value $1.00 per share, and associated preferred
stock purchase rights were outstanding.
The Index to Exhibits is on page 16.
Page 1 of 66
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PART I
ITEM 1. FINANCIAL STATEMENTS.
O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except for share data)
<TABLE>
<CAPTION>
March 31, June 30,
Assets: 1999 1998
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,869 $ 1,810
Trade receivables, net of allowance for doubtful accounts
of $2,708 and $2,289, respectively 78,720 61,548
Inventories:
Finished merchandise 29,249 26,892
Work in process 7,046 6,835
Raw materials 12,585 13,000
--------- ---------
48,880 46,727
Prepaid expenses and other current assets 3,302 3,762
--------- ---------
Total current assets 132,771 113,847
Property, plant and equipment, at cost 157,548 145,666
Less accumulated depreciation and amortization (60,135) (52,288)
--------- ---------
97,413 93,378
--------- ---------
Goodwill, net of accumulated amortization 41,839 43,089
--------- ---------
$ 272,023 $ 250,314
========= =========
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 17,056 $ 14,031
Current portion long-term debt 4,000 4,000
Accrued liabilities 23,726 22,613
Income taxes payable 2,984 310
--------- ---------
Total current liabilities 47,766 40,954
--------- ---------
Long-term debt, less current maturities 29,000 30,000
Deferred income taxes 15,690 15,690
Stockholders' equity:
Preferred stock; $1.00 par value, 20,000,000 shares authorized,
none issued -- --
Common stock; $1.00 par value, 100,000,000 shares authorized,
16,819,950 issued 16,820 16,820
Additional paid-in capital 87,416 87,809
Foreign currency translation (67) (36)
Retained earnings 84,496 68,317
--------- ---------
188,665 172,910
Less common stock in treasury at cost, 807,340 and
798,231 shares, respectively 9,098 9,240
--------- ---------
Total stockholders' equity 179,567 163,670
Commitments and contingencies
--------- ---------
$ 272,023 $ 250,314
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $108,529 $ 92,325 $293,988 $254,990
Costs and expenses:
Cost of sales 75,720 67,672 208,187 184,213
Selling, marketing and administrative 20,159 17,916 58,240 51,778
Interest, net 573 689 2,284 1,801
-------- -------- -------- --------
96,452 86,277 268,711 237,792
-------- -------- -------- --------
Income before income tax provision 12,077 6,048 25,277 17,198
Income tax provision 4,345 2,234 9,098 6,357
-------- -------- -------- --------
Net Income $ 7,732 $ 3,814 $ 16,179 $ 10,841
======== ======== ======== ========
Earnings per common share
Basic $ 0.48 $ 0.24 $ 1.01 $ 0.66
Diluted $ 0.47 $ 0.23 $ 1.00 $ 0.65
Weighted average common shares outstanding
Basic 15,984 16,170 15,951 16,440
Diluted 16,337 16,440 16,250 16,783
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from (used by) operating activities:
Net income $ 16,179 $ 10,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,367 8,395
Bad debt expense 737 1,014
Loss on disposal of assets 142 --
Employee option amortization 561 562
Changes in current assets and liabilities:
Trade receivables (17,909) (7,692)
Inventories (2,153) 956
Other assets 429 (1,560)
Accounts payable, accrued liabilities and
income taxes payable 6,251 7,806
-------- --------
Net cash provided by operating activities 14,604 20,322
-------- --------
Cash flows used for investing activities:
Capital expenditures (13,294) (22,860)
-------- --------
Net cash used for investing activities (13,294) (22,860)
-------- --------
Cash flows from (used by) financing activities:
Addition to (repayment of) long-term debt (1,000) 4,000
Purchase of common stock (2,811) (9,253)
Exercise of stock options 52 101
Sale of common stock to employee benefit plans 2,508 2,491
-------- --------
Net cash flows used by financing activities (1,251) (2,661)
Net increase (decrease) in cash and cash equivalents 59 (5,199)
Cash and cash equivalents, beginning of period 1,810 6,975
-------- --------
Cash and cash equivalents, end of period $ 1,869 $ 1,776
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
For the nine months ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Additional Foreign Total
paid-in currency Retained stockholders'
Preferred stock Common stock capital translation earnings Treasury stock equity
------------------ ----------------- ---------- ----------- -------- -------------- ------------
Shares Dollars Shares Dollars Shares Dollars
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 - $ - 16,820 $ 16,820 $ 87,809 $ (36) $ 68,317 (798) $ (9,240) $ 163,670
Net income 16,179 16,179
Foreign currency translation (31) (31)
Purchase of common stock (257) (2,811) (2,811)
Exercise of stock options,
net of tax benefit 52 52
Sale of common stock (445) 248 2,953 2,508
------- ------- ------- ------- ------- ------- -------- ------ ------- ---------
Balance, March 31, 1999 - $ - 16,820 $ 16,820 $ 87,416 $ (67) $ 84,496 (807) $ (9,098) $ 179,567
======= ======= ======= ======= ======= ======= ======== ====== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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O'SULLIVAN INDUSTRIES HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have
been prepared by O'Sullivan Industries Holdings, Inc. and subsidiaries
("O'Sullivan") in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-Q and Article 10
of Regulation S-X. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in O'Sullivan's Annual
Report on Form 10-K for the fiscal year ended June 30, 1998. The interim results
are not necessarily indicative of the results which may be expected for a full
year.
NOTE 2 - EARNINGS PER SHARE
Earnings per share ("EPS") are computed utilizing a dual presentation
format or basic and diluted EPS. Basic EPS excludes dilution and is computed by
dividing net income by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. The dilutive effect of outstanding options issued by
O'Sullivan are reflected in diluted EPS using the treasury stock method. Under
the treasury stock method, options will only have a dilutive effect when the
average market price for common stock during the period exceeds the exercise
price of the options.
The following is a reconciliation of the numerator and denominator used
in the basic and diluted EPS calculation:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------ -------------------------
1999 1998 1999 1998
------- ------- -------- --------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Income available to common stockholders
(numerator) $ 7,732 $ 3,814 $ 16,179 $ 10,841
======= ======= ======== ========
Weighted average shares outstanding
(basic EPS denominator) 15,984 16,170 15,951 16,440
Effect of dilutive securities--options 353 270 299 343
------- ------- -------- --------
Weighted average shares, plus assumed
conversions (diluted EPS denominator) 16,337 16,440 16,250 16,783
======= ======= ======== ========
</TABLE>
Options to purchase 488,784 additional shares of common stock at prices ranging
from $12.31 to $16.09 per share were outstanding but were not included in the
computation of diluted EPS for the three months ended March 1999, because the
options' exercise prices were greater than the average market price of the
common shares, and thus the effect would have been antidilutive.
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
O'Sullivan uses derivative financial instruments to reduce interest rate
risk. O'Sullivan does not hold or issue derivative financial instruments for
trading purposes. During fiscal 1997, O'Sullivan entered into a forward
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starting interest rate swap agreement with a notional principal amount
of $10.0 million. The effective date of the swap was October 1, 1998 and the
termination date is October 1, 2008. O'Sullivan has contracted to pay a fixed
rate of 7.13% and receive a floating interest rate during the duration of the
swap agreement. O'Sullivan called its existing $10.0 million of 8.25%
industrial development revenue bonds on October 1, 1998 at a redemption price
of 103%. The $300,000 premium on the early retirement of the bonds was
recognized as a loss in O'Sullivan's second quarter of fiscal 1999 and was
included in interest expense. The Company refinanced these bonds with new,
ten-year industrial revenue bonds with a tax-exempt variable interest rate
which is reset weekly. Interest on the bonds is paid monthly. The bonds mature
on October 1, 2008. Accordingly, the swap will have the effect of hedging
O'Sullivan against an increase in interest rates. Management has designated
this swap as a hedge against future interest rate exposure.
Amounts to be paid or received under the swap agreement will be accrued
as interest rates change and will be recognized over the life of the swap
agreement as adjustments to interest expense. Gains or losses on terminated
swaps will be recognized over the remaining life of the underlying obligation as
an adjustment to interest expense. Due to the decrease in interest rates since
the swap was consummated, the fair value of the forward starting swap agreement
approximated $977,000 at March 31, 1999. This amount represents the amount
O'Sullivan would have to pay to terminate the swap and approximates the present
value of the reduced variable rate interest O'Sullivan expects to pay over the
life of the bonds. This amount has not been recognized in the Consolidated
Financial Statements, since it is accounted for as a hedge and O'Sullivan has no
present intention of terminating the swap prior to the maturity date of the
bonds.
NOTE 4 - NEW ACCOUNTING STANDARDS
Comprehensive Income. Effective July 1, 1998, O'Sullivan adopted
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("FAS 130"). Comprehensive income is defined as the change in equity (net
assets) of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. Comprehensive income for the three months ended March
31, 1999 and 1998 were $7,733,000 and $3,845,000, respectively. Comprehensive
income for the nine months ended March 31, 1999 and 1998 were $16,160,000 and
$10,832,000 respectively.
Accounting for Derivative Instruments. Effective July 1, 1999,
O'Sullivan will adopt Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133"). This
new accounting standard will require that derivative instruments be measured at
fair value and recognized in the balance sheet as either assets or liabilities,
as the case may be. The treatment of changes in the fair value of a derivative
(i.e., gains and losses) will depend on its use and designation. Gains and
losses on derivatives designated as hedges against the cash flow effect of a
forecasted transaction will initially be reported as a component of
comprehensive income and, subsequently, reclassified into earnings when the
forecasted transaction affects earnings. Gains and losses on all other forms of
derivatives will be recognized in the period of change. If FAS 133 had been
adopted on July 1, 1998, the net change in the interest rate swap for the three
months ended March 31, 1999, would have been an increase in comprehensive income
of $285,000. For the nine months ended March 31, 1999, the net change in the
interest rate swap would have been a reduction in comprehensive income of
$625,000 (a nine month period reduction in comprehensive income of $22,000 and a
cumulative effect type of adjustment of $603,000). O'Sullivan has no present
intention of terminating the swap prior to the maturity date of the bonds.
NOTE 5 - SIGNIFICANT EVENTS
On March 24, 1999, O'Sullivan announced that members of its
senior management team, in conjunction with a financial buyer, had made a
proposal to O'Sullivan's Board of Directors to acquire O'Sullivan, subject to
requisite financing.
Upon receiving the proposal, the Board of Directors established a Special
Committee composed of independent directors to review its strategic alternatives
in order to maximize stockholder value. The Special Committee retained the
investment banking firm of Salomon Smith Barney Inc. to assist in the
exploration and evaluation of strategic alternatives including solicitation of
proposals from other potential acquirers of O'Sullivan.
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The review process continues to proceed in a timely manner.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
RETIREMENT AGREEMENT
In August 1998, O'Sullivan announced that Daniel F. O'Sullivan,
Chairman and Chief Executive Officer, had decided to retire effective upon the
completion of the Board's search for a replacement. In October 1998, Mr.
O'Sullivan and the Board of Directors completed negotiations on Mr. O'Sullivan's
retirement package. The retirement agreement reached with Mr. O'Sullivan
provides for certain benefits to be paid over a period of time.
On March 24, 1999, the Board of Directors announced that it had
suspended its search for a new Chairman and Chief Executive Officer to replace
Mr. O'Sullivan, pending the completion of the strategic alternatives review by
the Special Committee of independent directors. Under terms of Mr. O'Sullivan's
retirement agreement, the aggregate amount of his ultimate benefits is dependent
upon the date his successor is employed and therefore is not yet determinable.
Accordingly, the one-time charge has not yet been recognized by O'Sullivan.
TERMINATION PROTECTION AGREEMENTS
In March 1999, O'Sullivan entered into 24 Termination Protection
Agreements with its director-level managers. The Termination Protection
Agreements (all of which are substantially similar) have initial terms of one
year which automatically extend for successive one-year periods unless
terminated by either party. If the employment of any of the managers is
terminated (with certain exceptions) within twelve months following a "Change in
Control," or in certain other instances in connection with a Change in Control,
the managers are entitled to receive a cash payment equal to the total of six
months salary and one-half of their respective annual bonus (twelve months
salary and an annual bonus amount in certain instances). The managers would also
be entitled to the continuation of certain insurance benefits (life insurance,
disability, medical, dental and hospitalization benefits) for a period of up to
six (or twelve) months. The agreements also provide for outplacement services
for the manager.
The Termination Protection Agreements also provide that O'Sullivan will
make an additional "gross-up payment" (as defined in the Agreements) to the
managers to offset fully the effect of any excise tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), on any payment
made to any of the managers arising out of or in connection with the employment
of any of the managers. In addition, O'Sullivan will pay all legal fees and
related expenses incurred by any of the managers arising out of employment or
termination of employment.
Under the Termination Protection Agreements, a "Change in Control" will
be deemed to have occurred if either (i) any person or group acquires beneficial
ownership of 15% of the voting securities of O'Sullivan, (ii) there is a change
in the composition of a majority of the Board of Directors within any two-year
period which is not approved by certain of the directors who were directors at
the beginning of the two-year period; (iii) the stockholders of O'Sullivan
approve a merger, consolidation or reorganization involving O'Sullivan; (iv)
there is a complete liquidation or reorganization involving O'Sullivan; or (v)
O'Sullivan enters into an agreement for the sale or other disposition of all or
substantially all of the assets of O'Sullivan.
NOTE 7 - CONCENTRATION OF CREDIT RISK
In March 1999, Service Merchandise Co., a large customer of O'Sullivan,
filed for bankruptcy protection under Chapter 11. Service Merchandise has
announced that it expects to reorganize and continue its operations. We
increased our allowance for doubtful accounts by $0.6 million during the third
fiscal quarter as a result of the Service Merchandise filing. There can be no
assurance that Service Merchandise will be able to reorganize successfully and
continue its business, or, if it does so, at what level it will continue its
purchases from O'Sullivan.
In July 1997, a large customer of O'Sullivan, Montgomery Ward & Co., filed
for bankruptcy protection under Chapter 11. Montgomery Ward expects that it will
be able to reorganize its operations under Chapter 11
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protection and has continued to purchase products from us; however, the level of
purchases declined in fiscal 1998 and showed a moderate increase in fiscal 1999,
but could decline further as a result of the reorganization or otherwise.
If Service Merchandise, Montgomery Ward or another major customer
ceases or substantially reduces its purchases of products from O'Sullivan, there
can be no certainty that we will be able to replace these sales.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1999 increased 17.6% to
$108.5 million from $92.3 million for the quarter ended March 31, 1999. Sales
for the nine month period ended March 31, 1999 increased 15.3% to $294.0 million
from $255.0 million for the nine months ended March 31, 1999. During the quarter
and the nine month period, sales increased in the discount mass merchant,
specialty retailer and office superstore channels. Sales increased principally
due to higher unit volume, while the average price per unit did not increase
materially. Sales increases continue to be driven primarily by strong market
growth, fueled in part by the sub-$1,000 computer market and the expansion of
our market share in the consumer electronics channel.
In March 1999, Service Merchandise Co., a large customer of O'Sullivan,
filed for bankruptcy protection under Chapter 11. Service Merchandise has
announced that it expects to reorganize and continue its operations. We
increased our allowance for doubtful accounts by $0.6 million during the third
fiscal quarter as a result of the Service Merchandise filing. There can be no
assurance that Service Merchandise will be able to reorganize successfully and
continue its business, or, if it does so, at what level it will continue its
purchases from O'Sullivan.
In July 1997, a large customer of O'Sullivan, Montgomery Ward & Co.,
filed for bankruptcy protection under Chapter 11. Montgomery Ward expects that
it will be able to reorganize its operations under Chapter 11 protection and has
continued to purchase products from us; however, the level of purchases declined
in fiscal 1998 and showed a moderate increase in fiscal 1999, but could decline
further as a result of the reorganization or otherwise.
If Service Merchandise, Montgomery Ward or another major customer
ceases or substantially reduces its purchases of products from O'Sullivan, there
can be no certainty that we will be able to replace these sales.
Gross profit increased to $32.8 million, or 30.2% of sales, for the
three month period ended March 31, 1999 from $24.7 million, or 26.7% of sales,
for the comparable prior year quarter. Gross profit increased to $85.8 million,
or 29.2% of sales for the nine month period ended March 31, 1999, compared to
$70.8 million, or 27.8% of sales for the comparable prior year period. Our
higher gross margin during the quarter was due principally to the higher level
of sales and improvements in productivity in all three of our facilities.
In the fourth quarter of fiscal 1999, certain key commodity suppliers
have announced their intent to pass certain price increases on to their
customers, including O'Sullivan. If successful in their entirety, the after-tax
effect is anticipated to be approximately $2.8 million. O'Sullivan believes that
it can partially offset the effect of such increases through continued value
analysis of our products, productivity gains in manufacturing, and inclusion of
the higher costs in the selling price of our products. However, there can be no
assurance that O'Sullivan will be successful in offsetting these potential price
increases.
Selling, marketing and administrative expenses increased to $20.2
million, or 18.6% of sales, for the three months ended March 31, 1999, from
$17.9 million, or 19.4% of sales, for the three months ended March 31, 1999.
Selling, marketing and administrative expenses for the nine month period ended
March 31, 1999, increased to $58.2 million, or 19.8% of sales, from $51.8
million, or 20.3% of sales, for the comparable prior year period. For the
quarter ended March 31, 1999, the dollar increase in selling, marketing and
administrative expenses for the quarter was due primarily to increased sales
levels with the exception of a $0.6 million bad debt expense related to the
Chapter 11 filing of Service Merchandise. Out-bound freight costs were up over
the prior year quarter primarily due to the higher sales level and customer mix.
Advertising costs were down slightly over the prior year quarter.
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Interest expense of $0.6 million for the quarter ended March 31, 1999,
decreased 17.0% compared to the $0.7 million during the quarter ended March 31,
1998. Interest expense decreased primarily due to the refinancing of the
Virginia Industrial Revenue Bonds ("IRB's") in the second quarter of this fiscal
year. Interest expense of $2.3 million for the nine months ended March 31, 1999
is 26.8% higher than the related prior year of $1.8 million, reflecting a $0.3
million call premium on the IRB's in the second quarter and increased borrowings
in the first quarter. Borrowings at March 31, 1999 were down slightly when
compared to the prior year.
REVIEW OF STRATEGIC ALTERNATIVES
On March 24, 1999, O'Sullivan announced that members of its senior
management team, in conjunction with a financial buyer, had made a proposal to
O'Sullivan's Board of Directors to acquire O'Sullivan, subject to requisite
financing. Upon receiving the proposal, the Board of Directors established a
Special Committee composed of independent directors to review its strategic
alternatives in order to maximize stockholder value. The Special Committee
retained the investment banking firm of Salomon Smith Barney Inc. to assist in
the exploration and evaluation of strategic alternatives including solicitation
of proposals from other potential acquirers of O'Sullivan. The review process
continues to proceed in a timely manner.
In August 1998, O'Sullivan announced that Daniel F. O'Sullivan,
Chairman and Chief Executive Officer, had decided to retire effective upon the
completion of the Board's search for a replacement. In October 1998, Mr.
O'Sullivan and the Board of Directors completed negotiations on Mr. O'Sullivan's
retirement package. The retirement agreement reached with Mr. O'Sullivan
provides for certain benefits to be paid over a period of time.
On March 24, 1999, the Board of Directors announced that it had
suspended its search for a new Chairman and Chief Executive Officer to replace
Mr. O'Sullivan, pending the completion of the strategic alternatives review by
the Special Committee of independent directors. Under terms of Mr. O'Sullivan's
retirement agreement, the aggregate amount of his ultimate benefits is dependent
upon the date his successor is employed and therefore is not yet determinable.
Accordingly, the one-time charge has not yet been recognized by O'Sullivan.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, O'Sullivan had cash and cash equivalents of $1.9
million and net working capital of $85.0 million compared to cash and cash
equivalents of $1.8 million and net working capital of $72.9 million at June 30,
1998.
Cash provided by operating activities during the nine months ended
March 31, 1999 amounted to $14.6 million compared to $20.3 million in the
comparable prior year period. The decrease in cash flows resulted from higher
sales, which increased receivables, and higher finished goods inventories for
this year's nine months compared to the prior year period. Cash used in
financing activities for this year to date included approximately $13.3 million
for capital expenditures, primarily for equipment in our Virginia facility,
compared to $22.9 million for the prior year period. Cash used by financing
activities for the nine months was $1.3 million compared to $2.7 million in the
prior year quarter. The $1.3 million for this year's nine months was primarily
due to the purchase of treasury stock (net of contributions to employee benefit
plans) and repayment of long-term debt.
At March 31, 1999, O'Sullivan had long-term debt outstanding of $29.0
million. In 1995, O'Sullivan issued $20.0 million in private placement notes to
certain insurance companies. The notes are payable in $4.0 million increments
from fiscal 1999 to fiscal 2003; accordingly, $16.0 million of debt is
classified as long term and $4.0 million is classified as current portion of
long-term debt. A subsidiary of O'Sullivan was the obligor on $10.0 million of
8.25% IRB's that would have matured on October 1, 2008. On October 1, 1998,
O'Sullivan refinanced these bonds with new, ten-year IRB's with the interest
having a variable rate. The $0.3 million premium on the early retirement of the
bonds was recognized as a loss in O'Sullivan's second quarter of fiscal 1999.
The remainder of O'Sullivan's long-term debt is $3.0 million borrowed under
O'Sullivan's revolving Credit Agreement.
O'Sullivan has an unsecured $25.0 million revolving Credit Agreement
with a bank that expires on February 28, 2001. With the refinancing of the
IRB's, the $10.8 million standby letter of credit established in favor of
Tandy Corporation expired on October 1, 1998. The Credit Agreement has several
financial ratio covenants
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including the maintenance of a minimum working capital ratio and a minimum net
worth. In addition, the Credit Agreement has provisions specifying certain
limitations on dividends, investments and future indebtedness. O'Sullivan is
currently in compliance with all of its debt agreements.
On May 6, 1997, O'Sullivan announced that its Board of Directors had
authorized the purchase of up to five percent of the outstanding shares of its
common stock. O'Sullivan completed its purchases under the program in October
1998. Funding for the purchases came from available working capital and existing
borrowing facilities.
O'Sullivan also purchases its common stock to fund its employee benefit
programs. O'Sullivan did not purchase any of its common stock during the third
quarter of fiscal 1999. For the quarter, O'Sullivan transferred common stock
with a cost of $0.7 million to its employee benefit plans.
O'Sullivan uses derivative financial instruments to reduce interest
rate risk. O'Sullivan does not hold or issue derivative financial instruments
for trading purposes. During fiscal 1997, O'Sullivan entered into a forward
starting interest rate swap agreement with a notional principal amount of $10.0
million. The effective date of the swap is October 1, 1998 and the termination
date is October 1, 2008. O'Sullivan has contracted to pay a fixed rate of 7.13%
and receive a floating interest rate during the duration of the swap agreement.
The swap will have the effect of hedging O'Sullivan's exposure to an increase in
interest rates under its refinanced IRB's discussed above. Management has also
designated this swap as a hedge against future interest rate exposure.
Amounts to be paid or received under the swap agreement will be accrued
as interest rates change and will be recognized over the life of the swap
agreement as adjustments to interest expense. Gains or losses on terminated
swaps will be recognized over the remaining life of the underlying obligation as
an adjustment to interest expense. Due to the decrease in interest rates since
the swap was consummated, the fair value of the forward starting swap agreement
approximated $977,000 at March 31, 1999. This amount represents the amount
O'Sullivan would have to pay to terminate the swap and approximates the present
value of the reduced variable rate interest O'Sullivan expects to pay over the
life of the bonds. This amount has not been recognized in the Consolidated
Financial Statements, since it is accounted for as a hedge and O'Sullivan has no
present intention of terminating the swap prior to the maturity date of the
bonds.
O'Sullivan believes that cash flow from operations, along with current
unused balances under existing credit agreements, will be sufficient to fund
O'Sullivan's operations in fiscal 1999, including capital expenditures, which
are currently estimated in the range of $16.0 million for increased production
capacity, improved productivity, enhanced new product development and for
replacement equipment.
YEAR 2000 COMPLIANCE
Almost all companies must address whether their computer systems and
applications will recognize and process dates after December 31, 1999. In prior
years, many computer programs were written using two digits rather than four to
define the applicable year. These programs were written without considering the
impact of the upcoming change of the century and may experience problems
handling dates beyond the year 1999. This could cause computer applications to
fail or to create erroneous results unless corrective measures are taken.
In fiscal 1998, O'Sullivan completed final rollout of an enterprise
software package to support its expanded sales and multiple plant and warehouse
locations. With the exception of one ancillary module, the vendor of the
software package states the package is year 2000 compliant. We expect to install
and test upgrades to the final non-compliant module by May 31, 1999. We are
continuing our testing efforts to backup the software vendors' statements of
compliance.
O'Sullivan is in the process of testing its computer systems to verify
that software and hardware can process dates after December 31, 1999. This
testing will continue. We have implemented electronic communications
capabilities to ensure that order, shipping and invoicing data for dates after
December 31, 1999 can be processed. This testing and verification is complete.
We have successfully tested Y2K data with the National Retail Federation (NRF)
and have received its Y2K compliance certification. We are also processing Y2K
compliant order, shipping and invoicing data with certain of our EDI partners.
We continue to test and implement
11
<PAGE> 12
Y2K compliant electronic communications with other customers.
O'Sullivan's ability to produce its products is dependent upon timely
receipt of raw materials. Accordingly, we have requested our suppliers to
provide information regarding their efforts to address year 2000 compliance
issues. Every major supplier responded that it has evaluated and addressed its
year 2000 compliance issues or is in the process of doing so. If a major
supplier does not resolve its year 2000 compliance issues and is unable to
provide us with timely deliveries of quality materials after December 31, 1999,
we expect to locate and use alternative suppliers, although it is possible that
we may be unable to do so, or may be able to do so only at increased expense.
In addition, O'Sullivan has reviewed remaining critical business
systems and is in the process of reviewing its computerized machinery and
equipment for year 2000 compliance issues. We have reviewed over 1,898 pieces of
equipment; the few modification requirements identified have been implemented.
Only five pieces of equipment have not yet been tested due to scheduling of
outside consultants. As deficiencies are discovered, a plan to remedy the
deficiency is crafted and implemented. The review of machinery and equipment is
expected to be complete by June 30, 1999. Based upon current information, we
estimate that aggregate amounts expended to resolve year 2000 issues should not
exceed $500,000.
We expect to complete implementation of computer systems that are year
2000 compliant in fiscal 1999. However, this expectation is subject to
uncertainties. For example, if we do not identify and fix all year 2000 problems
in critical operations, O'Sullivan's results of operations or financial
condition could be materially impacted. O'Sullivan's results could also be hurt
if a major supplier or customer is unable to supply raw materials or receive our
product.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
O'Sullivan's market risk is impacted by changes in interest rates,
foreign currency exchange rates and certain commodity prices. Pursuant to our
policies, natural hedging techniques and derivative financial instruments may be
utilized to reduce the impact of adverse changes in market prices. O'Sullivan
does not hold or issue derivative instruments for trading purposes, and has no
material sensitivity to changes in market rates and prices on its derivative
financial instrument positions.
O'Sullivan has market risk in interest rate exposure, primarily in the
United States. O'Sullivan manages interest rate exposure through its
conservative debt ratio target and its mix of fixed and floating rate debt.
Interest rate swaps may be used to adjust interest rate exposures when
appropriate based on market conditions, and, for qualifying hedges, the interest
differential of swaps is included in interest expense. O'Sullivan believes that
its foreign exchange risk is not material.
Due to the nature of its product lines, O'Sullivan has material
sensitivity to certain commodities including particle board, fiberboard and
cartoning. We manage commodity price exposures primarily through the duration
and terms of our vendor contracts. A one percent change in these commodity
prices, assuming none of the increase could be passed on to customers, would
affect the after-tax earnings of O'Sullivan by approximately $700,000 annually.
In the fourth quarter of fiscal 1999, certain key commodity suppliers
have announced their intent to pass certain price increases on to their
customers, including O'Sullivan. If successful in their entirety, the after-tax
effect is anticipated to be approximately $2.8 million. O'Sullivan believes that
it can partially offset some of the effect of such increases through continued
value analysis of our products, productivity gains in manufacturing, and
inclusion of the higher costs in the selling price of our products. However,
there can be no assurance that O'Sullivan will be successful in offsetting these
potential price increases.
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
12
<PAGE> 13
FORWARD LOOKING STATEMENTS
Certain portions of this Report, and particularly the Notes to the
Consolidated Financial Statements and the Management's Discussion and Analysis
of Financial Condition and Results of Operation in Part I of this report,
contain forward-looking statements. These statements can be identified by the
use of future tense or dates or terms such as "believe," "expect," "anticipate"
or "plan." Important factors could cause results to differ materially from those
anticipated by some of the statements made in this report. Some of the factors
include:
- receiving a fair offer for O'Sullivan from a potential buyer;
- changes from anticipated levels of sales of O'Sullivan's products,
whether due to future national or regional economic and competitive
conditions, customer acceptance of existing and new products, or
otherwise;
- pricing pressures due to excess capacity in the ready-to-assemble
furniture industry, as occurred in 1995;
- customer demand in excess of O'Sullivan's ability to supply product,
such as the capacity constraint that affected O'Sullivan's shipping
performance in the first half of fiscal 1994;
- raw material cost increases, particularly in particle board and
fiberboard, such as the increases that reduced O'Sullivan's earnings in
fiscal 1994 and 1995 and such as have been received recently;
- transportation cost increases due to a shortage of supply of trucks or
railcars;
- the bankruptcy of a major customer, such as Service Merchandise in
March 1999 and Montgomery Ward & Co. in 1997;
- loss of significant customers in connection with a merger or
acquisition or bankruptcy;
- actions of current or new competitors, such as reduction of prices on
competitive products or introduction of new products competitive with
O'Sullivan's products;
- increased advertising costs associated with promotional efforts;
- failure by O'Sullivan or a major supplier or vendor to identify and
remedy all critical year 2000 compliance issues or the discovery of
additional year 2000 compliance issues requiring significant
expenditures to remedy;
- new litigation or governmental regulations; and
- other uncertainties,
all of which are difficult to predict and many of which are beyond the control
of O'Sullivan.
TERMINATION PROTECTION AGREEMENTS
In March 1999, O'Sullivan entered into 24 Termination Protection Agreements
with its director-level managers. The Termination Protection Agreements (all of
which are substantially similar) have initial terms of two years which
automatically extend for successive one-year periods unless terminated by either
party. If the employment of any of the managers is terminated (with certain
exceptions) within twelve months following a "Change in Control," or in certain
other instances in connection with a Change in Control, the managers are
entitled to receive a cash payment equal to the total of six months salary and
one-half of their respective annual bonus (twelve months salary and an annual
bonus amount in certain instances). The managers would also be entitled to the
continuation of certain insurance benefits (life insurance, disability, medical,
dental and hospitalization benefits) for a period of up to six (or twelve)
months. The agreements also provide for outplacement services for the manager.
The Termination Protection Agreements also provide that O'Sullivan will
make an additional "gross-up payment" (as defined in the Agreements) to the
managers to offset fully the effect of any excise tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), on any payment
made to any of the managers arising out of or in connection with the employment
of any of the managers. In addition, O'Sullivan will pay all legal fees and
related expenses incurred by any of the managers arising out of employment or
termination of employment.
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<PAGE> 14
Under the Termination Protection Agreements, a "Change in Control" will
be deemed to have occurred if either (i) any person or group acquires beneficial
ownership of 15% of the voting securities of O'Sullivan, (ii) there is a change
in the composition of a majority of the Board of Directors within any two-year
period which is not approved by certain of the directors who were directors at
the beginning of the two-year period; (iii) the stockholders of O'Sullivan
approve a merger, consolidation or reorganization involving O'Sullivan; (iv)
there is a complete liquidation or reorganization involving O'Sullivan; or (v)
O'Sullivan enters into an agreement for the sale or other disposition of all or
substantially all of the assets of O'Sullivan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
A list of exhibits required to be filed as part of this Report is set
forth in the Index to Exhibits, which immediately precedes such exhibits, and is
incorporated herein by reference.
(b) Reports on Form 8-K:
None
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
Date: May 13, 1999 By: /s/ Richard D. Davidson
--------------------------------------------
Richard D. Davidson
President and
Chief Operating Officer
Date: May 13, 1999 By: /s/ Terry L. Crump
--------------------------------------------
Terry L. Crump
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE> 16
INDEX TO EXHIBITS
Exhibit No. Description Page
3.1 & 4.1 Certificate of Incorporation of O'Sullivan (incorporated
by reference from Exhibit 3.1 to Registration Statement
on Form S-1 (File No. 33-72120))
3.2 & 4.2 Bylaws of O'Sullivan (incorporated by reference from
Exhibit 3.2 to Registration Statement on Form S-1
(File No. 33-72120))
4.3 Specimen Stock Certificate of O'Sullivan (incorporated by
reference from Exhibit 4.1 to Amendment No. 3 to Registration
Statement on Form S-1 (File No. 33-72120))
4.4 Rights Agreement dated as of February 1, 1994 between
O'Sullivan and the First National Bank of Boston, as Rights
Agent 17
4.4a First Amendment to Rights Agreement 46
10.1 Fourth Amendment to Amended and Restated Credit Agreement
between O'Sullivan, O'Sullivan Industries, Inc. and
NationsBank, N.A. dated as of March 30, 1999 50
10.2 Form of Termination Protection Agreement between O'Sullivan
and director-level managers 53
27 Financial Data Schedule 66
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, O'Sullivan has not
filed agreements relating to certain long-term debt of O'Sullivan aggregating
$10 million. O'Sullivan agrees to furnish the Securities and Exchange Commission
a copy of such agreements upon request.
16
<PAGE> 1
EXHIBIT 4.4
RIGHTS AGREEMENT
Rights Agreement, dated as of February 1, 1994 between O'Sullivan
Industries Holdings, Inc., a Delaware corporation (the "Company"), and The First
National Bank of Boston, a national banking association (the "Rights Agent"),
hereafter the "Agreement."
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") on the earlier of
February 1, 1994, immediately prior to the closing of the offering contemplated
by the Company's Registration Statement on Form S-1 filed on November 24, 1993,
as amended (the "Registration Statement") is declared effective under the
Securities Act of 1933 (the "1933 Act") by the Securities and Exchange
Commission (the "Record Date"), for each Common Share of the Company, if any,
issued and outstanding on the Record Date, each Right representing the right to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock ("Preferred Stock"), without par value, of the Company having
the rights and preferences set forth in the Fourth Paragraph of the Certificate
of Incorporation of the Company, a true and correct copy of which is attached
hereto as Exhibit A, upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to Common Shares that shall
become outstanding after the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date in accordance with the provisions
of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter
defined) who or which, together with all Affiliates (as hereinafter defined) and
Associates (as hereinafter defined) of such Person, without the prior approval
of at least a majority of the Disinterested Directors (as hereinafter defined),
shall be the Beneficial Owner (as hereinafter defined) of 15% or more of the
Common Shares then outstanding (other than as a result of a Permitted Offer (as
hereinafter defined)) or was such a Beneficial Owner at any time after the date
hereof, whether or not such person continues to be the Beneficial Owner of 15%
or more of the then outstanding Common Shares. Notwithstanding the foregoing,
(A) the term "Acquiring Person" shall not include (i) the Company, (ii) any
Subsidiary (as hereinafter defined) of the Company, (iii) any employee benefit
plan of the Company or of any Subsidiary of the Company, or (iv) any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan, and (B) no Person shall be deemed to be an "Acquiring
Person" (X) as a result of the acquisition of Common Shares by the Company
which, by reducing the number of Common Shares outstanding, increases the
proportional number of shares beneficially owned by such Person together with
all Affiliates and Associates of such Person, provided, that if (i) a Person
would become an Acquiring Person (but for the operation of this subclause (x))
as a result of the acquisition of Common Shares by the Company, and (ii) after
such share acquisition by the Company, such Person, or an Affiliate of such
Person becomes the Beneficial Owner of any additional Common Shares, then such
Person shall be deemed an Acquiring Person, or (Y) if (i) within eight (8) days
after such Person would otherwise have become an Acquiring Person, such Person
notifies the Board of Directors that such person did so inadvertently and (ii)
within two (2) days after such notification, such Person is the Beneficial Owner
<PAGE> 2
of less than 15% of the outstanding Common Shares. Anything in this Agreement to
the contrary notwithstanding, (a) TE Electronics Inc. ("TE") and its Affiliates
and Associates shall not be treated as Acquiring Persons by virtue of TE's
acquisition of Common Shares prior to the consummation of the initial public
offering of Common Shares of the Company contemplated by the Registration
Statement, in the manner described in the Registration Statement and such
acquisition shall not be treated as a Triggering Event (as such term is defined
herein) hereunder; and (b) the U.S. Underwriters and International Underwriters
(as such terms are defined in the prospectus that is part of the Registration
Statement) and their Affiliates and Associates shall not be treated as Acquiring
Persons by virtue of the acquisition of Common Shares or other actions they may
take pursuant to the U.S. Purchase Agreement or the International Purchase
Agreement (as such terms are defined in the prospectus that is part of the
Registration Statement) or otherwise as underwriters of the initial public
offering of Common Shares of the Company contemplated by the Registration
Statement (including acquisitions pursuant to stabilizing transactions to
facilitate such initial public offering in accordance with Rule 10b-7
promulgated under the Securities Exchange Act of 1934, or to cover
overallotments created in connection with such initial public offering), and
such acquisition of Common Shares or such other actions by the U.S. Underwriters
and International Underwriters in connection with such initial public offering
shall not be treated as a Triggering Event hereunder.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(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 beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right or obligation to acquire (whether
such right or obligation is exercisable or effective 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 (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) relating to the
acquisition, holding, voting (except to the extent permitted by subparagraph
(ii)(B) of this paragraph (c)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the
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<PAGE> 3
Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or Federal holiday.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Boston time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Boston time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean shares of Common Stock, par value $1.00 per share, of the Company or,
in the event of a subdivision, combination or consolidation with respect to such
shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such Person or, if such
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person and which has issued and outstanding such
capital stock, equity securities or equity interests.
(g) "Disinterested Directors" shall mean the members of the
Board of Directors who are not officers of the Company and who are not Acquiring
Persons or their Affiliates, Associates or representatives of any of them, or
any Person who was directly or indirectly proposed or nominated as a director of
the Company by a Transaction Person.
(h) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(i) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(j) "Interested Stockholder" shall mean any Acquiring Person or
any Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(k) "Permitted Offer" shall mean a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at least
a majority of the Disinterested Directors to be adequate (taking into account
all factors that such Disinterested Directors deem relevant including, without
limitation, prices that could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and
otherwise in the best interests of the Company and its stockholders (other than
the Person or any Affiliate or Associate thereof on whose behalf the offer is
being made) taking into account all factors that such Disinterested Directors
may deem relevant.
(l) "Person" shall mean any individual, firm, partnership,
corporation, trust, association, joint venture or other entity, and shall
include any successor (by merger or otherwise) of such entity.
(m) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, $1.00 per share, of the Company having the
relative rights, preferences and limitations set forth in Article Fourth of the
Certificate of Incorporation of the Company attached to this Agreement as
Exhibit A.
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<PAGE> 4
(n) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(o) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(p) "Section 13 Event" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.
(q) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition shall include,
without limitation, a report filed pursuant to the Exchange Act) by the Company
or an Acquiring Person that an Acquiring Person has become such provided, that
if such Person is determined not to have become an Acquiring Person pursuant to
clause (B)(y) of the second sentence of Section 1(a) hereof, then no Share
Acquisition Date shall be deemed to have occurred.
(r) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such Person.
(s) "Transaction" shall mean any merger, consolidation or sale
of assets described in Section 13(a) hereof or any acquisition of Common Shares
of the Company which would result in a Person becoming a Transaction Person.
(t) "Transaction Person" with respect to a Transaction shall
mean (x) any Person who (i) is or will become an Acquiring Person if the
Transaction were to be consummated, and (ii) directly or indirectly proposed or
nominated a director of the Company which director is in office at the time of
consideration of the Transaction, or (y) an Affiliate or Associate of such a
Person.
(u) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and any Co-Rights Agents shall be as the
Company shall determine.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) ten days after the Shares
Acquisition Date or (ii) the Close of Business on the tenth business day (or
such later date as may be determined by action of the Company's Board of
Directors), after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any Person or entity organized, appointed
or established by the Company for or pursuant to the terms of any such plan) of,
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or 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) to commence (which intention to commence remains in effect for five
Business Days after such announcement),
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<PAGE> 5
a tender or exchange offer the consummation of which would result in any Person
becoming an Acquiring Person (including in the case of both (i) and (ii), any
such date which is after the date of this Agreement and prior to the issuance of
the Rights), the earlier of such dates being herein referred to as the
"Distribution Date," (x) the Rights will be evidenced (subject to the provisions
of paragraph (b) of this Section 3) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable only in connection
with the transfer of the underlying Common Shares (including a transfer to the
Company); provided, however, that if a tender offer is terminated prior to the
occurrence of a Distribution Date, then no Distribution Date shall occur as a
result of such tender offer. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent, by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate substantially in the form of Exhibit B hereto (a
"Right Certificate"), evidencing one Right for each Common Share so held. As of
and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) As promptly as practical following the Record Date, the
Company shall issue to each record holder of Common Shares, as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company, a certificate representing such record holder's Common Shares
bearing the legend set forth in paragraph (c) below, in replacement of the
certificate then held by such record holder. Until the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date, the Rights
will be evidenced by such replacement certificates registered in the names of
the holders thereof. Until the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date, the surrender for transfer of any such
replacement certificate for Common Shares shall also constitute the transfer of
the Rights associated with such Common Shares.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (b)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date,
shall be deemed also to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
O'Sullivan Industries Holdings, Inc. and The First National Bank
of Boston, dated as of February 1, 1994 (the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
executive offices of O'Sullivan Industries Holdings, 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. O'Sullivan Industries
Holdings, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge promptly following
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 certain related persons whether currently held by or on
behalf of such Person or by an Associates or Affiliates thereof
(as defined in the Rights Agreement) and any subsequent holder
of such Rights may become null and void.
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<PAGE> 6
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall be substantially in the
form set forth in Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the
Rights Certificate shall entitle the holders thereof to purchase such number of
one one-thousandths of a Preferred Share as shall be set forth therein at the
price per one one-thousandth of a Preferred Share set forth therein (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 Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are
null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
President or any Vice President, either manually or by facsimile signature, and
have affixed thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary, or an Assistant Secretary, of the Company, either
manually or by facsimile signature. The Right Certificates shall be
countersigned by the Rights Agent 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 Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such
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<PAGE> 7
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at the office of the Rights Agent designated for such purposes, books
for registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date and certificate number of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Sections 4(b), 7(e), 11 and 14 hereof, at any time after
the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, split up, combined
or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandth of a Preferred
Share (or, following a Triggering Event, other securities, as the case may be)
as the Right Certificate or Right Certificates surrendered then entitled such
holder (or its transferor in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split-up, combined or exchanged, with the form of assignment and
certificate appropriately executed, 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 Right Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate 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 the provisions
of Sections 4(b), 7(e), 11 and 14 hereof, countersign and deliver to the person
entitled thereto a Right Certificate or Right Certificates, as the case may be,
as so requested. The Company may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer, split-up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and 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 for the total
number of one one-thousandths of a Preferred Share (or other securities as the
case may be) as to which such surrendered Rights are
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<PAGE> 8
exercised, at or prior to the earlier of (i) the Close of Business on February
1, 2004 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date").
(b) The Purchase Price for each one one-thousandth of a
Preferred Share pursuant to the exercise of a Right shall initially be $110.00,
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.
Anything in this Agreement to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Company shall (i) declare or pay any dividend on the Common Shares payable
in Common Shares or (ii) effect a subdivision, combination or consolidation of
the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares) into a greater or lesser number of Common Shares, then in any
such case, the number of Rights shall be similarly adjusted such that each
Common Share outstanding thereafter shall carry with it one Right, and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price immediately prior to
such event by a fraction the numerator of which shall be the total number of
Common Shares outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. The adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
securities, as the case may be) and an amount equal to any applicable transfer
tax required to be paid by the holder of such Right Certificate in accordance
with Section 6 and Section 9 hereof by certified check, cashier's check or money
order payable to the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent of the Preferred Shares
certificates for the number of Preferred Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company, in its sole discretion, shall have elected to
deposit the Preferred Shares issuable upon exercise of the Rights hereunder into
a depositary, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional interests in shares in accordance
with Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt
thereof, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
In the event that the Company is obligated to issue other securities
(including Common Shares) of the Company pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other securities are
available for distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the Rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate
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<PAGE> 9
on the Right Certificate the number of Rights represented thereby which continue
to include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof, or an
appropriate notation shall be put on the Right Certificate with respect to those
Rights exercised .
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of an equity interest in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares. The Company
covenants and agrees that at all times prior to the occurrence of a Section
11(a)(ii) Event, it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares, or any authorized
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<PAGE> 10
and issued Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
and, after the occurrence of a Section 11(a)(ii) Event, shall to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a Section
11(a)(ii) event, Common Shares or any other securities) issuable upon the
exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares or securities.
The Company further covenants and agrees that it will pay when due and
payable any and all U.S. federal and state transfer taxes and charges that may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax that may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
Common Shares and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or deliver any certificates or depositary
receipts for Preferred Shares (or Common Shares and/or other securities as the
case may be) upon the exercise of any Rights, until any such tax shall have been
paid (any such tax being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Securities Act of 1933 (the "Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act and the rules and
regulations thereunder) until the date of the expiration of the rights provided
by Section 11(a)(ii). The Company will also take such action as may be
appropriate under the blue sky laws of the various states.
Section 10. Record Date. Each person in whose name any certificate for
Preferred Shares (or Common Shares and/or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares (or Common Shares and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the
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<PAGE> 11
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Company are open.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with
its Affiliates and Associates, shall become an Acquiring Person, then subject to
the last sentence of Section 23(a)(i), proper provision shall be made so that
each holder of a Right (except as provided below and in Section 7(e) hereof)
shall, for a period of 60 days after the later of the occurrence of any such
event or the effective date of an appropriate registration statement under the
Act pursuant to Section 9 hereof, have a right to receive, upon exercise thereof
at a price equal to the then current Purchase Price, in accordance with the
terms of this Agreement, such number of Common Shares (or, in the discretion of
the Board of Directors, one one-thousandths of a Preferred Share) as shall equal
the result obtained by (x) multiplying the then current Purchase Price by the
then number of one one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event, and dividing that product by (y) 50% of the then current per share market
price of the Company's Common Shares (determined pursuant to Section 11(d)
hereof) on the date of such first occurrence (such number of shares being
referred to as the "Adjustment Shares"); provided, however, that if the
transaction that would otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii);
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued (and unreserved) Common Shares to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable (and the Board has
determined to make the Rights exercisable into fractions of a Preferred Share),
notwithstanding any other provision of this Agreement, to the extent necessary
and permitted by applicable law, each Right shall thereafter represent the right
to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, (x) a number of
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<PAGE> 12
(or fractions of) Common Shares (up to the maximum number of Common Shares which
may permissibly be issued) and (y) one one-thousandths of a Preferred Share or a
number of, or fractions of other equity securities of the Company (or, in the
discretion of the Board of Directors, debt) which the Board of Directors of the
Company has determined to have the same aggregate current market value
(determined pursuant to Section 11(d)(i) and (ii) hereof, to the extent
applicable), as one Common Share (such number of, or fractions of, Preferred
Shares, debt, or other equity securities or debt of the Company being referred
to as a "capital stock equivalent"), equal in the aggregate to the number of
Adjustment Shares; provided, however, if sufficient Common Shares and/or capital
stock equivalents are unavailable, then the Company shall, to the extent
permitted by applicable law, take all such action as may be necessary to
authorize additional Common Shares or capital stock equivalents for issuance
upon exercise of the Rights, including the calling of a meeting of stockholders;
and provided, further, that if the Company is unable to cause sufficient Common
Shares and/or capital stock equivalents to be available for issuance upon
exercise in full of the Rights, then each Right shall thereafter represent the
right to receive the Adjusted Number of Shares upon exercise of the Adjusted
Purchase Price (as such terms are hereinafter defined). As used herein, the
"Adjusted Number of Shares" shall be equal to that number (or fractions of)
Common Shares (and/or capital stock equivalents) equal to the product of (x) the
number of Adjustment Shares and (y) a fraction, the numerator of which is the
number of Common Shares (and/or capital stock equivalents) available for
issuance upon exercise of the Rights and the denominator of which is the
aggregate number of Adjustment Shares otherwise issuable upon exercise in full
of all Rights (assuming there were a sufficient number of Common Shares
available) (such fraction being referred to as the "Proration Factor"). The
"Adjusted Purchase Price" shall mean the product of the Purchase Price and the
Proration Factor. The Board of Directors may, but shall not be required to,
establish procedures to allocate the right to receive Common Shares and capital
stock equivalents upon exercise of the Rights among holders of rights.
(b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or shares
having the same rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible into Preferred Shares
or equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
current per share market price of the Preferred Shares (as determined pursuant
to Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price and the denominator
of which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent. Preferred
Shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or
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<PAGE> 13
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price (as determined pursuant to Section 11(d)) of
the Preferred Shares on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price that would then be in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (1) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
Security, or (2) any subdivision, combination or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. If on any such date no such market maker is making a market in the
Security, the fair value of the Security on such date as determined in good
faith by the Board of Directors of the Company shall be used. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the transaction
of business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
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<PAGE> 14
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
the same manner as set forth in clause (i) of this Section 11(d). If the
Preferred Shares are not publicly traded, the "current per share market price"
of the Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent.
(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 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 one-thousandth of a Common Share or other
share or one ten-thousandth of a Preferred Share as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction that requires such adjustment or (ii)
the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than Preferred Shares, thereafter the number of such other shares so
receivable upon exercise of any Right shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Section 11(a)
through (e), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Preferred Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) (i) Unless the Company shall have exercised its election
as provided in subclause (ii) below, upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(b) and 11(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
one one- thousandths of a Preferred Share (calculated to the nearest one
ten-thousandth of a Preferred Share) obtained by (A) multiplying (x) the number
of one-one thousandths of a Preferred Share covered by a Right immediately prior
to the adjustment of the Purchase Price by (y) the Purchase Price in effect
immediately prior to such adjustment and (B) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(ii) The Company may elect on or after the date of any
adjustment of the Purchase Price as a result of the calculations made in Section
11(b) and (c) to adjust the number of Rights, in lieu of any adjustment in the
number of Preferred Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-thousandths of a Preferred Share for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to
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<PAGE> 15
such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any date thereafter, but, if the
Right Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(h), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of Preferred Shares which were expressed in the initial Right
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of one
one-thousandths of Preferred Shares, Common Shares or other securities issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue such number of fully paid and nonassessable one
one-thousandths of Preferred Shares, Common Shares or other securities at such
adjusted Purchase Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares, Common Shares, or other securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares, Common Shares,
or other securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
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 Preferred
Shares shall not be taxable to such shareholders.
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<PAGE> 16
(m) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which does not violate Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which does not violate Section 11(n) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
does not violate Section 11(n) hereof), if (x) at the time of or immediately
after such consolidation, merger, sale or transfer there are any charter or
by-law provisions or any rights, warrants or other instruments or securities
outstanding or agreements in effect or other actions taken, which would
materially diminish or otherwise eliminate the benefits intended to be afforded
by the Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company may not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such other Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this Section 11(m).
(n) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action the purpose of which
is to, or if at the time such action is taken it is reasonably foreseeable that
the effect of such action is to, materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
(o) The exercise of rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares and the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, on or following the Shares Acquisition
Date, directly or indirectly, (i) the Company shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of Common Stock are not treated alike, any other Person, (ii) the
Company shall consolidate with, or merge with, any Interested Stockholder or, if
in such merger or consolidation all holders of Common Stock are not treated
alike, any other Person, and the Company shall be the continuing or surviving
corporation of such consolidation or merger (other than, in a case of any
transaction described in (i) or (ii), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
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10
<PAGE> 17
outstanding or by being converted into securities of the surviving entity) all
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation and the holders of such
securities not having changed as a result of such merger or consolidation), or
(iii) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any Interested Stockholder or Stockholders or, if in such transaction all
holders of Common Stock are not treated alike, any other Person (other than the
Company or any Subsidiary of the Company in one or more transactions each of
which does not violate Section 11(n) hereof), then, and in each such case
(except as provided in Section 13(d) hereof), proper provision shall be made so
that (A) each holder of a Right (except as provided in Section 7(e) hereof),
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of freely tradeable
Common Shares of the Principal Party (as hereinafter defined), not subject to
any liens, encumbrances, rights of first refusal, or other adverse claims, as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-thousandths of a Preferred Share for which a
Right is then exercisable (without taking into account any adjustment previously
made pursuant to Section 11(a)(ii)) and dividing that product by (y) 50% of the
current per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such Section 13 Event; (B) 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; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (D)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(i) or (ii) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which Common Shares of the Company are converted
in such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation (including, if
applicable, the Company if it is the surviving corporation ); and
(ii) in the case of any transaction described in clause
(iii) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in any of
the foregoing cases, (1) if the Common Shares of such Person are not at such
time and have not been continuously over the preceding 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 Shares of which are and have
been so registered, "Principal Party" shall refer to such other Person; (2) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Shares of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Shares having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the
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<PAGE> 18
Principal Parties in each such chain shall bear the obligations set forth in
this Section 13 in the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized Common Shares which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Right Agents a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in clauses subparagraphs
(i) or (ii) of the first sentence of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to a
Permitted Offer (or a wholly owned Subsidiary of any such Person or Persons);
(ii) the price per Common Share offered in such transaction is not less than the
price per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
offered in such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on
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<PAGE> 19
the New York Stock Exchange, or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are one one-thousandth or integral
multiples of one one-thousandth of a Preferred Share) upon exercise of the
Rights or to issue certificates which evidence fractional Preferred Shares
(other than fractions that are one one-thousandth or integral multiples of one
one-thousandth of a Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-thousandth of a Preferred Share may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
Beneficial Owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not one one-thousandth
or integral multiples of one one-thousandth of a Preferred Share, the Company
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of one of the transactions or
events specified in Section 11 giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractions of such Common Shares, capital stock
equivalents or other securities. In lieu of fractional shares or units of such
Common Shares, capital stock equivalents or other securities, the Company may
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this Section 14(c), the current
market value shall be determined in the manner set forth in Section 11(d) hereof
for the Trading Day immediately prior to the date of such exercise, and if such
capital stock equivalent is not traded, each such capital stock equivalent shall
have the value of one one-thousandth of a Preferred Share.
(d) 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 provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the
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<PAGE> 20
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of the Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
(c) Subject to Section 6 and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or a beneficial interest in a Right or other Person as a result of
its inability to perform any of its obligations under this Agreement by reason
of any preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in
Section 24 hereof), or to receive dividends or other distributions or to
exercise any
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<PAGE> 21
preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and expenses 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
indemnity provided for herein shall survive the expiration of the Rights and the
termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for, or
in respect of, any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
all or substantially all of the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name: and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
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<PAGE> 22
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such advice
or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of an Acquiring Person and
the determination of the current market price of any Security) be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board, the President,
any Vice President, the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or 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 Right Certificates
after receipt of a certificate described in Section 12 hereof); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith or lack of action in accordance with instructions of any such officer
or for any delay in actions while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by
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<PAGE> 23
the Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on or after which such action shall be taken or 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 therein (which date shall
not be less than five Business Days after the date any such 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 such action (or
the effective date in the case of an omission), the Rights Agent has received
written instructions in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 60 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States (or
of any state of the United States), in good standing, that is authorized under
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<PAGE> 24
such laws to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and that has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Company (a) shall with respect to Common
Shares so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) the
Company shall not be obligated to issue any such Right Certificates if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Right Certificate would be issued, and (ii)
no Right Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) (i) The Board of Directors of the Company may, at its
option, redeem all but not less than all the then outstanding Rights (excluding
Rights under section 7(e)) at a redemption price of $.01 per Right, payable, at
the option of the Company, in cash, shares of the common stock or such other
consideration as the Board of Directors of the Company may determine, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"), (A) at any time prior
to the earlier of (x) the ten days following the Share Acquisition Date, or (y)
the Final Expiration Date, or (B) within ten days after any Person becomes an
Acquiring Person if (A) the Acquiring Person notifies the Board of Directors
that such Person became an Acquiring Person inadvertently and (B) during such
ten day period, and at the time of redemption, the Acquiring Person is no longer
the Beneficial Owner of fifteen (15) percent or more of the then outstanding
Common Shares. Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable pursuant to Section 11(a)(ii)
prior to the expiration of the Company's right of redemption hereunder.
-24-
<PAGE> 25
(ii) In addition, the Board of Directors of the Company
may, at its option, at any time following the occurrence of a Section 11(a)(ii)
Event and the expiration of any period during which the holder of Rights may
exercise the Rights under Section 11(a)(ii) but prior to any Section 13 Event,
redeem all but not less than all of the then outstanding Rights at the
Redemption Price (aa) in connection with any merger, consolidation, or sale or
other transfer (in one transaction or in a series of related transactions) of
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole), in which all holders of
Common Shares are treated alike and not involving (other than as a holder of
Common Shares being treated like all other such holders) an Interested
Stockholder or (bb) if and for so long as the Acquiring Person has reduced its
Beneficial Ownership to 15% or less of the outstanding shares of Common Stock in
a transaction or a series of transactions not involving the Company, and at the
time of redemption there are no other persons who are Acquiring Persons.
(b) Notwithstanding the provisions of Section 23(a), in the
event that a majority of the Board of Directors of the Company is comprised of
(i) persons elected at a meeting of or by written consent of stockholders and
who were not nominated by the Board of Directors in office immediately prior to
such meeting or action by written consent and/or (ii) successors of such persons
elected to the Board of Directors for the purpose of either facilitating a
Transaction with a Transaction Person or circumventing directly or indirectly
the provisions of this Section 23(b), then (I) the Rights may not be redeemed
for a period of 180 days following the effectiveness of such election if such
redemption is reasonably likely to have the purpose or effect of facilitating a
Transaction with a Transaction Person and (II) the Rights may not be redeemed
thereafter if (x) during such 180-day period, the Company enters into any
agreement, arrangement or understanding with any Transaction Person which is
reasonably likely to have the purpose or effect of facilitating a Transaction
with any Transaction Person and (y) such redemption is reasonably likely to have
the purpose or effect of facilitating a Transaction with any Transaction Person.
(c) In the case of a redemption permitted under Section
23(a)(i), immediately upon the date for redemption set forth (or determined in
the manner specified in) in a resolution of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. In the case of a redemption permitted only under Section
23(a)(ii), evidence of which shall have been filed with the Rights Agent, the
right to exercise the Rights will terminate and represent only the right to
receive the Redemption Price upon the later of ten Business Days following the
giving of such notice or the expiration of any period during which the rights
under Section 11(a)(ii) may be exercised. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such date for redemption set forth in a resolution of
the Board of Directors ordering the redemption of the Rights, the Company shall
mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 except in
connection with the purchase of Common Shares prior to the Distribution Date.
(d) The Company may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered
-25-
<PAGE> 26
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent of the Common Shares, and upon such action, all
outstanding Rights and Right Certificates shall be null and void without any
further action by the Company.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any Person
(other than a Subsidiary of the Company in a transaction which does not violate
Section 11(n) hereof), or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which does not violate Section 11(n) hereof), 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 Right Certificate, in accordance with
Section 25 hereof, a notice of such proposed action to the extent feasible and
file a certificate with the Rights Agent to that effect, which shall specify the
record date for the purposes of such stock dividend, or distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the Preferred Shares, if any
such date is to be 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 Preferred Shares 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 Preferred Shares, whichever shall be
the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Company
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 25 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of rights under Section 11(a)(ii) hereof and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also to Common Shares and/or, if appropriate, other
securities of the Company.
Section 25. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent and which is provided to any holder of a Rights Certificate) as
follows:
O'Sullivan Industries Holdings, Inc.
1900 Gulf Street
Lamar, Missouri 64759
Attention: Corporate Secretary
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<PAGE> 27
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
The First National Bank of Boston
150 Royall Street
Mail Stop 45-02-16
Canton, Massachusetts 02021
Attention: Shareholder Services Division
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate or, if prior
to the Distribution Date, to the holder of certificates representing Common
Shares shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of the
certificates representing Common Shares. From and after the Distribution Date,
the Company and the Rights Agent shall from time to time, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, or (iv) to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Rights Agent may deem necessary or desirable, and which shall not
adversely affect the interests of the holders of Right Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that this Agreement may be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence (A) a time period relating
to when the Rights may be redeemed, only at such time as the Rights are
redeemable and there is no Acquiring Person, or (B) any other time period, only
so long as such lengthening is for the purpose of protecting, enforcing or
clarifying the rights of (or the benefits to) the holders of Rights. Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment,
provided that such supplement or amendment does not adversely affect the rights
or obligations of the Rights Agent under Section 18 or Section 20 of this
Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares. Notwithstanding anything contained in this Rights Agreement to the
contrary, in the event that a majority of the Board of Directors of the Company
is comprised of (i) persons elected at a meeting of or by written consent of
stockholders and who were not nominated by the Board of Directors in office
immediately prior to such meeting or action by written consent and/or (ii)
successors of such persons elected to the Board of Directors for the purpose of
either facilitating a Transaction with a Transaction Person or circumventing
directly or indirectly the provisions of this Section 26, then for a period of
180 days following the effectiveness of such action, this Rights Agreement shall
not be amended or supplemented in any manner reasonably likely to have the
purpose or effect of facilitating a Transaction with a Transaction Person.
-27-
<PAGE> 28
Section 27. Determination and Actions by the Board of Directors, etc.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates). For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Right Certificates and all other parties, and
(y) not subject the Board to any liability to the holders of the Right
Certificates.
Section 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. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 32. 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 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-28-
<PAGE> 29
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.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
Attest:
By /s/ Rowland H. Geddie, III By /s/ D. F. O'Sullivan
---------------------------------- ---------------------------------
Name: Rowland H. Geddie, III Name: D. F. O'Sullivan
-------------------------------- -------------------------------
Title: Vice President, General Counsel Title: Chairman and Chief Executive
-------------------------------- ------------------------------
and Secretary Officer
THE FIRST NATIONAL BANK OF BOSTON
Attest:
By /s/ Andrew March By /s/ Gordon Stevenson
-------------------------------- ---------------------------------
Name: Andrew March Name: Gordon Stevenson
------------------------------ ------------------------------
Title: Account Manager Title: Administration Manager
------------------------------- -----------------------------
-29-
<PAGE> 1
EXHIBIT 4.4A
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment No. 1, dated as of March 1, 1999 (the "First Amendment"), to the
Rights Agreement, dated as of February 1, 1994 (the "Rights Agreement"), by and
between O'Sullivan Industries Holdings, Inc., a Delaware corporation (the
"Company"), BankBoston, N.A. (formerly known as The First National Bank of
Boston), a national banking association ("FNB"), as Rights Agent, and UMB Bank,
N.A. ("UMB"), as successor Rights Agent.
WHEREAS, the Company and FNB are currently parties to the Rights
Agreement, pursuant to which FNB serves as Rights Agent;
WHEREAS, the Company and FNB desire that FNB resign as Rights Agent and
the Company and UMB desire that UMB be appointed as successor Rights Agent, each
effective as of March 1, 1999; and
WHEREAS, the parties hereto wish to make certain changes to the Rights
Agreement to facilitate this succession and to eliminate the delayed redemption
provisions therein.
NOW THEREFORE, the Company, FNB and UMB hereby agree as follows:
1. Amendments to Rights Agreement. The Rights Agreement shall be and
hereby is amended as provided below, effective as of the date of this First
Amendment:
(a) Section 2 is hereby modified and amended by: (i) deleting from subparagraph
(g) therein the words "a Transaction Person." and replacing them with the words
"an Acquiring Person or any of its Affiliates, Associates or representatives.",
(ii) deleting subparagraph (s) in its entirety, (iii) deleting subparagraph (t)
in its entirety and (iv) reordering subparagraph (u) such that it will
hereinafter be subparagraph (s).
(b) Subparagraph (c) of Section 3 is hereby modified and amended by: (i)
deleting from the first sentence of the legend therein the words "The First
National Bank of Boston, dated as of February 1, 1994" and replacing them with
the words "the Rights Agent, dated as of February 1, 1994, as the same may be
amended from time to time" and (ii) deleting from the last sentence of the
legend therein the words "set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an Acquiring Person certain
related persons whether currently held by or on behalf of such Person or by an"
and replacing them with the words "Rights beneficially owned by Acquiring
Persons or";
(c) Section 20 is hereby modified and amended by adding immediately after
subparagraph (k) therein the following words:
"(l) If, with respect to any actual Right Certificate (i.e., not
including certificates deemed to be Right Certificates) surrendered to
the Rights Agent for exercise or transfer, the certificate attached
thereto and contained in the form of assignment or the form of
election
<PAGE> 2
to purchase set forth on the reverse thereof, as the case may be, has
not been completed to certify that the holder is not an Acquiring
Person (or an Affiliate or Associate thereof), the Rights Agent may
take no further action with respect to such requested exercise or
transfer until receiving written instructions from the Company.
"(m) Except as otherwise agreed in writing by the Rights Agent and the
Company, the Rights Agent shall have no responsibility to the Company,
any holders of Rights or any stockholder for interest or earnings on
any monies held by the Rights Agent pursuant to this Agreement.
"(n) The Rights Agent shall not be required to take notice or be deemed
to have notice of any event or condition hereunder, including, but not
limited to, a Distribution Date, a Redemption Date, any adjustment of
the Purchase Price or the Common Stock, the existence of an Acquiring
Person, an Adverse Person or a Beneficial Owner or any other event or
condition that may require action by the Rights Agent, unless the
Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other requirements
required by this Agreement to be delivered to the Rights Agent must, in
order to be effective, be received at the principal office of the
Rights Agent, and in the absence of such notice so delivered, the
Rights Agent may conclusively assume no such event or condition
exists.";
(d) Section 23 is hereby modified and amended by deleting subparagraph (b)
in its entirety and by reordering subparagraphs (c) and (d) such that they will
hereinafter be subparagraphs (b) and (c), respectively; and
(e) Section 25 is hereby modified and amended by: (i) deleting from the
first sentence the words "sent by" and replacing them with the words "received
by the Company via", (ii) deleting from the second sentence the words "sent by"
and replacing them with the words "received by the Rights Agent via", and (iii)
deleting from the second sentence the address
"The First National Bank of Boston
150 Royall Street
Mail Stop 45-02-16
Canton, Massachusetts 02021
Attention: Shareholder Services Division"
and replacing it with the following address:
"UMB Bank, N.A.
P.O. Box 419692
Kansas City, Missouri 64141-6692
Attention: Corporate Trust Department
(f) Section 26 is hereby modified and amended by deleting in its entirety
the last sentence therein (i.e., the sentence beginning with the words
"Notwithstanding anything contained . . ." and
-2-
<PAGE> 3
ending with the words ". . . with a Transaction Person.").
2. Change of Rights Agent. Pursuant to Section 21 of the Rights
Agreement, FNB hereby resigns as Rights Agent and the Company hereby accepts
such resignation, effective as of 12:01 a.m., Central Standard Time, March 1,
1999. The Company hereby appoints UMB as successor Rights Agent, effective as of
12:01 a.m., Central Standard Time, March 1, 1999, and UMB hereby accepts such
appointment, subject to all the terms and conditions of the Rights Agreement as
amended hereby.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to the Rights 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.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
ATTEST:
By: /s/ Richard D. Davidson
-----------------------------------------
Richard D. Davidson, President and
Chief Operating Officer
/s/ Rowland H. Geddie, III
- --------------------------------
Rowland H. Geddie, III
Vice President, General
Counsel and Secretary
BANKBOSTON, N.A. (formerly The First
National Bank of Boston
ATTEST: By: /s/ Carol Mulvey-Eori
-----------------------------------------
Name: Carol Mulvey-Eori
Title: Director of Client Administration
/s/ Karen Finnegan
- --------------------------------
Name: Karen Finnegan
Title: Account Manager
UMB BANK, N.A.
ATTEST: By: /s/ Frank Bramwell
-----------------------------------------
Name: Frank Bramwell
Title: SVP
/s/ K. Scott Mathews
- --------------------------------
Name: K. Scott Mathews
Title: Assistant Secretary
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<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Fourth Amendment to Amended and Restated Credit Agreement (this
"Amendment"), made and entered into and is effective as of March 30, 1999, by
and among O'Sullivan Industries, Inc., a Delaware corporation ("Industries"),
O'Sullivan Industries Holdings, Inc., a Delaware corporation ("Holdings";
Industries and Holdings are sometimes referred to hereinafter individually and
collectively as "Borrower"), NationsBank, N.A. (successor by merger to The
Boatmen's National Bank of St. Louis), a national banking association
("NationsBank"), as a lender ("Lender") and NationsBank, as agent ("Agent").
RECITALS:
A. Borrower, O'Sullivan - Virginia, Agent and Lender are the current
parties to that certain Amended and Restated Credit Agreement by and
among Borrower, O'Sullivan - Virginia, Agent, Lender and Wachovia Bank
of Georgia, N.A. ("Wachovia"), a national banking association, as a
lender, effective November 22, 1994, as amended by that First Amendment
thereto, dated as of May 15, 1995, that Second Amendment thereto, dated
as of December 29, 1995, that certain letter from Borrower to Lenders,
dated June 24, 1996 and that certain Third Amendment thereto, dated as
of June 13, 1997 (as it may be further amended, restated, extended,
renewed, replaced, or otherwise modified from time to time, the "Loan
Agreement") pursuant to which certain credit facilities were extended
to Borrower.
C. Borrower, Agent and Lender desire, upon the terms and conditions set
forth herein, to amend the Loan Agreement as provided herein.
In consideration of the mutual covenants and promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower, Agent and Lender agree as follows:
1. DEFINITIONS. All capitalized terms used and not otherwise defined herein
shall have the meanings given them in the Loan Agreement. Section and Exhibit
references are to Sections and Exhibits of the Loan Agreement unless otherwise
indicated.
2. AMENDMENT TO LOAN AGREEMENT.
2.1. ULTIMATE REVOLVING MATURITY DATE. The words "February 28, 2000" in
the first sentence of Section 2.1.1 are deleted and replaced with the
following: "February 28, 2001".
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Each Borrower hereby
represents and warrants to Agent and Lender that (i) no consents are necessary
from any third parties in connection with its execution, delivery or performance
of the Amendment and related documents (collectively, the "Amendment Documents")
to which it is a party, (ii) the Amendment Documents to which it is a party
constitute the legal, valid and binding obligations of it, enforceable against
it in accordance with their terms, except to the extent that the enforceability
thereof against it may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally or by equitable principles of
general application (whether considered in an action at law or in equity), (iii)
except as disclosed on the disclosure schedule attached to the Loan Agreement as
Exhibit 11, any supplemental disclosure schedules on any prior amendments to the
Loan Agreement and the disclosure schedule attached to this Amendment as Exhibit
A, all of the representations and warranties contained in Section 11, as amended
by this Amendment, are true and correct in all material respects with the same
force and effect as if made on and as of the date of this Amendment, except that
with respect to the representations and warranties made regarding financial data
in Section 11.11, such representations and warranties are hereby made
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<PAGE> 2
with respect to the most recent Financial Statements and other financial data
(in the form required by the Loan Agreement) delivered by Borrower as required
by the Loan Agreement, and (iv) there exists no Default or Event of Default
under the Loan Agreement, as amended by this Amendment.
4. EFFECT ON LOAN DOCUMENTS. Except as specifically amended by the
Amendment Documents, the Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed in all respects. The execution, delivery
and effectiveness of the Amendment Documents shall not operate as a waiver of
any right, power or remedy of Lenders or Agent under the Loan Documents, nor
constitute a waiver of any provision of the Loan Documents except as
specifically set forth herein. Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference to the Loan
Agreement, as amended hereby.
5. REAFFIRMATION. Each Borrower hereby ratifies, affirms, acknowledges,
and agrees that the Loan Agreement (as amended by this Amendment) represents its
valid, enforceable and collectible obligation, except to the extent that the
enforceability thereof against it may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally or by equitable principles of
general application (whether considered in an action at law or in equity), and
it further acknowledges that there are no existing claims, defenses, personal or
otherwise, or rights of setoff whatsoever known to it with respect to any of the
Loan Documents.
6. GOVERNING LAW. The Amendment Documents shall be governed by and
construed in accordance with the laws and decisions of the State of Missouri
without giving effect to the choice or conflicts of law principles thereunder.
7. SECTION TITLES. The section titles contained in this Amendment are and
shall be without substance, meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.
8. COUNTERPARTS; FACSIMILE TRANSMISSIONS. This Amendment may be executed
in one or more counterparts and on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Signatures to this Amendment may be given by facsimile or other
electronic transmission, and such signatures shall be fully binding on the party
sending the same.
9. INCORPORATION BY REFERENCE. Agent, Lender and Borrower hereby agree
that all of the terms of the Loan Documents are incorporated in and made a part
of this Amendment by this reference.
10. STATUTORY NOTICE. The following notice is given pursuant to
Section 432.045 of the Missouri Revised Statutes; nothing contained in such
notice will be deemed to limit or modify the terms of the Loan Documents or this
Amendment:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S) AND
US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS
WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS
THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
BORROWER, AGENT AND LENDER HEREBY AFFIRM THAT THERE IS NO UNWRITTEN ORAL CREDIT
AGREEMENT BETWEEN ANY OF THEM WITH RESPECT TO THE SUBJECT MATTER OF THIS
AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first above written.
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<PAGE> 3
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Terry L. Crump
-----------------------------------------
Name: Terry L. Crump
---------------------------------------
Title: Executive Vice President & CFO
--------------------------------------
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ Terry L. Crump
-----------------------------------------
Name: Terry L. Crump
---------------------------------------
Title: Executive Vice President & CFO
--------------------------------------
NATIONSBANK, N.A., AS AGENT AND LENDER
By: /s/ Scott Hartwig
-----------------------------------------
Name: Scott Hartwig
---------------------------------------
Title: Senior Vice President
--------------------------------------
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<PAGE> 1
EXHIBIT 10.2
TERMINATION PROTECTION AGREEMENT
FOR MANAGER EMPLOYEES
OF
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
THIS AGREEMENT is made as of the 22nd day of March, 1999, by and
between the "Company" (as hereinafter defined) and ____________________________
(the "Manager").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a "Change in Control" (as hereinafter defined) exists
and that the threat or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation; and
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Manager in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Manager to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Manager to
provide the Manager with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control and to
provide the Manager with the "Gross-Up Payment" (as hereinafter defined) and
certain other benefits whether or not the Manager's employment is terminated;
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of March 22,
1999 and shall continue in effect until March 22, 2001; provided, however, that
commencing on March 22, 2000 and on each March 22 thereafter, the term of this
Agreement shall be automatically extended for one year unless either the Company
or the Manager shall have given written notice to the other at least 90 days
prior thereto that the term of this Agreement shall not be so extended; and
provided further, however, that notwithstanding any such notice by the Company
not to extend, the term of this Agreement shall not expire prior to the
expiration of twelve months after the occurrence of a Change in Control, if such
Change in Control occurs during the term of this Agreement.
2. DEFINITIONS.
2.1 ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts earned or accrued through the "Termination
Date" (as hereinafter defined) but not paid as of the Termination Date including
(i) base salary, (ii) reimbursement for reasonable and necessary expenses
incurred by the Manager on behalf of the Company during the period ending on the
Termination Date, (iii) vacation pay, if required by
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<PAGE> 2
applicable law, and (iv) bonuses and incentive compensation (other than the "Pro
Rata Bonus" (as hereinafter defined)).
2.2 BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall
mean the greater of the Manager's annual base salary (a) at the rate in effect
on the Termination Date or (b) at the highest rate in effect at any time during
the 90 day period prior to the Change in Control, and shall include all amounts
of his base salary that are deferred under the qualified and non-qualified
employee benefit plans of the Company, if any.
2.3 BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the highest annual bonus paid or payable to the Manager for any
fiscal year in respect of the three (3) full fiscal years ended prior to the
Change in Control, and shall include all amounts of his annual bonus that are
deferred under the qualified and non-qualified employee benefit plans of the
Company, if any.
2.4 CAUSE. For purposes of this Agreement, a termination of
employment is for "Cause" if the Manager (a) has been convicted of a felony; (b)
failed intentionally and continually substantially to perform his reasonably
assigned duties with the Company (other than a failure resulting from the
Manager's incapacity due to physical or mental illness) which failure continued
for a period of at least 30 days after a written notice of demand for
substantial performance has been delivered to the Manager specifying the manner
in which the Manager has failed substantially to perform; or (c) intentionally
engaged in conduct which is demonstrably and materially injurious to the
Company, momentarily or otherwise; provided, however, that no termination of the
Manager's employment shall be for Cause as set forth in clause (b) above until
(x) there shall have been delivered to the Manager a copy of a written notice
setting forth that the Manager was guilty of the conduct set forth in clause (b)
and specifying the particulars thereof in detail; and (y) the Manager shall have
been provided an opportunity to be heard in person by the President of the
Company (with the assistance of the Manager's counsel if the Manager so
desires). No act, or failure to act, on the Manager's part, shall be considered
"intentional" unless the Manager has acted, or failed to act, with a lack of
good faith and with a lack of reasonable belief that the Manager's action or
failure to act was in the best interest of the Company.
2.5 CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of 15% or more of the combined voting power of the Company's
then outstanding Voting Securities; provided, however, that in determining
whether a Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan (or a trust forming a
part thereof) maintained by (x) the Company or (y) any corporation or other
Person of which a majority of its voting power or its equity securities or
equity interest is owned
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<PAGE> 3
directly or indirectly by the Company (a "Subsidiary"); (2) the Company or any
Subsidiary; or (3) any Person in connection with a "Non-Control Transaction" (as
hereinafter defined).
(b) The individuals who, as of February 1, 1994, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by the Company's stockholders, of any new director was approved by
a vote of at least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Agreement, be considered as a member of the Incumbent
Board; provided further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any agreement intended to avoid
or settle any Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving the
Company, unless
(i) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least 60% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving Corporation")
in substantially the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation or
reorganization, and
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation, and
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of 15% or more
of the then outstanding Voting Securities) has Beneficial Ownership of
15% or more of the combined voting power of the Surviving Corporation's
then outstanding voting securities, and
(iv) a transaction described in clauses (i) through
(iii) shall herein be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the Company; or
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<PAGE> 4
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person, provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if the Manager's employment is terminated following the Effective Date
but within one (1) year prior to a Change in Control and the Manager reasonably
demonstrates that such termination (i) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to effect a
Change in Control and who effectuates a Change in Control (a "Third Party") or
(ii) otherwise occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then for all purposes of this Agreement, the date
of a Change in Control with respect to the Manager shall mean the date
immediately prior to the date of such termination of the Manager's employment.
2.6 COMPANY. For purposes of this Agreement, the "Company" shall
mean O'Sullivan Industries Holdings, Inc. and its subsidiaries and shall include
their respective "Successors and Assigns" (as hereinafter defined).
2.7 DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Manager's ability to
substantially perform his duties with the Company for a period of 180
consecutive days and the Manager has not returned to his full time employment
prior to the Termination Date as stated in the "Notice of Termination" (as
hereinafter defined).
2.8 EFFECTIVE DATE. For purposes of this Agreement, "Effective Date"
shall mean March 22, 1999.
2.9 (a) GOOD REASON. For purposes of this Agreement, "Good Reason"
shall mean the occurrence after a Change in Control of any of the events or
conditions described in Subsections (i) through (vi) hereof:
(i) a reduction in the rate of the Manager's base salary
below the Base Amount or his target incentive compensation below his
highest target incentive compensation in effect at any time during the
90 day period prior to the Change in Control or any failure to pay the
Manager any compensation or benefits to which he is entitled within
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<PAGE> 5
15 days of the date notice of such failure to pay is given to the
Company and, in the case of any annual bonus, within 45 days following
the end of the fiscal year pursuant to which such bonus relates; or
(ii) the failure by the Company to continue in effect
(without reduction in reward opportunities and/or bonus potential for
comparable performance) the Company's bonus, unless such plan is
replaced with a plan that provides at least substantially equivalent
compensation, reward opportunities and/or bonus potential to the
Manager; or
(iii) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy, of the Company,
which petition is not dismissed within 60 days; or
(iv) any material breach by the Company of any provision
hereof; or
(v) any purported termination of the Manager's
employment for Cause by the Company which does not comply with the
terms of Section 2.4 hereof; or
(vi) the failure of the Company to obtain an agreement,
satisfactory to the Manager, from any Successor or Assign of the
Company to assume and agree to perform this Agreement, as contemplated
in Section 6 hereof.
(b) Any event or condition described in this Section 2.9(a)(i)
through (vi) which occurs following the Effective Date but within one year prior
to a Change in Control but which the Manager reasonably demonstrates (i) was at
the request of a Third Party or (ii) otherwise arose in connection with, or in
anticipation of, a Change in Control which actually occurs, shall constitute
Good Reason for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
2.10 NOTICE OF TERMINATION. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination from the Company of the Manager's employment which
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Manager's employment under the provision
so indicated.
2.11 PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.12 SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.13 TERMINATION DATE. For purposes of this Agreement, "Termination
Date" shall mean in the case of the Manager's death, his date of death, in the
case of Good Reason, the last
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<PAGE> 6
day of his employment, and in all other cases, the date specified in the Notice
of Termination; provided, however, that if the Manager's employment is
terminated by the Company for Cause or due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Manager, provided that in the case of Disability the
Manager shall not have returned to the full-time performance of his duties
during such period of at least 30 days.
3. TERMINATION OF EMPLOYMENT.
3.1 If, during the term of this Agreement, the Manager's employment
with the Company shall be terminated within twelve months following a Change in
Control, the Manager shall be entitled to the following compensation and
benefits:
(a) If the Manager's employment with the Company shall be
terminated (1) by the Manager other than for Good Reason; (2) by reason of the
Manager's death; or (3) by the Company for Cause or Disability, the Company
shall pay to the Manager the Accrued Compensation and, if such termination is
other than by the Company for Cause, a Pro Rata Bonus.
(b) If the Manager's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the Manager
shall be entitled to the following:
(i) the Company shall pay the Manager all Accrued
Compensation and a Pro-Rata Bonus; and
(ii) the Company shall pay the Manager as termination
pay and in lieu of any further compensation for periods subsequent to
the Termination Date, in a single payment an amount (the "Termination
Amount") in cash equal to [one-half of] the sum of (A) the Base Amount
and (B) the Bonus Amount; and
(iii) for [six]/[twelve] months from the Termination
Date (the "Continuation Period"), the Company shall at its expense
continue on behalf of the Manager and his dependents and beneficiaries
the life insurance, disability, medical, dental and hospitalization
benefits provided to the Manager at any time during the 90-day period
prior to the Change in Control or at any time thereafter or (y) to
other similarly situated Managers who continue in the employ of the
Company during the Continuation Period; provided, however, that the
Manager shall continue to pay the employee portion of any premiums for
such benefits. The coverage and benefits (including deductibles and
contributions by the Manager, if any) provided in this Section
3.1(b)(iii) during the Continuation Period shall be no less favorable
to the Manager and his dependents and beneficiaries, than the most
favorable of such coverages and benefits during the periods referred to
above. If the Company is unable, because of legal requirements
governing its benefit plans, to provide the Manager with continued
coverage under its life insurance, disability, medical, dental and
hospitalization benefits required hereunder, the Company shall either
(a) provide such insurance and benefits under separate plans or
insurance policies at the Company's expense; or (b) pay to the Manager
an amount (grossed up for federal, state and local income taxes, if
such benefits were provided on a pre-tax basis prior to the Change in
Control) sufficient for him to secure all such benefits, taking into
account his age, health and health experience
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<PAGE> 7
and other factors that might affect the availability and pricing of
such benefits. The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the Manager
obtains any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Manager hereunder as long as the
aggregate coverages and benefits of the combined benefit plans is no
less favorable to the Manager than the coverages and benefits required
to be provided hereunder. This Subsection (iii) shall not be
interpreted so as to limit any benefits to which the Manager, his
dependents or beneficiaries may be entitled under any of the Company's
employee benefit plans, programs or practices following the Manager's
termination of employment, including without limitation, retiree
medical and life insurance benefits; and
(iv) the Company shall make the Manager whole for any
taxes owed by the Manager with respect to any benefit referenced in
Section 3(b)(iii) that was non-taxable to the Manager during the 90-day
period prior to the Change in Control; and
(v) if the Manager is not vested in his profit sharing
account in the Savings Plan, the Company shall pay in a single payment
an amount equal to the quotient of (A) his non-vested profit sharing
account balance as of the Termination Date divided by (B) one (1) minus
the Tax Rate; and
(vi) the Company shall pay in a single payment an amount
equal to the present value of all benefits that would become payable
under executive benefit plans in which the Manager participates at any
time during the 90-day period prior to the Change in Control, which
plans are designed to provide deferred retirement income for
participants. If such a plan defines benefits payable in terms of
payment of an account balance payable upon leaving the employment of
the Company (whether in a lump sum or installments), such balance shall
be paid in a lump sum calculated pursuant to such plan. Otherwise, the
benefits payable under such plan shall be determined by calculating
retirement benefits payable under such plans as though the Manager had
continued to work for the Company, had then retired from the Company at
age 65 (assuming the Manager is not at least age 65 on the Termination
Date) (using as the discount rate the yield on U.S. Five Year Treasury
Notes on the Termination Date as published in The Wall Street Journal)
and had received compensation increases equal to the highest percentage
increase in his compensation for the three complete fiscal years of the
Company immediately preceding the occurrence of the Change in Control;
and such payment shall be in lieu of any such benefits that would
otherwise be paid under such plans; and
(vii) the restrictions on any outstanding incentive
awards (including restricted stock and granted performance shares or
units) granted to the Manager including, but not limited to, awards
granted under the Company's Amended and Restated 1994 Incentive Stock
Plan, as amended, or under any other incentive plan or arrangement
shall lapse and such incentive awards shall become 100% vested, all
stock options and stock appreciation rights granted to the Manager
shall become immediately exercisable and shall become 100% vested, and
all performance units granted to the Manager shall become 100% vested;
and
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<PAGE> 8
(viii) the Company shall pay for [six]/[twelve] months
of outplacement services with an outplacement service selected by the
Company. The outplacement services provided shall be selected by the
Company as reasonably necessary or helpful in securing a new position.
If and when the Manager secures a new permanent (as opposed to
temporary or interim) position, the Company may discontinue further
outplacement services.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i),
(ii), (iv), (v), and (vi), shall be paid in a single lump sum cash payment
within five days after the Manager's Termination Date (or earlier, if required
by applicable law).
(d) The Manager shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Manager in any subsequent employment
except as provided in Section 3.1(b)(iii).
3.2 (a) The termination pay and termination benefits provided for in
this Section 3 shall be in lieu of any other severance or termination pay to
which the Manager may be entitled under any Company severance or termination
plan, program, policy or practice.
(b) The Manager's entitlement to any other compensation or
benefits (other than the Pro Rata Bonus and other than the termination pay and
termination benefits as provided under this Section 3) shall be determined in
accordance with the Company's employee benefit plans (including, the plans
listed on Appendix A) and other applicable programs, policies and practices then
in effect.
(c) The Company shall have the right to deduct from any amount
payable under this Agreement the amount equal to the federal, state and local
income taxes required by law to be withheld with respect to the amounts payable
hereunder.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if any portion of the termination pay or termination benefits provided
for in this Section 3 and any other present or future plan of the Company or
other present or future agreement between the Manager and the Company would not
be deductible by the Company for federal income tax purposes by reason of
application of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), then payment of that portion to the Manager shall be deferred
until the earliest date upon which payment thereof can be made to the Manager
without being non-deductible pursuant to Section 162 of the Code. In the event
of such deferral, the Company shall pay interest to the Manager on the deferred
amount at 120% of the applicable federal rate provided for in Section 1274(d)(1)
of the Code.
4. NOTICE OF TERMINATION. Following a Change in Control, any purported
termination of the Manager's employment by the Company and/or the Employer shall
be communicated by Notice of Termination to the Manager. For purposes of this
Agreement, no such purported termination shall be effective without such Notice
of Termination.
Page 8 of 12
<PAGE> 9
5. EXCISE TAX PAYMENTS.
(a) In the event that any payment or benefit (within the meaning
of Section 280G(b)(2) of the Code), to the Manager or for his benefit paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment with the
Company or a change in ownership or effective control of the Company or of a
substantial portion of its assets (a "Payment" or "Payments"), would be subject
to the excise tax imposed by Section 4999 of the Code (or any successor
provision) or any interest or penalties are incurred by the Manager with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Manager will be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Manager of all taxes
(including any interest or penalties, other than interest and penalties imposed
by reason of the Manager's failure timely to file a tax return or pay taxes
shown due on his return, imposed with respect to such taxes and the Excise Tax),
including any Excise Tax imposed upon the Gross-Up Payment, the Manager retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. For purposes of determining the amount of the Gross-Up Payment, the
Manager shall be deemed to pay taxes at the Tax Rate applicable at the time of
payment of the Gross-Up Payment.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such Gross-Up Payment
shall be made at the Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Manager which is designated as one of
the five largest accounting firms in the United States (the "Accounting Firm").
The Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the Company
and the Manager within five days of the Termination Date if applicable, or such
other time as requested by the Company or by the Manager (provided the Manager
reasonably believes that any of the Payments may be subject to the Excise Tax)
and if the Accounting Firm determines that no Excise Tax is payable by the
Manager with respect to a Payment or Payments, it shall furnish the Manager with
a written opinion reasonably acceptable to the Manager that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten days of the
delivery of the Determination to the Manager, the Manager shall have the right
to dispute the Determination (the "Dispute"). The Gross-Up Payment, if any, as
determined pursuant to this Paragraph 5(b) shall be paid by the Company to the
Manager within five days of the receipt of the Accounting Firm's determination.
The existence of the Dispute shall not in any way affect the Manager's right to
receive the Gross-Up Payment in accordance with the Determination. If there is
no Dispute, the Determination shall be binding, final and conclusive upon the
Company and the Manager subject to the application of Paragraph 5(c) below.
(c) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a
portion thereof) will be paid which should not have been paid (an "Excess
Payment") or a Gross-Up Payment (or a portion thereof) which should have been
paid will not have been paid (an "Underpayment"). An Underpayment shall be
deemed to have occurred (i) upon notice (formal or informal) to the Manager from
any governmental taxing authority that the Manager's tax liability (whether in
respect of the Manager's current taxable year or in respect of any prior taxable
year) may be increased by reason of the imposition of the
Page 9 of 12
<PAGE> 10
Excise Tax on a Payment or Payments with respect to which the Company has failed
to make a sufficient Gross-Up Payment, (ii) upon a determination by a court,
(iii) by reason of determination by the Company (which shall include the
position taken by the Company, together with its consolidated group, on its
federal income tax return) or (iv) upon the resolution of the Dispute to the
Manager's satisfaction. If an Underpayment occurs, the Manager shall promptly
notify the Company and the Company shall promptly, but in any event, at least
five days prior to the date on which the applicable government taxing authority
has requested payment, pay to the Manager an additional Gross-Up Payment equal
to the amount of the Underpayment plus any interest and penalties (other than
interest and penalties imposed by reason of the Manager's failure to file timely
a tax return or pay taxes shown due on the Manager's return) imposed on the
Underpayment. An Excess Payment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the Excise Tax shall not be imposed
upon a Payment or Payments (or portion thereof) with respect to which the
Manager had previously received a Gross-Up Payment. A "Final Determination"
shall be deemed to have occurred when the Manager has received from the
applicable government taxing authority a refund of taxes or other reduction in
the Manager's tax liability by reason of the Excise Payment and upon either (x)
the date a determination is made by, or an agreement is entered into with, the
applicable governmental taxing authority which finally and conclusively binds
the Manager and such taxing authority, or in the event that a claim is brought
before a court of competent jurisdiction, the date upon which a final
determination has been made by such court and either all appeals have been taken
and finally resolved or the time for all appeals has expired or (y) the statute
of limitations with respect to the Manager's applicable tax return has expired.
If an Excess Payment is determined to have been made, the amount of the Excess
Payment shall be treated as a loan by the Company to the Manager and the Manager
shall pay to the Company on demand (but not less than 10 days after the
determination of such Excess Payment and written notice has been delivered to
the Manager) the amount of the Excess Payment plus interest at an annual rate
equal to the Applicable Federal Rate provided for in Section 1274(d) of the Code
from the date the Gross-Up Payment (to which the Excess Payment relates) was
paid to the Manager until the date of repayment to the Company.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments.
6. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Manager, the Company, its Successors and Assigns and the Company
shall require any Successor or Assign to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Manager, his beneficiaries or legal
representatives, except by will or by the
Page 10 of 12
<PAGE> 11
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Manager's legal personal representative, heirs and
beneficiaries.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Manager as they become due as a result of (a) the Manager's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment); (b) the Manager seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with (i)
the Dispute and (ii) the Gross-Up Payment whether as a result of any applicable
government taxing authority proceeding, audit or otherwise) or by any other plan
or arrangement maintained by the Company under which the Manager is or may be
entitled to receive benefits; and (c) the Manager's hearing before the Board as
contemplated in Section 2.4 of this Agreement; provided, however, that the
circumstances set forth in clauses (a) and (b) (other than as a result of the
Manager's termination of employment under circumstances described in Section
2.5(d)) occurred on or after a Change in Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Manager's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Manager may qualify, nor shall anything herein limit or reduce such rights
as the Manager may have under any other agreements with the Company (except for
any severance or termination agreement). Amounts which are vested benefits or
which the Manager is otherwise entitled to receive under any plan or program of
the Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
10. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment or other right which the
Company may have against the Manager or others.
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Manager and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express
Page 11 of 12
<PAGE> 12
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
12. GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER, THAT IN ANY
ACTION INVOLVING THE MANAGER AND THE COMPANY WITH RESPECT TO ANY CLAIM OR
ASSERTION THAT THE MANAGER'S EMPLOYMENT WAS PROPERLY TERMINATED FOR CAUSE, THE
COMPANY HAS THE BURDEN OF PROVING THAT THE Manager'S EMPLOYMENT WAS PROPERLY
TERMINATED FOR CAUSE.
13. FORUM. Any suit brought by the Manager under this Agreement may be
brought in the appropriate state or federal court for Barton County, Missouri,
or for the county wherein the Manager maintains his residence. Any suit brought
by the Company under this Agreement may only be brought in the county wherein
the Manager maintains his residence unless the Manager consents to suit
elsewhere.
14. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Manager has executed this
Agreement as of the day and year first above written.
ATTEST: O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By:
- -------------------------------------- -------------------------------------
Rowland H. Geddie, III Richard D. Davidson
Secretary President and Chief Operating Officer
-------------------------------------
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'SULLIVAN INDUSTRIES HOLDINGS, INC. FOR THE PERIOD
ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,869
<SECURITIES> 0
<RECEIVABLES> 81,428
<ALLOWANCES> 2,708
<INVENTORY> 48,880
<CURRENT-ASSETS> 132,771
<PP&E> 157,548
<DEPRECIATION> 60,135
<TOTAL-ASSETS> 272,023
<CURRENT-LIABILITIES> 47,766
<BONDS> 29,000
0
0
<COMMON> 16,820
<OTHER-SE> 162,747
<TOTAL-LIABILITY-AND-EQUITY> 272,023
<SALES> 293,988
<TOTAL-REVENUES> 293,988
<CGS> 208,187
<TOTAL-COSTS> 208,187
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,284
<INCOME-PRETAX> 25,277
<INCOME-TAX> 9,098
<INCOME-CONTINUING> 16,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,179
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
</TABLE>
